Cogent Communications, which acquired Sprint’s network assets in 2023, is repositioning itself as a key player in AI infrastructure amid a hard reset in its data-center footprint. The company sold 10 data-center facilities for $225 million in net proceeds, removing about $7 million annually in negative EBITDA drag, while planning to divest another 14 sites totaling 54 megawatts. These divestitures reflect a strategic shift away from traditional telecom infrastructure toward specialized wavelength services for AI training and inference, where demand is growing rapidly despite supply constraints.
Since September 2022, global capital for AI has totaled $7 trillion, with only about $1 trillion spent to date. Cogent’s CEO, Dave Schaeffer, emphasized that AI-driven demand is outpacing the company’s ability to scale infrastructure, particularly in memory and telecom equipment, which have seen price surges and extended lead times. The company’s Wavelength business, which serves AI workloads, grew 62% year-over-year in the latest quarter and 9.2% sequentially, accounting for about 25% of the North American inner-city wavelength market—valued at roughly $3.5 billion. Cogent currently holds 3% of this market but aims for 25% long-term, having delivered service in 608 of 1,137 planned locations and serving 548 unique customers.
The company’s post-acquisition performance highlights a turnaround from Sprint’s struggling operations. The acquired business, which carried negative 60% EBITDA margins, represented 42% of revenue at the time of the deal and declined 69% in customer base. Core internet services, now 84% of revenue, grew 9% annually post-acquisition—up from 5% pre-acquisition—while EBITDA margins expanded by 220 basis points annually over an 18-year period of no acquisitions. Cogent’s revenue grew at a 10.2% CAGR during this period, and EBITDA margins rose from zero at IPO in 2005 to 40.5% by the time of the Sprint acquisition.
The company’s initial data-center footprint was enabled by December 2024, roughly 18 months after closing the Sprint deal. However, the original mid-2028 market-share target has since been adjusted to an interim goal of 3,000 wavelengths, with 1,000 already sold. The conversion of former Sprint switch sites into data centers required a $100 million incremental investment, and the buyer, I Squared, planned an ultimate total investment of $1 billion for the first 10 facilities.
Operational details underscore the challenges of scaling for AI. Cogent converted 125 former Sprint switch sites, removing 23,800 cabinets of telephone gear and upgrading to modern infrastructure. These sites, typically 15 miles from downtowns, feature 40,000-square-foot buildings with 4–5 megawatts of power, though they remain optimized more for inference than large-scale training. Memory prices surged fivefold, and telecom equipment lead times stretched from 90 days to three years, complicating expansion plans.
Cogent’s strategy aligns with broader industry trends, where AI demand is driving a surge in wavelength services. The company’s fiber network spans 94,000 route miles of inner-city fiber and 34,000 route miles of metropolitan fiber, sourced from 383 global suppliers. While the company operates 59 single-tenant facility connections, its market share remains modest, reflecting the competitive and constrained nature of the AI infrastructure sector.
