Cogent Communications Holdings (NASDAQ: $CCOI) is under intense pressure after its latest earnings release triggered a brutal selloff, sending shares plunging more than 30% in a single session. The collapse reflects investor concern over declining core revenue and negative operating cash flow, even as the company pushes aggressively into high-margin wavelength services tied to AI-driven data demand.
Earnings Reveal Mixed Picture as Revenue Declines Continue
Cogent reported service revenue of $240.5 million for the fourth quarter of 2025, representing a 0.6% decline from the prior quarter and a 4.7% drop year-over-year. Full-year service revenue fell to $975.8 million from $1.04 billion in 2024, highlighting ongoing structural pressure as the company reshapes its business following the Sprint wireline acquisition.
Profitability showed some improvement on the surface. Adjusted EBITDA rose to $76.7 million in the fourth quarter, up 4.0% sequentially and nearly 15% year-over-year, with margins expanding to 31.9%. However, operating cash flow remained negative, with Cogent reporting a $6.0 million cash outflow for the quarter and $10.6 million negative cash flow for the full year.
Net loss per share improved to $0.64 compared to $0.91 a year earlier, but the company remains firmly in loss-making territory. The disconnect between margin improvements and shrinking revenue reflects a deeper transition underway.
Wavelength Business Emerges as Core Growth Engine
The most important takeaway from the report was the explosive growth in Cogent’s wavelength segment, which is rapidly becoming the centerpiece of its strategy.
Wavelength revenue surged 18.8% sequentially and jumped 73.7% year-over-year to $12.1 million in the fourth quarter. For the full year, wavelength revenue more than doubled, rising 100.3% to $38.5 million. Customer connections in the segment rose 84.6% year-over-year, confirming accelerating demand.
This growth is closely tied to rising data center connectivity needs driven by artificial intelligence workloads. Optical wavelength services allow enterprises and hyperscale operators to move massive amounts of data across networks with lower latency and higher efficiency.
Management has made clear that wavelength is central to its long-term transformation, targeting significant market share gains in North America.
At the same time, legacy areas continue to shrink. Off-net revenue fell sharply, declining 17.9% year-over-year in the fourth quarter, while total customer connections dropped 4.7% over the same period. This reflects a deliberate strategy to exit lower-margin customers while focusing on higher-quality, higher-profit network relationships.
Asset Sales and Debt Strategy Could Unlock Value
Cogent is also attempting to strengthen its balance sheet through asset monetization and refinancing efforts. The company is exploring the sale or leasing of surplus data centers acquired as part of the Sprint transaction, with proceeds expected to reduce debt and improve financial flexibility.
Meanwhile, predictable payments from T-Mobile tied to the Sprint deal continue to provide a steady cash inflow, helping offset operational challenges.
Management is also planning to refinance debt maturing in 2027, aiming to extend maturities and reduce financial overhang. These moves could play a key role in stabilizing investor confidence if executed successfully.
Market Performance
Investors reacted harshly to the earnings release. Cogent shares plunged over 31% in intraday trading, falling to around $17.90 and marking one of the steepest declines in the telecom sector this year.
The stock is now down nearly 78% over the past 12 months, collapsing from highs above $80 as investors reassess its growth outlook and financial stability.
Despite the selloff, analyst sentiment remains cautiously optimistic. Consensus price targets still imply meaningful upside from current levels, reflecting confidence in the company’s long-term transformation strategy.
However, the market is clearly demanding proof that growth in wavelength and other high-margin services can offset the ongoing erosion of legacy revenue.
Strategic Pivot Enters Critical Phase
Cogent’s transformation is now entering its most important stage. The integration of Sprint’s network is largely complete, and management has shifted focus toward organic growth, profitability expansion, and balance sheet improvement.
Wavelength services, IPv4 leasing, and on-net connectivity are all showing strong momentum, suggesting that parts of the new strategy are working.
Is Cogent A Buy in 2026?
The pace of legacy revenue decline and persistent cash flow challenges remain serious risks. The next few quarters will be crucial in determining whether Cogent can successfully transition into a high-growth, high-margin data connectivity leader, or whether the stock’s collapse reflects deeper structural problems.
For now, the market remains skeptical, but the underlying growth in AI-driven network demand means Cogent’s story is far from over.
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