CCOI — Q2 2026 Financial Report Analysis

Cogent Communications' second quarter of 2026 shows a profit of $66.6 million, but only because it sold ten data centers. Strip out the $130.7 million gain from that sale and the underlying business still lost money before tax, service revenue fell 4.3% from a year earlier to $235.6 million, and operating cash flow was just $3.2 million. The real story is the balance sheet: the sale proceeds are being used to buy back Cogent's own bonds at about 90 cents on the dollar, and the company has $750 million of notes due in June 2027 that it says it expects to refinance.

At a glance

• $66.6 million net income ($1.38 per diluted share), versus a $57.8 million loss a year ago — driven by a one-time $130.7 million gain on selling ten data centers bought with Sprint's old wireline network. Without asset-sale and debt gains, pre-tax loss was about $50.5 million (our calculation from the income statement).
• On-net revenue up 2.3% year over year to $135.4 million while off-net revenue fell 17.3% to $84.5 million. Cogent is deliberately letting low-margin customers inherited from the Sprint deal leave; its own-network business is still growing slowly.
• $3.2 million of operating cash flow against $38.5 million of capital spending. The business still does not fund itself; T-Mobile's contractual payments ($33.3 million this quarter) and the data center sale are filling the gap — which is why the dividend was cut to $0.02 a share last year.

The numbers

*Our calculation: GAAP operating income of $118.9 million minus $132.0 million of "gains on sale of data center and other assets" (which includes the $130.7 million data center gain), divided by service revenue. n/m = not meaningful (swing from loss to profit).

Operating margin is the share of revenue left after running the business, before interest and tax. The 50.5% GAAP figure is real accounting but tells you nothing about Cogent's day-to-day economics, because the data center gain sits inside operating income.

What the Sprint wireline deal is doing to the revenue line

Cogent bought Sprint's old wireline network from T-Mobile in May 2023 (it calls it the "Cogent Fiber Business"). That network came with about $39.5 million of monthly revenue, of which 81.7% was "off-net" — service delivered over other carriers' last-mile lines, which Cogent has to rent — and only 6.3% "on-net" (buildings physically wired to Cogent's own fiber). Off-net business carries much lower margins because of those rented "tail circuits."

Three years later Cogent is still shedding that inheritance on purpose. The 10-Q attributes the 4.3% revenue decline "primarily" to "cancellations of low margin and non-core customers we acquired with the Cogent Fiber Business." You can see it in the mix:

• On-net rose to 57.4% of revenue from 53.7% a year ago; on-net connections were up 0.7% to 88,013 and Cogent added 98 on-net buildings over the year (to 3,627).
• Off-net fell to 35.9% of revenue from 41.5%; off-net connections fell 12.2% to 23,033.
• Wavelengths — dedicated optical circuits sold over the fiber Cogent acquired from Sprint — grew 63.8% to $14.8 million (6.3% of revenue), with connections up 66.4% to 2,445. This is the main new product the Sprint network made possible, now offered at 1,137 locations in the US, Canada and Mexico. Growth is slowing sequentially, though: +27.2% quarter on quarter in Q2 2025, +12.3% in Q1 2026, +9.2% this quarter.

By customer type, the split moved the same direction:

Net-centric grew because of "growth in network traffic from our legacy net-centric customers." But the pricing pressure there is severe: Cogent's average price per megabit on its installed base fell 34.4% in a year, so traffic had to grow 16% just to keep that line moving. Corporate revenue fell on the same Sprint-customer cancellations plus soft office occupancy, which the filing still flags as a risk. Enterprise — almost entirely Sprint's old customers — keeps shrinking by design.

Costs are coming down with the revenue. Network operations expense fell 9.1%, which the filing ties to cutting "leased circuit costs, including the reduction of the related 'tail-circuit' costs for the reduction in off-net revenue." That is why non-GAAP gross margin (revenue minus network costs, before depreciation) improved to 47.0% from 44.4% even as revenue shrank. Depreciation fell 29.7% because acquired Sprint equipment is now fully depreciated — a GAAP tailwind, not a cash one.

SG&A went the other way, up 11.0% to $72.1 million, due to higher amortization of sales commissions, property taxes and a $2.8 million rise in stock-based compensation.

The data center sale and the bond buybacks

On June 29, 2026, Cogent sold ten former Sprint data center buildings and their land for $225.0 million gross ($224.2 million net). Their book value was $93.4 million, hence the $130.7 million gain. Fourteen of the 24 facilities originally earmarked for sale remain on the market.

Most of that money is not free to spend. To get bondholders to loosen a covenant (the maximum secured leverage ratio rose from 4.00x to 4.75x EBITDA), Cogent agreed to put at least $175 million of data center proceeds toward buying back debt at a discount. Of the roughly $168 million of after-tax proceeds, all were classified as restricted cash for that purpose; about $57 million is available for general use.

Cogent has moved fast:

• In June it bought $20.4 million of its 6.50% 2032 secured notes at an average 91.955% of face value (a $1.6 million gain).
• In July it bought another $118.4 million at 90.071% (an expected $11.8 million gain, to be booked in Q3).
• Total retired so far: $138.8 million, cutting annual interest on those notes from $39.0 million to $30.0 million.

Buying your own bonds at 90 cents is good arithmetic, but it also tells you what the market thinks of Cogent's credit: those notes were issued at par only a year earlier, in June 2025.

Takeaway: This quarter's profit is a one-time asset sale, not a turnaround. The underlying business is still burning cash after capital spending, and the two supports holding it up — T-Mobile's $8.3 million monthly payments and sales of surplus Sprint data centers — are both finite. The question that matters for the next year is whether Cogent can refinance $750 million of 7% notes due June 2027 on terms it can carry.

What the headline numbers hide

• Cash conversion is very weak. Operating cash flow was $3.2 million against $66.6 million of net income (the $224.2 million sale proceeds show up under investing, not operating). For the first half, operating cash flow was $18.0 million, while capital spending was $84.8 million and finance-lease principal payments (mostly dark fiber leases) $23.0 million. Interest paid on notes was $61.2 million in the half, up from $48.0 million.
• About a third of "adjusted EBITDA" is T-Mobile's money, not customer revenue. Cogent's headline "EBITDA, as adjusted" of $71.1 million adds $25.0 million of cash received under the IP Transit Services Agreement — a $700 million payment T-Mobile agreed to make to whoever took over Sprint's money-losing wireline business. Plain EBITDA (earnings before interest, tax, depreciation and amortization) was $46.1 million, a 19.6% margin, down from $48.5 million a year ago. Through June, T-Mobile had paid $566.7 million of the $700 million; at $8.3 million a month, the remaining payments run out in late 2027. (This quarter's $33.3 million of T-Mobile cash includes July's payment, received early on June 30.)
• The dividend cut was forced, not optional. Cogent paid $49.6 million in dividends in Q2 2025 ($1.01 a share) versus $2.3 million ($0.02) this quarter. The filing cites "the cash flow requirements of the Cogent Fiber Business" among the reasons. Even at $0.02, the dividend is covered only because the cash flow gap is being funded by T-Mobile payments, asset sales and cash on hand.
• One-offs inflate both years' comparisons. This year: the $132.0 million of asset-sale gains and a $1.6 million debt-buyback gain. Last year: a $5.6 million loss on redeeming the 2026 notes, plus an $8.9 million non-cash swap valuation benefit inside interest expense. Taxes swung from a $16.7 million benefit to a $16.5 million provision, which the filing ties partly to the data center gain.
• Leverage is high. Total debt at face value was $2.3 billion (including $630.2 million of fiber lease obligations) against $369.7 million of cash, of which $186.0 million is restricted. Cogent's own net leverage ratio, adjusted for amounts still due from T-Mobile, was 6.23x — down from 6.79x in Q1 mainly because of the sale cash — and interest coverage under its bond indentures was 2.28x, the lowest of the last six quarters.
• No guidance to compare against. The earnings release and 10-Q give no revenue or EBITDA guidance, so there is no prior target to hold management to.

What to watch next

• The 2027 refinancing. The 10-Q says Cogent expects to refinance its $450 million 2027 notes and $300 million 2027 mirror notes "in the third quarter of 2026, subject to market conditions." As of this writing, EDGAR shows no 8-K announcing a new deal since the August 6 results. The interest rate on any new debt — versus 7.00% on the 2027 notes today, and the higher yield the market now demands on the 2032 notes trading near 90 cents — will set Cogent's cost base for years.
• IPv4 restricted cash deadline (October 2026). Cogent has until October 2026 to hit leverage and coverage tests that unlock the rest of the cash restricted under its IPv4 address-backed notes; anything still locked after that goes to prepaying those notes.
• More data center sales. Fourteen facilities remain for sale; the next $7.0 million of proceeds goes to complete the $175 million buyback commitment.
• Whether on-net and wavelength growth can outrun the off-net run-off. Total service revenue has fallen sequentially for six straight quarters. Off-net still makes up over a third of revenue and fell another 5.1% from Q1. Until off-net losses shrink or wavelength growth re-accelerates, the top line keeps drifting down; our read is that revenue stabilizes only once the remaining Sprint-era off-net base is much smaller, which on the current pace of roughly 4–5% sequential declines is not this year.