Optimum's Q2 Earnings Miss Estimates on Revenue Pressure

OPTU Strengthens Broadband Strategy

Residential revenues declined 6.7% year over year to $1.54 billion, with broadband and video remaining key sources of pressure. Residential ARPU fell 1.1% to $132.22, primarily due to the shift away from video, although non-video ARPU growth of $1.57, mainly tied to convergence, provided an offset.

Broadband net losses totaled 40,000 compared with 35,000 in the year-ago quarter, while total broadband subscribers ended at 4 million. Optimum continued simplifying pricing and packaging, strengthening customer retention efforts and using data-driven base management. The share of residential broadband customers taking 1 Gig or higher speeds rose to 53% from 38% a year earlier.

Optimum Builds Mobile and Video Momentum

Mobile remained a bright spot. The company added 50,000 lines in the quarter, its strongest second-quarter performance, bringing total mobile lines to 724,000. Residential mobile service revenue rose 40% year over year to $53 million, while mobile penetration of the broadband base increased to 8.9% from 6.9%.

Video trends also improved. Newer tiered offerings, including Entertainment TV, Extra TV and Everything TV, reached 18% penetration of the residential video base, up from 10% a year earlier. Residential video ARPU increased 1.4%, while migration to the newer packages continued to support retention and video profitability.

OPTU Expands Margins Despite Revenue Pressure

Total revenues were $2.02 billion, with residential revenues falling to $1.54 billion. Business services and wholesale revenue increased 1.2% to $366 million, driven by 7% growth at Lightpath. News and Advertising revenue declined 15.8% to $100 million. Management said residential video and video-related news and advertising accounted for $92 million, or roughly 75%, of the year-over-year revenue decline.

Cost discipline helped cushion the revenue decline. Gross margin expanded 180 basis points to 71%, while Adjusted EBITDA fell 2.2% to $785.7 million. Adjusted EBITDA margin increased 140 basis points to 38.8%. Programming and direct costs declined more than 11%, while operating expenses excluding share-based compensation fell more than 4% in the quarter.

Optimum Advances Network Expansion

Optimum added 68,000 new passings during the quarter and 223,000 during the last 12 months. Approximately 97% of its total footprint supported 1 Gig or higher speeds at quarter-end. The company also continued investing in fiber and network modernization, while Lightpath reported strong demand for AI-grade infrastructure.

The company is also simplifying its operations. Optimum completed the divestiture of an advertising agency services business in the second quarter and plans to wind down New York Interconnect operations in the coming months. Management said these actions are intended to simplify the business and focus resources on higher-priority growth opportunities.

OPTU Cash Flow and Balance Sheet Position

Net cash provided by operating activities declined 44.6% year over year to $228.1 million. Cash capital expenditures fell 16.6% to $320 million, but Free Cash Flow swung to a deficit of $91.9 million from positive Free Cash Flow of $28.4 million in the year-ago quarter. For the first six months, Free Cash Flow was a deficit of $229.3 million versus a deficit of $140.2 million a year earlier.

Optimum's consolidated net debt was $25.33 billion as of June 30, 2026, representing net leverage of 8.0X. The weighted average cost of debt was 6.8%, while the weighted average life was 2.8 years. In July, CSC II completed a tender offer for 120 million Class A shares at $2.5 per share for an aggregate purchase price of $300 million.

Optimum Maintains 2026 Outlook

Management expects total revenues to decline in the mid-single digits for full-year 2026, excluding the News and Advertising divestiture. The company expects subscriber volumes to continue affecting its top-line performance and anticipates tougher ARPU comparisons in the second half, particularly in the fourth quarter.

Optimum also expects full-year Adjusted EBITDA to decline in the low to mid-single digits as revenue pressure is partly offset by continued cost discipline. Full-year capital expenditures are expected to range between $1.2 billion and $1.5 billion, with higher spending anticipated in the second half of 2026.

OPTU’s Zacks Rank

Optimum currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Other Upcoming Releases

Keysight Technologies, Inc. KEYS is scheduled to release third-quarter fiscal 2026 earnings on Aug. 18. The Zacks Consensus Estimate for earnings is pegged at $2.46 per share, suggesting growth of 43.02% from the year-ago reported figure.

Keysight has a long-term earnings growth expectation of 19.44%. The company delivered an average earnings surprise of 9.46% in the last four reported quarters.

Analog Devices, Inc. ADI is set to release third-quarter fiscal 2026 earnings on Aug. 19. The Zacks Consensus Estimate for earnings is pegged at $3.33 per share, implying growth of 62.44% from the year-ago reported figure.

Analog Devices has a long-term earnings growth expectation of 31.04%. The company delivered an average earnings surprise of 5.48% in the last four reported quarters.

Applied Materials, Inc. AMAT is scheduled to release third-quarter fiscal 2026 earnings on Aug. 13. The Zacks Consensus Estimate for earnings is pegged at $3.36 per share, suggesting growth of 35.48% from the year-ago reported figure.

Applied Materials has a long-term earnings growth expectation of 32.44%. The company delivered an average earnings surprise of 6.06% in the last four reported quarters.

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