Cogent Communications (CCOI) investor relations material

Business performance and strategic initiatives

• Achieved a 10.2% CAGR over 18 years with corporate segment outperforming at 11.2% and consistent EBITDA margin expansion of 220 basis points annually.

• Acquired Sprint, which was in decline, and executed a plan to cut costs and repurpose assets, converting old TDM voice network into a modern wavelength network.

• Divested 10 converted data centers for $225 million, reducing debt and negative EBITDA drag, with 14 more centers planned for sale.

• Data center conversions involved significant upgrades, making them suitable for distributed inference applications rather than high-density AI training.

• Monetization of data centers exceeded investment, and remaining facilities are expected to be leased out after divestiture.

Market trends and growth drivers

• AI training has emerged as a major demand driver for wavelength services, now representing about 25% of the total market and growing rapidly.

• Wavelength market growth is primarily fueled by AI, with traditional use cases remaining static.

• Supply chain constraints have led to telecom equipment inflation and longer delivery times, impacting service provisioning.

• New data centers are being built in remote locations due to power and land availability, requiring point-to-point wavelength connectivity for AI training.

• Major hyperscalers now account for 60% of telecom equipment demand, shifting industry dynamics.

Competitive landscape and market share

• Holds 3% share of the North American innercity wavelength market, aiming for 25% but expects a slower ramp due to credibility and supply chain issues.

• Lumen and Zayo dominate the innercity wavelength market, while Verizon and AT&T lead in metro markets.

• Unique network routes provide competitive advantage by offering diversity not available from larger incumbents.

• Faster provisioning and broad footprint have helped win business from both hyperscalers and emerging AI-focused companies.

• Contracts are take-or-pay, but flexibility is exercised for new customers facing supply chain or facility delays.