Liberty Capital Q2 2026 Earnings: Flat Revenue, Lower Operating Margins

Liberty Capital (Nasdaq: GLIBA, GLIBK) reported Q2 2026 revenue of $261 million, unchanged from $261 million a year earlier, while operating income fell to $29 million from $51 million. Adjusted OIBDA declined 11% as higher business delivery and network costs outweighed improved consumer gross margin, and trailing-12-month free cash flow decreased to $59 million.

Core Earnings Data

Revenue was flat because a 2% decline in consumer revenue offset 1% growth in business revenue. Profitability weakened more materially: operating expenses excluding depreciation and amortization increased 7%, while selling, general and administrative expense excluding stock-based compensation rose 12%.

Adjusted OIBDA and free cash flow are non-GAAP measures. The cash flow figures below cover the 12 months ended June 30 rather than the quarter alone.

Consumer and Business Performance

The two operating categories moved in different directions. Consumer revenue declined following GCI’s 2025 exit from video services, but its gross margin improved; business revenue increased slightly, while higher direct costs caused a substantial margin contraction.

Consumer data revenue was unchanged at $60 million, while wireless revenue increased 2% to $52 million. Other consumer revenue fell 38% to $5 million, primarily reflecting the completed video exit.

Consumer broadband subscribers increased 1% year over year to 155,400, but the total included approximately 5,400 subscribers acquired with a small broadband operator during the quarter. Excluding that acquisition, broadband subscribers would have declined by 1,200 during the first half of 2026. Consumer wireless lines rose 1% to 202,100, with 3,100 lines added year to date.

Business data revenue increased 2% to $127 million, driven by service upgrades for existing healthcare and education customers. Business wireless revenue was unchanged at $10 million, while business wireless lines fell 7% to 8,000.

Higher Business Delivery Costs Overwhelmed Consumer Margin Gains

Consumer direct costs declined to $33 million from $35 million as GCI no longer incurred the same video programming costs following its exit from video services. That reduction allowed consumer gross margin to remain at $84 million despite lower revenue.

The benefit was more than offset by business direct costs, which increased 35% to $35 million. Management attributed the increase mainly to higher distribution costs, including restored service on the Quintillion network, as well as higher circuit costs associated with upgraded customer services. Technology expense also increased to $69 million from $67 million, and SG&A expense excluding stock-based compensation rose to $28 million from $25 million.

Below Adjusted OIBDA, depreciation and amortization increased to $56 million, stock-based compensation rose to $7 million, and Liberty Capital recorded $4 million of Quintillion acquisition costs. Together, these items contributed to the larger 43% decline in GAAP operating income.

Cash Flow, Debt, and Capital Allocation

Trailing-12-month operating cash flow decreased by $34 million to $308 million. Over the same period, capital expenditures increased to $259 million from $243 million, while grant proceeds fell to $10 million from $54 million. The combination reduced trailing-12-month free cash flow to $59 million from $153 million.

Cash, cash equivalents, and restricted cash increased to $510 million at June 30 from $448 million at March 31. Total debt increased by $228 million during the quarter to $1.263 billion, including a $160 million draw used to fund a loan to Quintillion under the acquisition agreement. GCI leverage rose to 2.8 times from 2.3 times, while Liberty Capital leverage increased to 2.1 times from 1.6 times.

GCI had $447 million of undrawn credit capacity, net of letters of credit, at quarter-end. Its amended credit facility provides up to $480 million of additional financing capacity, although funding under the $155 million delayed-draw term loan and $25 million incremental revolving facility is contingent on the Quintillion acquisition closing.

After quarter-end through July 31, GCI repurchased approximately $129 million principal amount of its senior notes due in October 2028 using cash and revolver borrowings. In July, Liberty Capital also adopted a policy to begin recurring quarterly dividends in December 2026, initially totaling about $60 million annually, or approximately $15 million per quarter. Each dividend remains subject to board declaration and customary conditions, and the policy can be modified, suspended, or terminated.

2026 Capital Spending Guidance

Liberty Capital expects GCI’s full-year 2026 capital expenditures, net of grant proceeds, to total $290 million. With $125 million spent during the first half, this outlook implies approximately $165 million of net capital expenditures during the second half.

Management expects the Alaska operating company to deliver stable performance in 2026 and a step-up in cash generation in 2027. GCI also expects to complete the Quintillion acquisition during 2026.

Risks Investors Should Watch

• Business margin pressure: Higher distribution and circuit costs reduced business gross margin by 600 basis points. Continued cost growth without faster revenue expansion would remain a constraint on consolidated profitability.
• Heavy capital spending and lower grant proceeds: The company expects $290 million of net capital expenditures in 2026, while trailing-12-month grant proceeds have already fallen substantially. This combination can continue to limit free cash flow.
• Higher debt and acquisition exposure: Total debt and leverage increased during the quarter, partly because of Quintillion-related financing. The acquisition remains pending, while some additional financing is contingent on its completion.
• Underlying broadband subscriber trends: Reported consumer broadband subscribers benefited from an acquisition. Excluding that transaction, subscribers declined during the first half, making organic customer trends an important indicator for future data revenue.
• Conditional dividend execution: The planned quarterly dividend has not yet been declared and remains subject to board approval, capital requirements, and other customary conditions.

Conclusion

Liberty Capital’s second-quarter revenue remained stable, but higher business delivery, technology, and administrative costs produced a significant decline in margins and operating income. Consumer cost savings provided only a partial offset, while elevated capital spending, lower grant proceeds, and increased leverage weighed on cash generation. The next key indicators are business cost control, organic broadband trends, execution of the Quintillion acquisition, and whether management can deliver the expected improvement in cash generation while funding its planned dividend.