Cogent (NASDAQ:CCOI) Misses Q3 Revenue Estimates, Stock Drops 21.5%

Internet service provider Cogent Communications (NASDAQ:CCOI) fell short of the markets revenue expectations in Q3 CY2025, with sales falling 5.9% year on year to $241.9 million. Its GAAP loss of $0.87 per share was 14.6% above analysts’ consensus estimates.

Is now the time to buy Cogent? Find out by accessing our full research report, it’s free for active Edge members.

Company Overview

Operating a massive network spanning 20,000 miles of fiber optic cable and connecting to over 3,200 buildings worldwide, Cogent Communications (NASDAQ:CCOI) provides high-speed Internet access, private network services, and data center colocation to businesses and bandwidth-intensive organizations across 54 countries.

Revenue Growth

A company’s long-term sales performance can indicate its overall quality. Any business can put up a good quarter or two, but many enduring ones grow for years.

With $987.5 million in revenue over the past 12 months, Cogent is a small player in the business services space, which sometimes brings disadvantages compared to larger competitors benefiting from economies of scale and numerous distribution channels. On the bright side, it can grow faster because it has more room to expand.

As you can see below, Cogent grew its sales at an excellent 11.8% compounded annual growth rate over the last five years. This shows it had high demand, a useful starting point for our analysis.

We at StockStory place the most emphasis on long-term growth, but within business services, a half-decade historical view may miss recent innovations or disruptive industry trends. Cogent’s annualized revenue growth of 9.7% over the last two years is below its five-year trend, but we still think the results suggest healthy demand.

This quarter, Cogent missed Wall Street’s estimates and reported a rather uninspiring 5.9% year-on-year revenue decline, generating $241.9 million of revenue.

Looking ahead, sell-side analysts expect revenue to grow 5.4% over the next 12 months, a deceleration versus the last two years. Still, this projection is above average for the sector and indicates the market sees some success for its newer products and services.

The 1999 book Gorilla Game predicted Microsoft and Apple would dominate tech before it happened. Its thesis? Identify the platform winners early. Today, enterprise software companies embedding generative AI are becoming the new gorillas. a profitable, fast-growing enterprise software stock that is already riding the automation wave and looking to catch the generative AI next.

Operating Margin

Cogent’s high expenses have contributed to an average operating margin of negative 3.9% over the last five years. Unprofitable business services companies require extra attention because they could get caught swimming naked when the tide goes out. It’s hard to trust that the business can endure a full cycle.

Looking at the trend in its profitability, Cogent’s operating margin decreased by 31.3 percentage points over the last five years. This raises questions about the company’s expense base because its revenue growth should have given it leverage on its fixed costs, resulting in better economies of scale and profitability. Cogent’s performance was poor no matter how you look at it - it shows that costs were rising and it couldn’t pass them onto its customers.

In Q3, Cogent generated a negative 7.5% operating margin.

Earnings Per Share

Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

Sadly for Cogent, its EPS declined by 62.6% annually over the last five years while its revenue grew by 11.8%. This tells us the company became less profitable on a per-share basis as it expanded.

Diving into the nuances of Cogent’s earnings can give us a better understanding of its performance. As we mentioned earlier, Cogent’s operating margin expanded this quarter but declined by 31.3 percentage points over the last five years. Its share count also grew by 3.9%, meaning the company not only became less efficient with its operating expenses but also diluted its shareholders.

Like with revenue, we analyze EPS over a shorter period to see if we are missing a change in the business.

For Cogent, its two-year annual EPS declines of 47.7% show it’s still underperforming. These results were bad no matter how you slice the data.

In Q3, Cogent reported EPS of negative $0.87, up from negative $1.33 in the same quarter last year. This print easily cleared analysts’ estimates, and shareholders should be content with the results. Over the next 12 months, Wall Street expects Cogent to improve its earnings losses. Analysts forecast its full-year EPS of negative $4.09 will advance to negative $3.79.

Key Takeaways from Cogent’s Q3 Results

Cogent missed on the revenue and EBITDA lines, making for a weak quarter. The stock traded down 21.5% to $30 immediately following the results.

So do we think Cogent is an attractive buy at the current price? If you’re making that decision, you should consider the bigger picture of valuation, business qualities, as well as the latest earnings. We cover that in our actionable full research report which you can read here, it’s free for active Edge members.