Cogent Communications (CCOI) reported that its wavelength business grew from zero to $60 million in roughly 18 months, citing accelerating demand tied to AI training infrastructure, while founder and CEO Dave Schaeffer told attendees at the Goldman Sachs Communacopia + Technology Conference 2026 that the company's fundamentals are "stronger today than they have ever been."
The wavelength segment, which now carries 2,500 unique wavelengths across 608 data centers to 548 customers, grew 9.2% sequentially and approximately 62% year-over-year. Pricing sits at roughly 2.5 times higher per bit-mile than standard internet services, and Schaeffer set a long-term revenue target of $500 million — a threshold requiring about 25,000 wavelengths against the current installed base.
Schaeffer highlighted that around 60% of an AI training facility's capital cost is devoted to GPUs that must run continuously without buffering, and that public internet connections lack the defined latency, privacy, and reliability that dedicated wavelength service provides. He cited roughly $7 trillion in announced AI training capital spending, with about $1 trillion already spent and $6 trillion remaining.
Underlying EBITDA margins recovered to approximately 20%, excluding subsidy payments, with management expecting expansion of at least 200 basis points annually toward the mid-40s. At its May 2023 peak, EBITDA margins reached 40.5%, compared with 0% at the June 2005 IPO. Net-on sales now account for 82% of total sales, up from a historical 75%, and carry about 90% contribution margins.
The Sprint acquisition remains a defining overhang. Acquired revenues declined 69% over three years, and the deal temporarily pushed combined EBITDA margins below 2%, as the acquired Sprint business carried negative $300 million in EBITDA on $485 million in revenue. Schaeffer described the transaction as one where the company received "$20 billion of asset value for a dollar" plus a $700 million payment over 54 months. T-Mobile subsidy payments total $700 million across that period, with roughly 22 months remaining.
To reduce leverage, Cogent sold 10 data centers to I Squared Capital for $225 million in gross proceeds and used $175 million of the proceeds to repurchase debt: $138.9 million of 2032 secured debt at 90 cents on the dollar and $50 million of unsecured debt at 99 cents. The sale generated approximately $224 million in tax gain, substantially sheltered. Fourteen additional data centers remain for sale, with letters of intent signed on four. Net leverage stood at 6.23 times at the end of Q2, down from 6.7 times immediately after the Sprint close and above the 4.0-times target the company says it will reach before resuming capital returns. Total debt is $2.64 billion against last-twelve-month EBITDA of $163 million, and $700 million of unsecured debt matures in June 2027.
Elsewhere, Cogent owns 38 million IPv4 addresses — the third-largest holding globally — and leases 15 million of them for roughly $70 million in annual revenue. The company carries about 25% of all global internet traffic across 94,000 route miles of inner-city fiber connected to 33,000 route miles of metro fiber, serving 1,950 data centers in 58 countries.
Cost-reduction efforts are nearing completion. With $8 million in remaining savings to achieve by end of Q2, $7 million in annualized savings from data-center divestitures and $36 million in eliminated integration costs, the company indicated it is close to fully realizing its synergy targets.
