Uniti Group Q1 Earnings Call Highlights

Key Points

• Uniti posted a strong first quarter with total fiber revenue up 15% year over year, helped by Kinetic subscriber growth and hyperscaler AI-related demand in Fiber Infrastructure. Adjusted EBITDA also rose 10% on a pro forma basis.
• Kinetic’s fiber business accelerated, adding 88,000 homes passed and 30,000 net new fiber subscribers in the quarter. Fiber subscribers reached 564,000, penetration improved to 29.1%, and consumer fiber revenue increased 26% year over year.
• Management kept full-year 2026 guidance unchanged despite a strong quarter, saying large hyperscaler deals can shift timing. The company also highlighted long-term upside from AI and hyperscaler demand, plus potential asset monetization of $500 million to $1 billion over the next 12 to 36 months.

Uniti Group NASDAQ: UNIT executives said the company started 2026 with stronger fiber growth, record Kinetic customer activity and continued demand from hyperscale customers tied to artificial intelligence infrastructure, while maintaining its full-year outlook because of the timing variability of large dark fiber deals.

President and CEO Kenny Gunderman said Uniti is executing on its strategy as an “insurgent fiber provider,” with growth coming from two main areas: fiber-to-the-home expansion at Kinetic and hyperscaler AI-related builds in its Fiber Infrastructure segment.

“Fiber is clearly viewed as a mission-critical asset in a way that has never been before,” Gunderman said, adding that Uniti’s footprint is located in or near markets with power and land availability, which he said creates opportunities tied to AI-related infrastructure demand.

Fiber Revenue and Kinetic Subscriber Growth Accelerate

Uniti reported that total fiber revenue grew 15% year over year in the first quarter. Fiber Infrastructure revenue rose 13%, and the segment posted consolidated bookings monthly recurring revenue of approximately $1.6 million, which Senior EVP and CFO Paul Bullington said was the third-highest level on record.

At Kinetic, the company expanded its fiber network to pass an additional 88,000 homes during the quarter, its highest level of new passings in nearly four years. Kinetic ended the quarter with approximately 1.94 million homes passed with fiber.

The business also added 30,000 net new fiber subscribers, ending the quarter with 564,000 total fiber subscribers. Bullington said total Kinetic fiber subscribers grew 22% from the prior-year period, while Kinetic consumer fiber revenue increased 26% year over year.

Kinetic fiber penetration reached 29.1%, up 20 basis points sequentially and 120 basis points from a year earlier. Fiber average revenue per user increased 5% year over year.

Gunderman said Kinetic had its strongest quarter ever for gross adds and its best quarter ever for consumer fiber churn. He said the company had previously identified Kinetic consumer fiber churn as too high and had made reducing it a companywide incentive metric.

2026 Guidance Held Steady Despite Strong First Quarter

On a pro forma basis, Uniti said consolidated revenue rose 1% year over year in the first quarter, while adjusted EBITDA increased 10%. Bullington said the growth was driven primarily by hyperscaler AI deals recognized during the quarter, partially offset by declines in Uniti Solutions and legacy copper and TDM services.

The company reaffirmed its full-year 2026 outlook. At the midpoint, Uniti continues to expect:

• Consolidated revenue of approximately $3.63 billion.
• Adjusted EBITDA of approximately $1.45 billion.
• Consolidated net capital expenditures of about $1.4 billion.
• Kinetic revenue of $2.15 billion and contribution margin of $905 million.
• Fiber Infrastructure revenue of $975 million and contribution margin of $560 million.
• Uniti Solutions revenue of $700 million and contribution margin of $310 million.

Bullington said the company expects Kinetic to reach 2.3 million to 2.35 million homes passed with fiber by year-end, with 675,000 to 700,000 fiber subscribers. Uniti also expects Kinetic consumer fiber revenue of $635 million to $655 million in 2026, representing growth of roughly 25% to 30% from the prior year.

During the question-and-answer session, Raymond James analyst Frank Louthan asked why the company did not raise guidance after the stronger first quarter. Gunderman said the quarter was in line with the company’s plan and that management had expected revenue and EBITDA to be uneven because of large hyperscaler deals.

“Our business is tracking ahead of the midpoint,” Gunderman said. “We debated raising guidance, but we ultimately decided to stick with where we are because some of these larger deals can kind of move around.”

Hyperscaler and AI Demand Remain Central to Fiber Infrastructure

Gunderman described the wholesale fiber opportunity as “generational” and said Uniti is benefiting from demand tied to fiber-to-the-home builds, mobile wireless, satellite, hyperscalers and generative AI.

He said Uniti expects to build approximately 6,000 new route miles of fiber and generate close to $1 billion of cumulative non-recurring cash revenue by 2028. The company also expects the opportunity to evolve toward lease-up and recurring revenue, with potential for up to $500 million of recurring annual cash revenue over time.

Gunderman said close to 80% of Uniti’s hyperscaler business includes selling all or part of existing infrastructure. He said blended anchor lease-up yields are 35%, and the combined internal rates of return on hyperscaler deals sold to date are approximately 30%.

The company also highlighted growth in lit bandwidth. Gunderman said Uniti recently launched FastWaves, a product designed to provide faster turn-up intervals, and is selectively enabling WAVE capability on routes where it sees competitive advantages. He said Uniti sold a 20-terabit WAVE package to a hyperscaler in May, calling it the largest lit bandwidth order in the company’s history.

Competition, Churn and Cost Pressures Discussed

John Harrobin, President of Kinetic, said the company is not seeing an impact from fixed wireless access or low-Earth-orbit satellite competition in its fiber markets. However, he said Kinetic did see some increased LEO activity in copper markets during the quarter, reflected in churn.

Harrobin attributed that activity to aggressive promotions, free equipment and the timing of Kinetic’s price increases. He said the company views that churn as temporary because it expects to win customers back when it builds fiber in those markets.

Harrobin said Kinetic’s fiber churn improved 14% year over year, while early-life customer churn improved 20% year over year. He cited initiatives focused on identifying customer pain points, improving install completion rates, reducing trouble tickets and truck rolls, lowering repeat service rates and reducing transfer rates.

In response to a question from TD Cowen analyst Gregory Williams, Gunderman said Uniti is not seeing material delays in customer circuit turn-ups. He said the company is seeing some higher customer premises equipment costs and some higher conduit pricing tied to resin costs, but those expectations were already reflected in guidance.

Capital Structure and Potential Asset Monetization

Bullington said Uniti has taken steps since announcing its agreement to merge with Windstream to extend debt maturities, lower its overall cost of debt, access new debt markets and optimize its secured and unsecured debt mix. He said blended yields on the company’s debt have declined from about 12.5% in February 2023 to about 6.5% today.

He said Uniti expects to remain active in the asset-backed securities market, while maintaining a balanced mix of ABS and non-ABS debt.

Bullington also said Uniti believes it has $500 million to $1 billion of non-core assets it could monetize over the next 12 to 36 months, including excess fiber, non-core or non-clustered assets and operations, spectrum and real estate assets. He said any divestitures would be opportunistic and would have a negligible effect on adjusted EBITDA because many of the assets produce minimal or no cash flow today.

About Uniti Group NASDAQ: UNIT

Uniti Group Inc is a real estate investment trust that owns, operates and acquires communications infrastructure assets across the United States. Established in September 2015 through a spin-off from Windstream Holdings, Uniti Group focuses on leasing fiber, small cell networks, cell towers and related infrastructure to service providers, wireless carriers and other enterprises requiring high-capacity connectivity. The company's assets are designed to support the growing data demands of residential, business and governmental customers, with an emphasis on long-term contractual lease arrangements.

Uniti's portfolio encompasses an extensive fiber network that spans metropolitan and rural markets, as well as a portfolio of wireless towers and small cell nodes that facilitate mobile network densification and help carriers deploy 5G services.

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