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COGENT COMMUNICATIONS HOLDINGS, INC. (CCOI)·Q2 2025 Earnings Summary

Executive Summary

  • Q2 topline was soft but margins improved: service revenue fell 0.3% q/q and 5.5% y/y to $246.2M, while EBITDA rose 10.8% q/q to $48.5M (19.7% margin) on mix and cost controls .
  • Versus S&P Global consensus: Revenue was roughly in line (slight miss ~0.6%), EPS was a modest beat (less negative), but EBITDA was a significant miss as the Street expected materially higher EBITDA; see Estimates Context for details (S&P Global)*
  • Mix continues to pivot: wavelength revenue +27.2% q/q (+149.8% y/y) to $9.1M and IPv4 leasing +6.3% q/q (+40.1% y/y) to $15.3M, while off-net and non-core revenues declined as intentional grooming continued .
  • Capital structure/returns: Board raised the quarterly dividend to $1.015 for Q3 (+0.5%) and expanded the buyback authorization by $100M through 12/31/26; Cogent also issued $600M 2032 secured notes and redeemed 2026 notes in Q2 (incurring a $5.6M extinguishment loss) .

What Went Well and What Went Wrong

What Went Well

  • Wavelength momentum: revenue +27.2% q/q (to $9.1M) and customer connections +11.1% q/q, with 938 data centers now wave-enabled across the U.S., Mexico, and Canada .
  • Margins improved despite flat revenue: EBITDA +10.8% q/q to $48.5M (19.7% margin) and Non-GAAP gross margin held strong at 44.4% (vs. 44.6% in Q1) as mix shifted toward high-margin services and costs were controlled .
  • Returns to shareholders: the dividend was increased again (to $1.015 for Q3) and the buyback was expanded by $100M, signaling confidence even as leverage rose .

Quoted management context (prior quarter): “We intend to capture 25% of this highly concentrated North American [wavelength] market within 3 years” .

What Went Wrong

  • Revenue pressure from grooming and T-Mobile CSA step-down: service revenue -5.5% y/y; Commercial Agreement revenue dropped to $1.1M (vs. $5.9M in Q2’24), and off-net/non-core declines persisted as Cogent exited lower-quality revenue .
  • EBITDA vs. Street: While EBITDA rose sequentially, it fell well short of consensus (see Estimates Context), suggesting the Street modeled higher operating leverage and/or different adjustments than company “EBITDA as reported” .
  • Higher leverage and cash use: net leverage increased (7.52x LTM adj. EBITDA), operating cash flow was -$44.0M in Q2, and loss on debt extinguishment was $5.6M as Cogent refinanced and redeemed 2026 notes .

Financial Results

Headline P&L and margins (company-reported GAAP, unless noted)

MetricQ2 2024Q1 2025Q2 2025
Service Revenue ($M)$260.4 $247.0 $246.2
GAAP Gross Margin (%)11.6% 13.6% 13.6%
Non-GAAP Gross Margin (%)40.2% 44.6% 44.4%
EBITDA ($M)$27.1 $43.8 $48.5
EBITDA Margin (%)10.4% 17.7% 19.7%
Diluted EPS (GAAP)$(0.68) $(1.09) $(1.21)

Segment revenue mix

Revenue ($M)Q2 2024Q1 2025Q2 2025
On-net$140.8 $129.6 $132.3
Off-net$111.5 $107.3 $102.2
Wavelength$3.6 $7.1 $9.1
Non-core$4.6 $3.0 $2.7
Total Service Revenue$260.4 $247.0 $246.2

Key KPIs

KPIQ2 2024Q1 2025Q2 2025
Wavelength Connections (units)754 1,322 1,469
IPv4 Revenue ($M)$10.9 $14.4 $15.3
IPv4 Addresses Billed (units)12,813,955 12,879,749 13,187,109
Net-centric Revenue ($M)$91.1 $92.6 $97.3

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Quarterly Dividend/ShareQ3 2025$1.010 (Q2 2025) $1.015 Raised
Share Repurchase AuthorizationThrough 12/31/2026~$7.9M remaining as of 7/31/25 +$100M increase approved 8/6/25 Raised
Long-term Revenue GrowthMulti-year5–7% (Q4’24 call) 6–8% (updated Q1’25; reiterated) Raised (maintained)
EBITDA (as adjusted) Margin ExpansionMulti-year~+100 bps/yr (Q4’24 call) ~+150 bps/yr (updated Q1’25; reiterated) Raised (maintained)
Capex Run-RateH2 2025n/a~$100M annualized by Q3/Q4’25 (unchanged) Maintained
Deleveraging TrajectoryLate 2025 onwardn/aExpect delever to begin in Q4’25 (unchanged) Maintained

Earnings Call Themes & Trends

(We were unable to retrieve the Q2 2025 transcript due to a document system inconsistency; themes below reflect Q4 2024 and Q1 2025 calls plus Q2 2025 release.)

TopicPrevious Mentions (Q4’24 and Q1’25)Current Period (Q2’25)Trend
Wavelength rolloutTargeting 500 installs/month; provisioning cycle reduced to ~30 days; backlog rebuilt to ~3,433; ARPU ~$1.9–2.0k Wavelength revenue +27% q/q; connections +11% q/q; 938 data centers enabled Improving cadence and coverage
IPv4 monetizationPricing lifts and address takedowns (AUP violations); net adds volatile; plan to resume ~500k+/qtr net adds IPv4 revenue +6.3% q/q to $15.3M; billed addresses up q/q Pricing up; net adds resumed
Corporate/off-net groomingIntentionally exiting low-margin/non-core; expect return to total revenue growth by mid-Q3’25 Corporate revenue -1.5% q/q; off-net -4.8% q/q Nearing inflection
Leverage/financingLeverage to peak mid-2025; delever thereafter; capex to taper H2’25 Net leverage 7.52x; issued $600M 2032 secured notes; redeemed 2026 notes; opex cash -$44M Higher now; delever expected 4Q
Data center monetizationConverting ~23 facilities; multiple LOIs; aiming to monetize excess MW/sq ft No new monetization specifics in releaseIn progress
AI/trafficQ4’24 traffic +11% y/y; Q1’25 flattish sequentially; AI mix benefits NetCentric Not detailed in Q2 releaseMixed near-term, constructive LT

Management Commentary

  • “We intend to capture 25% of this highly concentrated North American [wavelength] market within 3 years.” — CEO, Dave Schaeffer (Q1 2025) .
  • “Now that the Sprint business is combined… we are adjusting our long-term annual revenue growth rate to 6% to 8%, and… EBITDA as adjusted margin to expand annually to 150 basis points.” — CEO, Dave Schaeffer (Q1 2025) .
  • “We will continue to receive an additional 32 monthly payments of $8.3 million each until November of 2027” under the IP Transit agreement with T-Mobile — CFO, Tad Weed (Q1 2025) .
  • “Acquiring the Sprint network has also allowed Cogent to construct a wavelength network… As of June 30, 2025, Cogent was offering optical wavelength services in 938 data centers.” (Q2 2025 release) .

Q&A Highlights

(We could not access the Q2 2025 call transcript. For context, below are salient Q1 2025 Q&A themes.)

  • Wavelength execution: capacity to provision ~500 waves/month as funnel grows to ~10,000 by year-end; installs became back-half loaded in Q1 as customers got ready; provisioning at ~30 days targeted .
  • Dividend cadence and leverage: Board slowed dividend growth to +$0.005/qtr as leverage ramps in 2025; expects deleveraging and higher capacity for returns starting Q4’25 .
  • IPv4 policy enforcement: ~600–700k addresses were taken down in Q1 due to AUP violations; management still expects to resume >500k net adds per quarter over time .
  • Corporate trajectory: Management reiterated a return to total revenue growth by mid-Q3’25 as grooming eases .

Estimates Context

S&P Global consensus vs. actuals (Primary definitions per S&P Global)*

MetricQ2 2025 ConsensusQ2 2025 Actual (S&P)
Primary EPS (USD)-0.935-0.807
Revenue (USD)247,673,460226,247,000
EBITDA (USD)74,844,29043,831,000
Coverage (# EPS ests / # Rev ests)11 / 12—

Notes: Company-reported actuals for Q2 2025 were revenue $246.247M, GAAP diluted EPS $(1.21), and EBITDA $48.5M; differences vs. S&P “actuals” reflect differing definitions/treatments (e.g., normalization/adjustments) .
Interpretation: modest EPS beat on S&P’s Primary EPS; revenue roughly in line/slight miss; a large EBITDA shortfall vs. consensus under S&P’s definition.
*Values retrieved from S&P Global.

Key Takeaways for Investors

  • Mix shift is working: sequential EBITDA and margin improved despite modest revenue erosion; growth vectors (wavelength, IPv4) are scaling, while off-net/non-core grooming continues to weigh on topline near term .
  • The core debate: why EBITDA tracked below Street models; until “EBITDA vs. consensus” definitions converge, expect higher scrutiny on adjusted versus reported constructs (Street may be benchmarking to a different EBITDA basis) .
  • Near-term catalysts: confirmation of mid-Q3 revenue inflection, continued wavelength acceleration (revenue and installs), and IPv4 net adds resuming at scale should be stock movers .
  • Balance sheet watch: leverage metrics rose with the $600M 2032 notes issuance and 2026 redemption; deleveraging from Q4’25 depends on EBITDA growth and potential asset monetization (data centers, IPv4 securitizations) .
  • Capital returns remain intact: dividend increased again and buyback expanded by $100M, implying management confidence in medium-term FCF generation even amid elevated leverage .
  • Execution priorities: sustain wavelength provisioning cadence, stabilize corporate/off-net revenues post-grooming, and maintain capex discipline toward the ~$100M H2’25 run-rate .
  • Risk skew: macro/corporate occupancy, competitive responses in waves, interest expense and swap valuation variability, and timing/terms of data center monetization remain key watch items .

Additional source documents and data cited:

  • Q2 2025 8-K/press release: service revenue, mix, margins, dividend and buyback, leverage, financial statements .
  • Q2 2025 operational KPIs and non-GAAP schedules .
  • Q1 2025 press release/call for prior-quarter trends and guidance updates .
  • Q4 2024 press release/call for baseline trends and capex/delever trajectory .
  • Notes offering and IPv4 securitization press releases (Q2 timeframe) .