Optimum Q2 2026 earnings: Margins improved as cash flow weakened

Optimum Communications (NYSE: OPTU) reported Q2 2026 revenue of $2.02 billion, down 5.8% year over year, and a GAAP diluted loss of $0.67 per share versus $0.21 a year earlier for the quarter ended June 30, 2026. Gross and adjusted EBITDA margins expanded through cost control, but weaker operating cash flow pushed free cash flow into a $91.9 million deficit as broadband and legacy-service declines outweighed mobile growth.

Core financial results

Revenue continued to contract, led by a 6.7% decline in residential revenue to $1.54 billion. Adjusted EBITDA fell more slowly than revenue, allowing its margin to rise 140 basis points, while gross margin expanded 180 basis points.

The GAAP result moved in the opposite direction. Operating income fell as restructuring, impairment and other operating items increased to $207.0 million from $66.8 million, while net interest expense rose to $475.6 million from $444.7 million.

Adjusted EBITDA and free cash flow are non-GAAP measures. Optimum defines free cash flow as operating cash flow less cash capital expenditures.

Business and segment performance

Residential broadband, video and telephony revenue all declined, while mobile remained the main source of residential growth. Business services and wholesale posted a modest increase, but News and Advertising revenue fell sharply.

Broadband remained under competitive pressure. Total broadband net losses were approximately 40,000, compared with 35,000 a year earlier, and the reported Q2 figure benefited from a bulk agreement. Optimum ended the quarter with approximately 4.0 million broadband subscribers. Residential ARPU fell 1.1% to $132.22, although convergence ARPU increased 2.4% to $79.80. Higher-speed adoption also continued, with 53% of residential broadband customers taking speeds of 1 Gig or higher, up from 38%.

Mobile produced approximately 50,000 net line additions, compared with 37,800 in Q2 2025, bringing total mobile lines to 724,000. Mobile penetration of the broadband base increased to 8.9% from 6.9%. The gains supported 40% growth in residential mobile service revenue, but mobile remained too small to offset the dollar declines in broadband and video revenue.

Video subscriber losses narrowed to 44,100 from 56,100 a year earlier. New tiered packages reached 18% of the residential video base, up from 10%, and video ARPU increased 1.4%. Management said migration to these packages is improving retention and margins, with video gross margin approximately 1,000 basis points higher than in Q2 2023.

Optimum added 68,200 total network passings during the quarter, ending with 10.1 million, and approximately 97% of its footprint could access speeds of 1 Gig or higher. FTTH customer net additions, however, slowed to 19,800 from 56,300 a year earlier, even as total FTTH customer relationships reached 748,900.

Margin expansion did not translate into GAAP earnings or free cash flow

The margin improvement reflects a meaningful distinction between Optimum’s adjusted and GAAP performance. Adjusted EBITDA excludes items including depreciation and amortization, share-based compensation, restructuring and impairment charges, interest, and taxes. In Q2, depreciation and amortization totaled $407.1 million, while restructuring, impairments and other operating items were $207.0 million.

For the first six months of 2026, operating expenses excluding share-based compensation declined 5%. Management attributed the reduction to fewer truck rolls and lower call volumes, lower customer-acquisition costs, and workforce optimization. These measures helped adjusted EBITDA margin rise despite lower revenue, but they did not prevent operating income and the attributable net loss from deteriorating.

Cash conversion also weakened. Operating cash flow declined by approximately $183.8 million year over year. Cash capital expenditures fell by about $63.5 million to $320.0 million, but that reduction was not enough to offset the operating cash flow decline. As a result, free cash flow moved from positive $28.4 million to a $91.9 million deficit. Capital intensity was 15.8% of revenue.

Balance sheet and capital structure

Optimum ended June with $25.33 billion of consolidated net debt and net leverage of 8.0 times annualized last-two-quarter adjusted EBITDA. Its weighted average cost of debt was 6.8%, and the weighted average remaining life was 2.8 years. Within the capital structure, the CSC Holdings restricted group carried $21.78 billion of net debt and leverage of 22.8 times on the same basis.

In May, a subsidiary completed a $300 million private placement of preferred units. The units pay dividends at 13% annually if paid in cash or 15% if compounded, with a possible additional two-percentage-point increase following certain events. The proceeds were used for general corporate purposes, including financing a tender offer and related expenses.

The subsidiary also issued preferred units with an initial stated value of $212.5 million in exchange for common shares held by Next Partner and certain directors and executives. Those common shares were not canceled. After quarter-end, the subsidiary completed a tender offer for 120 million Class A shares at $2.50 per share, costing $300 million before fees; those purchased shares were also not canceled.

Management’s view

Chairman and CEO Dennis Mathew emphasized simpler offers, revised pricing and packaging, data-driven retention efforts, and deeper broadband-mobile convergence. Management is also trying to improve the customer experience through digital tools and operational changes while directing investment toward projects expected to generate the strongest returns.

Strengthening the financial foundation remains a stated priority. That focus is particularly relevant given the company’s leverage, interest expense and negative free cash flow in the quarter.

Risks investors need to watch

• Broadband subscriber pressure: Broadband losses increased from a year earlier, and Q2’s reported result benefited from a bulk agreement. Continued losses would pressure residential revenue and limit the benefit of higher-speed adoption.
• Mobile is not yet large enough to offset fixed-line declines: Mobile revenue grew 40%, but the roughly $15 million increase was substantially smaller than the combined revenue declines in broadband, video and telephony.
• Weak cash generation: Lower capital spending did not prevent free cash flow from turning negative because operating cash flow fell more sharply.
• High leverage and financing costs: Consolidated net leverage was 8.0 times, interest expense increased, and the new preferred units carry cash or compounded dividend rates of 13% to 15%.
• Returns on network expansion: Optimum continued adding passings, but FTTH customer additions were considerably lower than a year earlier. The pace of customer conversion will affect returns on network investment.

Summary

Optimum’s Q2 2026 results showed that cost reductions can protect adjusted margins even as residential revenue contracts. The main unresolved issues are broadband customer losses, the gap between adjusted EBITDA and GAAP profitability, weaker cash generation and a highly leveraged capital structure. Mobile and convergence continued to grow, but they have not yet reached sufficient scale to offset declines in broadband, video and telephony.