Uniti Group NASDAQ: UNIT reported record fiber infrastructure bookings and accelerated fiber construction in the second quarter of 2026, as management pointed to rising demand from hyperscalers, neocloud providers and other customers deploying artificial intelligence-related infrastructure.
Chief Executive Officer Kenny Gunderman said total fiber revenue increased 10% from a year earlier, while fiber infrastructure revenue rose 6%, in line with company expectations. He described the quarter as a record for new fiber infrastructure bookings, exceeding the prior record by nearly 30%.
Management said demand was broad-based across its wholesale customer base. During the quarter, approximately 20% of fiber infrastructure bookings came from neocloud customers, 18% from superscalers, 10% from hyperscalers and 6% from fiber-to-the-home providers.
AI Demand Drives Wholesale Activity
Gunderman said AI adoption is expanding the need for high-bandwidth, low-latency connectivity, with near-term applications including customer-service automation, cybersecurity and corporate-function automation. He said future uses such as robotics, autonomous driving and scientific research could require still greater network capacity.
Uniti is seeing increased demand for both dark fiber and lit wave services. More than half of second-quarter fiber infrastructure bookings were for waves, or lit capacity, rather than dark fiber. Gunderman said wave services were the largest individual product contributor to the company’s record booking level.
The company highlighted two large wave packages sold during the quarter: a 20-terabit package connecting a neocloud customer from a Tier 2 market data center to a large metro area, and an 18-terabit package sold to a superscaler from another Tier 2 market data center. Together, those transactions represented 96 400-gigabit waves, according to management.
Gunderman said Uniti’s current waves sales funnel represents roughly 1.3 petabytes of traffic, with most of that opportunity involving relatively new customers. He also said nearly 80% of the company’s hyperscaler business uses all or part of Uniti’s preexisting network, contributing to blended anchor lease-up cash yields of 37%, the company’s highest level to date.
During the question-and-answer session, Gunderman said hyperscaler projects generally involve new fiber construction, route interconnections or overbuilds and tend to emphasize dark fiber. By contrast, neocloud and superscaler customers are increasingly using lit capacity for inference workloads and compute services.
He said large dark-fiber agreements generally run for 10 to 20 years, while lit and wave contracts are typically shorter, often in the three- to five-year range and closer to three years in many cases. The company is focused on customer credit quality as it pursues these newer categories of customers, he said.
Kinetic Expands Fiber Footprint
At Kinetic, Uniti’s consumer fiber business, the company passed an additional 141,000 homes with fiber during the quarter, its highest quarterly level on record. Kinetic ended the period with about 2.1 million homes passed with fiber, representing 46% of its consumer footprint.
Kinetic added 38,000 net fiber subscribers in the quarter, also a record, ending with 603,000 fiber subscribers. Total fiber subscribers increased 25% from the prior-year period, while consumer fiber revenue rose 19% year over year.
Fiber penetration reached 29%, up 90 basis points from a year earlier. Chief Financial Officer Paul Bullington said newer customer cohorts are achieving stronger penetration rates than earlier cohorts did at comparable stages, supporting management’s view that its 40% terminal penetration target is achievable and potentially conservative.
Uniti raised its 2026 target for incremental fiber homes passed by 25,000 and now expects to construct 475,000 to 525,000 new fiber homes during the year. The company expects to end 2026 with 2.33 million to 2.38 million homes passed with fiber, or more than 50% of the Kinetic footprint, and with 675,000 to 700,000 fiber subscribers.
Management expects Kinetic consumer fiber revenue of $635 million to $655 million for 2026, representing growth of roughly 25% to 30% from the prior year.
ARPU Pressure and Capital Spending
Consumer fiber average revenue per user was affected during the quarter by new-customer volume, the timing of rate-plan adjustments and retention efforts, Bullington said. Uniti expects fiber ARPU to decline by low single digits year over year in the third quarter before stabilizing and rising by low single digits in the fourth quarter.
Kinetic President John Harrobin said the company’s longer-term forecast still calls for 2% to 3% annual ARPU growth beginning in 2027. He said Kinetic faces large cable competitors in less than 60% of its fiber territory, compared with a mid-80% to low-90% exposure cited for certain peers. The company is using different pricing tiers and customer cohorts to respond to competitive promotions while maintaining subscriber growth, he said.
Uniti increased its Kinetic net capital expenditure outlook by $100 million to approximately $1.27 billion at the midpoint. Bullington said the higher spending does not solely reflect the 25,000 additional homes in the 2026 construction target, as a substantial portion is being pulled forward to support 2027 expansion.
Harrobin said the company expects a modest increase in fiber-material costs beginning around mid-2027, which could place its cost per passing toward the upper end of its previously communicated range. However, he said Uniti does not expect to be affected by customer-premises-equipment memory-chip constraints because of long-term supply contracts, scale and flexibility across equipment models.
Outlook and Capital Structure
On a pro forma basis, Uniti said second-quarter consolidated revenue declined 5% year over year and adjusted EBITDA fell 10%, primarily because of declines in Uniti Solutions and legacy copper and TDM services. Kinetic fiber-based revenue, including consumer and wholesale services, grew 12%, while fiber infrastructure revenue and adjusted EBITDA increased 10% and 20%, respectively.
For 2026, Uniti maintained midpoint expectations for Kinetic revenue of $2.145 billion and contribution margin of $905 million. It raised fiber infrastructure midpoint guidance to $1 billion of revenue and $575 million of contribution margin, citing strong hyperscale and AI-related activity.
The company expects Uniti Solutions to generate $700 million in revenue and $320 million in contribution margin at the midpoint. Consolidated guidance calls for approximately $3.655 billion of revenue, $1.475 billion of adjusted EBITDA and $1.525 billion of net capital expenditures.
Bullington cautioned that large dark-fiber sales can be uneven between quarters. Uniti expects limited large-deal contribution in the third quarter, with a significant portion anticipated in the fourth quarter, though some transactions could shift into early 2027 due to the timing of major construction projects.
Separately, Bullington said Uniti recently completed its second Kinetic asset-backed securities transaction, which is intended to help fund fiber construction over the next year and could support repayment of up to $500 million of secured debt through ongoing asset sale offers. The company also said it sees potential to monetize $500 million to $1 billion of non-core assets over the next 12 to 36 months, with minimal expected impact on adjusted EBITDA because many of those assets are underutilized or generate little cash flow.
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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