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Cogent has a non‑binding LOI to sell 10 of 24 Sprint data centers, with the buyer largely through due diligence and an expected close in June or early July; management says aggregate proceeds are substantially more than $144 million and will be disclosed in an 8‑K once a binding agreement and deposit are in place.
Management reached a verbal agreement to amend the 2032 indenture to allow pari‑passu/junior secured debt and plans to refinance the $750M 2027 notes after the make‑whole period ends June 15, 2026, committing most data‑center sale proceeds to deleveraging while quarter‑end net leverage was 6.79x.
Operationally Cogent is shifting to higher‑margin on‑net products (on‑net now ~62% of revenue) and rapidly growing wavelengths—wavelength revenue rose 90.8% YoY—but consolidated revenue remains pressured by a steep 67% decline in acquired Sprint run‑rate and customer acceptance constraints for some wavelength installs.
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Cogent Communications (NASDAQ:CCOI) used its first-quarter 2026 earnings call to highlight progress on monetizing former Sprint assets, refinancing plans for upcoming debt maturities, and continued growth in its on-net and wavelength businesses, while noting that consolidated revenue still faces headwinds from ongoing declines in the acquired Sprint customer base.
Chairman and CEO Dave Schaeffer said the company has “entered into a non-binding LOI for the sale of 10” of the 24 Sprint data centers it intends to monetize through outright sales or wholesale leasing. Schaeffer said the counterparty has “essentially completed its due diligence,” and Cogent expects the transaction to close “early this summer.”
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In response to analyst questions, Schaeffer provided additional detail on timing and disclosure. He said the buyer has requested a shorter period between signing a binding purchase agreement and closing, and Cogent expects closing “probably June or early July at the latest.” He added Cogent will file an 8-K once there is a binding agreement supported by a non-refundable deposit, and that disclosure will include “the economics and the locations,” along with the counterparty’s name and “the exact proceeds.”
Schaeffer also said the “aggregate proceeds are substantially more than the $144 million,” and described the 10 facilities as “a pretty good average across the 24 data centers” being evaluated, excluding the largest and smallest sites. He said Cogent has “multiple other parties conducting due diligence on multiple other data centers,” but management has focused internal resources on getting the first 10-center transaction completed.
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Management also addressed its efforts to refinance the company’s $750 million unsecured notes due June 2027. CFO Tad Weed read a prepared statement saying Cogent and a limited number of holders of its $600 million secured notes due 2032—representing “more than a majority of the outstanding principal amount”—have reached a “verbal agreement” on a consent to amend the 2032 indenture. If finalized, Weed said the amendment would “increase our ability under the indenture to incur pari passu or junior lien secured debt and includes several credit enhancements” for the 2032 notes.
Schaeffer said Cogent intends to complete its refinancing “after the expiration of our make-whole period, which ends June 15th, 2026.” He also said that if the amendment is finalized, the company would “forgo our previously announced secured debt realignment plan.”
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On how asset sale proceeds may be used, Schaeffer said Cogent has “committed the proceeds of the sale of our initial 10 data centers” to Cogent Communications Group, the borrower entity, to accelerate deleveraging. He noted the data centers are held at Cogent Infrastructure, “which is not a borrower under our high-yield indentures.” He told analysts the company committed to a group of bondholders that “the vast majority of the proceeds will go to buy back debt,” though not necessarily an amount equal to the purchase price.
Weed reported quarter-end total gross debt at par, including $629 million of finance lease IRU obligations, was $2.4 billion, while net debt—net of cash and $181.7 million due from T-Mobile—was $2.0 billion. Schaeffer said the company’s total gross debt was 7.4x EBITDA (as adjusted) over the last 12 months, and net leverage was 6.79x at quarter-end.
Cogent continued to emphasize wavelength as a growth area. Schaeffer said the company offered wavelength services in 1,107 locations at quarter-end, with 10-gig, 100-gig, or 400-gig capability, and a provisioning interval of about 30 days that “continues to improve.”
Wavelength revenue was $13.6 million, up 90.8% year-over-year and up 12.3% sequentially, according to Schaeffer. Customer connections rose 71.2% year-over-year and 9.6% sequentially to 2,263. Cogent had sold wavelength services in 581 unique locations to 492 unique customers by quarter-end.
However, Schaeffer said installation momentum was affected less by Cogent’s own supply issues and more by customers’ constraints. “We actually provisioned more wavelengths in the quarter than we did in the previous quarter, but the customers did not accept them,” he said, citing issues including power availability in data centers, customer equipment constraints such as pluggable optics, and timing for GPU deployments. He also noted that some wavelength orders are tied to facilities “not yet either fully powered or fully constructed.”
Asked about mix, Schaeffer said roughly 75% of wave sales have been 100-gig, with an increasing share of 400-gig and a “significant decrease” in 10-gig. He said “over 10% of sales” are now 400-gig.
Cogent reiterated its ambition to capture 25% of the North American long-haul wavelength market, saying it has reached about 3% so far. Schaeffer said the company is “hopeful” it can reach 25% by mid-2028, but added that supply and acceptance constraints “may in fact impact that,” and the company is “not in a position to make that determination.”
Weed said consolidated revenue for the quarter was $239.2 million, down $1.3 million sequentially (0.6%). He attributed part of the comparison to USF tax revenues, which reduced sequential revenue by $0.3 million and year-over-year by $0.7 million.
Weed emphasized that despite revenue pressure, margins have improved through cost reductions and a “rotation to our more profitable on-net products.” Comparing the first full combined quarter after the Sprint deal (third quarter 2023) to the current quarter, he said on-net revenue mix rose from 47% to 62% of total revenue, while off-net declined from 48% to 37%, and non-core fell to about 0.5% of revenue (about $1 million).
Weed said on-net revenue (including on-net wavelengths) increased $2.8 million sequentially, while off-net declined $3.9 million. Gross margin was 46.1%, up 150 basis points year-over-year, which management attributed to continued cost reductions and product optimization.
Management detailed how Sprint-related revenue has continued to contract. Weed said Sprint wireline represented 42% of total revenue at deal close but was 16% of total revenue this quarter. He said the acquired Sprint revenue run rate declined from $118 million per quarter at closing to $39 million this quarter—a $79 million reduction, or a 67% decline. Over the same period, Cogent’s “classic” revenue run rate rose from $155 million per quarter at closing to $198 million this quarter.
During Q&A, Schaeffer said the quarter’s revenue inflection was “related almost exclusively to several large enterprise customers churning a portion of their off-net revenues,” describing those revenues as out of contract and month-to-month.
On profitability, Schaeffer said EBITDA (as adjusted) increased $1.4 million year-over-year, while EBITDA margin (as adjusted) rose 150 basis points year-over-year. Sequentially, EBITDA (as adjusted) fell $6.6 million to $70.2 million, with margin at 29.3%. Schaeffer attributed the sequential decline primarily to seasonal SG&A increases in the first quarter, including CPI salary increases, payroll taxes, vacation timing, annual audit fees, and a sales meeting.
SG&A increased $7.1 million, or 11%, from the fourth quarter of 2025 to the first quarter of 2026. Schaeffer said the “vast majority” of the increase “will go away,” and the company expects to resume sequential EBITDA margin improvement and exceed its multi-year target of roughly 200 basis points of annual EBITDA margin expansion, though it does not expect to repeat the roughly 800 basis points of improvement achieved in 2025 versus 2024.
Capital expenditures were $46.2 million in the quarter, and Weed said the company has experienced “multiple equipment price increases from vendors due to supply chain constraints.” Schaeffer said the price pressure is unusual for Cogent, citing acute DRAM shortages and vendor pricing dynamics tied to hyperscaler buying power. He also told analysts the company has increased forward purchasing due to extended delivery windows, including one vendor quoting 15 months for key items.
Other operating metrics discussed included:
IPv4 leasing revenue: Schaeffer said IPv4 leasing revenue increased 4% sequentially to $18 million and rose 25% year-over-year, with average price per address stable at $0.40. He said Cogent holds title to about 37.8 million IPv4 addresses and has leased about 15 million.
Churn: Weed said on-net monthly unit churn was 1.2%, unchanged sequentially, while off-net churn was 1.7%, improving from 1.9% last quarter. Wavelength monthly churn was “less than 0.5%.”
Traffic: Weed said IP network traffic increased 4% sequentially and 14% year-over-year.
Sales force: Schaeffer said Cogent ended the quarter with 568 quota-bearing reps and sales force turnover of 4.8% per month, below the historical average of 5.7%. He said the company has been managing out underperforming reps and consolidating teams, while continuing to hire and expecting productivity to improve.
Looking ahead, Schaeffer reiterated a long-term target of 6% to 8% average revenue growth and roughly 200 basis points of EBITDA margin expansion per year, emphasizing those targets are “multi-year” and not intended as quarterly or annual guidance.
Cogent Communications (NASDAQ:CCOI) is a multinational Internet service provider specializing in high-speed Internet access and data transport services. The company operates one of the largest Tier 1 IP networks in the world, offering wholesale and enterprise customers reliable, low-latency connectivity. Cogent's core services include dedicated Internet access, Ethernet transport, wavelength services, and MPLS-based IP Virtual Private Networks, all delivered over its privately owned, fiber-optic backbone.
In addition to network connectivity, Cogent provides data center colocation and managed services designed to support businesses with demanding bandwidth and redundancy requirements.
The article "Cogent Communications Q1 Earnings Call Highlights" was originally published by MarketBeat.