Cogent Q3 Revenue Falls as Wavelength Growth Lifts Margins

Cogent Communications Holdings reported lower third-quarter 2026 revenue as continued contraction in off-net and legacy Sprint business outweighed growth in on-net and wavelength services. Profitability margins nevertheless expanded, with the network operator’s adjusted EBITDA margin reaching 32.0%.

Revenue totaled $231.2 million, down 4.4% from $241.9 million a year earlier and 1.8% from $235.6 million in the second quarter. Off-net revenue fell 19.5% year over year and 9.3% sequentially to $76.6 million, making it the largest drag on the top line. Non-core revenue declined 46.8% from a year earlier to $0.7 million.

On-net revenue rose 1.9% on both a yearly and sequential basis to $137.9 million. Wavelength revenue increased 57.0% year over year and 7.8% from the previous quarter to $16.0 million, extending the expansion of a business Cogent has identified as a key growth opportunity.

The company’s non-GAAP gross profit was $110.2 million, down 0.6% year over year and 0.4% sequentially. Because revenue declined more quickly than gross profit, non-GAAP gross margin increased to 47.6%, compared with 45.8% in the third quarter of 2025 and 47.0% in the second quarter of 2026. GAAP gross profit was $56.7 million, while GAAP gross margin was 24.5%.

EBITDA rose 0.2% year over year and 6.1% sequentially to $48.9 million. The corresponding margin reached 21.1%, up from 20.2% a year earlier and 19.6% in the preceding quarter.

Including $25.0 million of cash payments under Cogent’s IP Transit Services Agreement with T-Mobile, adjusted EBITDA was $73.9 million, also 0.2% higher year over year. The adjusted margin increased to 32.0% from 30.5% a year earlier and 30.2% in the second quarter. Cogent noted that an $8.3 million payment related to July 2026 was received on June 30 but was allocated to the third quarter in the adjusted measure.

Wavelength growth offsets legacy-business contraction

Cogent’s revenue mix continues to shift away from the acquired Sprint wireline customer base. The monthly run rate of Sprint customer revenue declined 76% between the third quarter of 2023 and the third quarter of 2026. Over the same period, the monthly run rate of Cogent’s classic business, including wavelength services, increased 29%.

Legacy Sprint customers accounted for 8% of corporate revenue in the latest quarter, down from 30% in the third quarter of 2023. Their share of netcentric revenue fell to 5% from 21%, although they continued to represent 67% of enterprise revenue, compared with 100% three years earlier.

Corporate customers generated 42% of company revenue, netcentric customers contributed 46%, and enterprise customers accounted for 12%. By product, IP services represented 83% of revenue, followed by IP address leasing at 8%, optical transport at 7% and colocation at 2%.

Cogent had expanded the number of locations capable of supporting wavelength services to 1,151 by quarter-end, up from 1,137 in the second quarter. The company provided wavelength services to 578 customers across 660 locations, supported by 320 metro wave networks.

Management continues to emphasize expansion in wavelength services, colocation, IPv4 address leasing and its core IP connectivity products. Cogent owns 37.8 million IPv4 addresses, about 40% of which are in use, and operates 172 Cogent and edge data centers with 150 megawatts of available capacity. The company said its network and data centers were approximately 26% and 33% utilized, respectively, leaving capacity for additional traffic and customers.

Debt and cash flow remain key considerations

Net cash provided by operating activities was $3.8 million in the quarter. As of September 30, Cogent had $181.3 million of cash, cash equivalents and restricted cash, compared with $369.7 million at the end of June. Total debt declined to $2.16 billion from $2.34 billion over the same period, while total net debt increased slightly to $1.98 billion from $1.97 billion.

Gross leverage, based on trailing 12-month adjusted EBITDA, decreased to 7.41 times from 8.02 times in the prior quarter. Net leverage increased to 6.79 times from 6.75 times. After adjusting for amounts due from T-Mobile, gross and net leverage were 6.94 times and 6.32 times, respectively.

Cogent identified the integration of the acquired Sprint wireline operations as an ongoing risk. Other uncertainties include foreign-exchange movements, competition and pricing pressure, customer retention, network disruptions, dependence on third-party fiber and equipment vendors, regulation, cybersecurity requirements, and the renewal of fiber leases and rights-of-way. The company also cited its ability to repay or refinance unsecured notes due in June 2027 among its financial risks.