Cogent Communications Holdings, Inc.’s (CCOI) shares have plunged 80.7% over the past year against the industry’s growth of 93.1%, lagging peers like AT&T Inc. T and Verizon Communications Inc. VZ. AT&T has lost 10.1%, while Verizon is up 8.5% over this period.
This reflects investor concerns surrounding its elevated debt burden, continued runoff of the acquired Sprint Wireline business and weak cash generation. The sharp reduction in its dividend has further dented investor sentiment. Cogent cut its quarterly dividend to just 2 cents per share in late 2025 from $1.015 previously.
One-Year CCOI Stock Price Performance
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Growth Engines Offer Encouragement
Cogent’s core operations are showing signs of improvement despite weakness in consolidated revenues. In the second quarter of 2026, service revenues declined 4.3% year over year to $235.6 million, primarily reflecting the continued contraction of the acquired Sprint business. However, on-net revenues, including wavelength services, increased 6.2% to $150.2 million.
The wavelength business remains a notable growth catalyst. Second-quarter wavelength revenues surged 63.8% year over year to $14.8 million, while wavelength customer connections increased 66.4%. Cogent is currently offering wavelength services across 1,137 locations and believes it can eventually capture 25% of the North American long-haul wavelength market compared with roughly 3% currently.
Profitability trends are also moving in the right direction. Adjusted EBITDA increased sequentially to $71.1 million, while the adjusted EBITDA margin expanded 90 basis points sequentially to 30.2%. The growing contribution from higher-margin on-net services and continued cost reductions should support further margin improvement.
High Leverage Remains CCOI's Biggest Concern
Despite operational improvements, Cogent’s balance sheet remains a major overhang. Total debt was approximately $2.34 billion at the end of the second quarter. Although adjusted net leverage improved to 6.23 times from 6.79 times sequentially, it remains elevated.
The company also has $750 million of unsecured notes maturing in June 2027. Management had targeted the third quarter of 2026 for refinancing these obligations, making successful execution and the resulting interest cost critical factors to watch.
Cogent is also taking steps to strengthen its financial position. The sale of 10 data centers generated $224.2 million in net proceeds, while the company has been repurchasing secured notes at discounts. Capital expenditures declined 31.4% year over year in the second quarter, which should help cash-flow generation.
Should You Bet on CCOI?
CCOI’s 80.7% decline reflects genuine fundamental concerns rather than merely weak market sentiment. High leverage, refinancing requirements, declining Sprint revenues and uncertain sustainable free cash flow warrant caution.
Nonetheless, rapid wavelength growth, expanding margins, asset monetization and declining leverage provide a foundation for a potential recovery if execution improves. Consequently, investors with the ability to tolerate elevated risk may consider staying invested in CCOI for long-term growth.
Cogent currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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This article originally published on Zacks Investment Research (zacks.com).