Uniti Group Inc. Q1 FY2026 earnings call

• Core Strategy & Positioning:

  • Unity positions itself as an insurgent fiber provider focused on Tier 2/3 markets, with a footprint near areas with available power and land that creates unique opportunity to serve AI infrastructure demand.
  • Growth is driven by two core engines: Kinetic fiber-to-the-home (FTTH) build, and hyperscaler/AI fiber build at Fiber Infrastructure.
  • Long-term target is 3.5 million fiber homes passed and 1.25 million fiber subscribers by end-2029, with 90% of total revenue coming from core fiber businesses.

• Kinetic Consumer Operations:

  • Achieved the best-ever quarter for consumer fiber churn (down 14% YoY, with early-customer churn down 20% YoY), and the highest quarterly gross additions in company history. Churn reduction is a company-wide incentive metric, with process improvements including higher install completion rates, lower repeat service calls, and targeted pain point resolution.
  • Over 50% of Kinetic subscribers and 50% of Kinetic consumer revenue are now on fiber, hitting two pre-committed milestones ahead of schedule. Penetration in newer build cohorts exceeds prior cohort penetration at the same stage, putting the 40% terminal penetration target within reach.

• Fiber Infrastructure & AI Opportunity:

  • Had the third-highest quarterly bookings ever, with hyperscaler demand exceeding 2026 expectations to date. The company expects the coming AI inference phase to drive massive additional demand for fiber connectivity, positioning Unity to gain share in the growing Waves (lit fiber) market.
  • Launched FastWaves, a faster-turnup lit fiber product, and recently secured the largest single lit bandwidth order in company history (a 20 terabit package for a hyperscaler), with additional similar deals in the sales funnel. Plans to build 6,000 new route miles of fiber, targeting $1 billion cumulative non-recurring cash revenue from hyperscaler deals by 2028, with up to $500 million in annual recurring revenue after that, for a total 2x-4x return on invested capital.

• Capital Structure:

  • Successful post-merger debt optimization has cut blended debt yields from 12.5% in February 2023 to 6.5% as of Q1 2026, a 600 basis point reduction. Asset-backed securities (ABS) will continue to play a growing role in funding due to their cost advantage, with the company maintaining a balanced mix of ABS and non-ABS debt.
  • Identified $500 million to $1 billion in non-core underutilized assets (excess fiber, non-clustered operations, spectrum, real estate) available for opportunistic monetization, with significant progress on multiple deals expected to close in the coming months. Monetization will have negligible impact on adjusted EBITDA.

1. Kinetic (consumer/business/wholesale fiber): Added 88,000 new fiber home passings (the highest quarterly total in nearly four years), ending Q1 2026 with 1.94 million total homes passed. Added 30,000 net new fiber subscribers, ending the quarter with 564,000 total fiber subscribers (22% YoY growth). Kinetic consumer fiber revenue grew 26% YoY, while total Kinetic fiber-based revenue grew 16% YoY. Fiber penetration hit 29.1%, up 120 bps YoY and 20 bps sequentially, and fiber ARPU increased 5% YoY. Kinetic contributed 59.2% of consolidated 2026 guided midpoint revenue. 2. Fiber Infrastructure (wholesale, hyperscaler/AI fiber): Recorded the third-highest quarterly bookings MRR of $1.6 million. Fiber infrastructure revenue grew 13% YoY overall. 80% of hyperscaler business uses all or part of existing infrastructure, with a combined IRR of approximately 30% on closed hyperscaler deals to date, and blended anchor lease-up yields of 35%. Fiber Infrastructure contributes 26.8% of consolidated 2026 guided midpoint revenue. 3. Unity Solutions (non-core managed/legacy services): Continues a mid-teens YoY revenue decline, generating predictable cash flow from retained profitable operations while low-margin legacy TDM services are wound down. Unity Solutions contributes 19.3% of consolidated 2026 guided midpoint revenue. 4. Consolidated results: Pro forma consolidated revenue grew 1% YoY, while adjusted EBITDA grew 10% YoY, marking the first quarter of combined top-line and EBITDA growth for the merged company.

• Full-year 2026 consolidated guidance is maintained at a midpoint of $3.63 billion in total revenue and $1.45 billion in adjusted EBITDA, with $1.4 billion in net capital expenditure (CapEx). Management noted that business is currently tracking ahead of the guidance midpoint, but maintained existing guidance due to potential timing variability of large hyperscaler deals. Management is more optimistic about full-year upside than at the start of 2026.
• Kinetic 2026 guidance is unchanged: midpoint $2.15 billion in revenue, $905 million in contribution margin, and $1.2 billion in net CapEx. The segment remains on track to reach 2.3-2.35 million fiber homes passed (over 50% of the total Kinetic footprint), 675,000-700,000 fiber subscribers, and $635-$655 million in consumer fiber revenue (25%-30% YoY growth) by end-2026, with a full-year target of 450,000-500,000 new fiber homes built (45,000 were built in both March and April 2026, meeting the early build ramp target).
• Fiber Infrastructure 2026 guidance is unchanged: midpoint $975 million in revenue, $560 million in contribution margin, and $140 million in net CapEx (14% capital intensity). Large hyperscaler sales-type lease dark fiber revenue is expected to remain lumpy, with most revenue recognized in Q1 and Q4 2026, and 100% of 2026 guided revenue already covered by executed contracts.
• Unity Solutions 2026 guidance is unchanged: midpoint $700 million in revenue and $310 million in contribution margin, with an expected mid-teens YoY revenue decline as planned.
• Long-term guidance is maintained: consolidated revenue and EBITDA growth is expected to be achieved in 2027, with fiber set to become the majority of total revenue by end-2026.

• Large hyperscaler deals have inherent timing variability, which can cause quarterly results to shift even if full-year demand expectations remain on track.
• Minor increases in customer premises equipment (CPE) and conduit costs (driven by higher resin prices) have been observed, though these impacts are already fully incorporated into 2026 guidance and the company has sufficient inventory to absorb current cost increases.
• Fixed wireless access (FWA) and low-earth orbit (LEO) satellite competition is causing modest churn increases in legacy copper markets, though management views this churn as temporary, as it expects to win customers back once fiber is overbuilt in those markets.
• Future cost of capital improvements are dependent on overall market conditions, which are outside of management control.

Q: The quarter outperformed expectations, but guidance was not raised. Can you explain the variability in hyperscaler revenue timing, and what competitive impact are you seeing from fixed wireless and satellite? / A: The Q1 outperformance was broadly expected and reflected slight outperformance outside of the hyperscaler segment. While business is tracking ahead of the 2026 guidance midpoint and management is more optimistic about full-year upside, large contracts can shift by a month or two, so guidance was maintained to account for this timing variability. No competitive impact is seen in fiber markets, but LEO satellite promotions caused a modest uptick in churn in copper markets during the quarter. Management expects most of this churn to be recovered when fiber is overbuilt in those areas. (312 characters)

Q: Would you consider selling Kinetic assets sooner than your original timeline of reaching 3.5 million homes, and are you seeing order delays or rising equipment costs? / A: There is no fixed timeline for asset sales; management is focused on maximizing shareholder value as quickly as possible, and is open to opportunistic M&A deals for Kinetic assets in the near term. No material order delays are observed. Minor cost increases for CPE and conduit were seen, but these were already baked into 2026 guidance, and the company has sufficient inventory and sufficient vendor scale to avoid material disruptions. (315 characters)

Q: How should we think about hyperscaler revenue timing over the next few years, and how is the AI build pipeline progressing? / A: Hyperscaler demand continues to exceed expectations, with far larger fiber purchases per customer than in prior cycles (50-100x more strand mileage per customer). $70 million of hyperscaler one-time sales revenue was recognized in Q1, with most remaining 2026 revenue expected to come in the back half, particularly Q4. Hyperscaler demand is expected to grow year-over-year for the next three years, before the inference phase ramps up and drives substantial recurring wave revenue growth. (348 characters)

Q: How low can Kinetic churn go, and what initiatives are driving the current improvement? / A: Churn fell 14% YoY to a record low in Q1, with early-customer churn down 20% YoY. Initiatives include better upfront issue resolution, higher install completion rates, lower repeat service calls, and industry-leading best practices from prior executive experience. Management expects churn to continue improving year-over-year, eventually reaching industry-leading levels, following normal seasonal churn patterns. (270 characters)