Charter Communications, Inc. (CHTR) Earnings

Management highlights

- Customer Growth & Product Strategy * Mobile added over 400,000 net new lines in Q2, reaching 1.7 million net new lines in the last 12 months, making Charter the fastest growing mobile provider in its footprint. Mobile penetration of Charter's internet customer base is currently 20%, with significant remaining upside. Bundling mobile or video with internet reduces customer churn by nearly 40%, with greater churn reduction for accounts with more mobile lines. * 55% of eligible video customers have activated at least one of Charter's included programmer streaming apps, with an average of four apps activated per customer; app activation further reduces churn across all customer tenures. * The gigabit-plus converged network is fully deployed across Charter's entire footprint. The company is facing strong competition for new internet customers, leading to softer gross additions that have delayed a return to broadband customer growth. - Customer Satisfaction & Service Improvements * Management is focused on improving NPS (net promoter score), driven by competitive pricing, price locks for bundled services, and the $1,000 savings guarantee for new and existing customers that add mobile. * Charter maintains a 100% U.S.-based sales and service team, with expanded digital self-service capabilities matched to the quality of top-performing human agents. Same-day onsite service is guaranteed (with credit if not delivered), with average arrival within two hours of service requests. * Nick Jeffrey will join Charter as Chief Operating Officer on September 1, bringing complementary talent from the upcoming Cox transaction. - Cox Transaction Update * The Cox transaction is now expected to close mid-to-late August 2026, after a closing delay related to regulatory review in California. Charter has a fully developed integration plan and expects to execute faster than previous integrations. * Shortly after close, Charter will launch its Spectrum pricing and packaging across the Cox footprint, leveraging the same successful bundling and migration approach used for prior M&A integrations. Management expects to drive higher mobile and video penetration, lower churn, and improved customer satisfaction in Cox markets, with significant B2B growth upside from combining Cox's hospitality, Segra, and RapidScale capabilities with Charter's footprint. * Run-rate annual transaction cost synergies are still expected to be at least $800 million, with management now expecting the figure to grow to $1 billion after close. Over 1,000 new frontline sales roles are already being recruited for Cox territories, and all Cox call center activity will be onshored and insourced within a year of close. * Pro forma for the close and Liberty Broadband transaction, the combined company will have ~1.3 million miles of network, 70 million passings, ~37 million total customers, ~$67 billion in annual revenue, and ~$28 billion in annual EBITDA. Mobile penetration within the combined footprint is only 8%, leaving large long-term mobile growth upside. - Capital Allocation & Deleveraging * Management has lowered the post-transaction net leverage target to 3.5x net debt to adjusted EBITDA, expected to be achieved within three years of the Cox and Liberty Broadband transaction closes. Multi-pronged deleveraging actions include open market debt repurchases and a capped $20 billion debt exchange offer launched after quarter-end that will reduce total debt principal if successful. * Share repurchases are paused through the end of Q3 2026, and will restart in Q4, with share repurchases continuing during the deleveraging process to take advantage of Charter's historically low valuation while still meeting leverage targets. * After the completion of current network evolution and expansion projects, run-rate annual standalone capital expenditures are expected to fall below $8 billion, from a projected ~$11.4 billion in 2026. - AI and New Revenue Opportunities * Charter's fiber network provides the low latency, high reliability, and high speed required to support growing AI infrastructure demand. Management expects to benefit from AI-driven increases in network demand, data center connectivity, and cost improvements, with existing edge data center facilities offering over 250 megawatts of available capacity without additional incremental investment.

Guidance

- Full year 2026 standalone Charter EBITDA, excluding Cox transition costs, is now expected to decline ~1% year-over-year, representing a downward revision from prior guidance. Management noted the back half of 2026 will benefit from political advertising, cost pass-throughs, and efficiency initiatives, and is targeting better results than this updated trajectory. * 2026 full year standalone capital expenditures are projected to be ~$11.4 billion, unchanged from prior guidance. After 2026, capital expenditures are expected to decline meaningfully in dollar terms, falling to a run rate below $8 billion per year for standalone Charter once current network evolution and expansion projects are completed. * Full year 2026 cash tax payments are projected to total between $500 million and $800 million, unchanged from prior guidance. * Post-close Cox and Liberty Broadband transactions, leverage is projected to be just above 3.9x net debt to adjusted LTM EBITDA as of the end of Q3 2026, pro forma for successful completion of the announced debt exchange offer. The new 3.5x post-transaction leverage target is expected to be achieved within three years of close. * Broadband ARPU is expected to improve sequentially in Q3 2026. Aggressive retention offers from Q1 2026 largely normalized by June 2026, and a late Q3 rate/cost pass-through will provide a tailwind for full year 2026. Management expects total connectivity ARPU and overall customer relationship ARPU (excluding programmer app allocation) to grow in full year 2026. * Charter expects to stabilize and return to broadband customer growth over time, as the growth of new competition eases, supported by product improvements, pricing, rising demand for faster speeds, and improving NPS.

Segment performance

1. Residential: Total residential revenue declined 3.5% year-over-year (down 1.8% when excluding programmer app allocation headwinds). Internet customer net losses totaled 172,000, with churn essentially flat year-over-year. Video customer net losses improved to 21,000, versus 80,000 losses in 2Q25. Mobile added 406,000 net new lines, bringing total mobile lines to over 12.5 million (16% 12-month growth). Subsidized rural internet gained 47,000 net new customers in the quarter. 2. Commercial: Total commercial revenue grew 1.5% year-over-year. Mid-market and large business revenue grew 2.8% (3.5% when excluding wholesale revenue). Small business revenue grew 0.7%: small business ARPU grew 1.5% year-over-year, offset by a 0.8% decline in small business customer count. 3. Advertising: Total advertising revenue grew 12.3% year-over-year, driven by higher political advertising; excluding political revenue, advertising declined 4.6% year-over-year. 4. Other Revenue: Grew 7.1% year-over-year, driven by higher mobile device sales, partially offset by a $45 million one-time benefit in the year-ago quarter. 5. Consolidated: Total Q2 2026 revenue declined 1.7% year-over-year (down 0.8% when excluding advertising and programmer app allocation). Adjusted EBITDA declined 4.3% year-over-year (3.2% when excluding $65 million in Cox transaction transition costs). Net income attributable to Charter shareholders was $1.3 billion, flat year-over-year. Capital expenditures totaled $2.9 billion, flat year-over-year. Free cash flow totaled $1 billion, down $75 million year-over-year.

Risks & headwinds

- Intensified competition from fixed wireless providers, fiber overbuilders with aggressive promotions, and mobile substitution has driven softer gross internet additions and higher customer losses, and has pressured broadband ARPU, with a return to growth taking longer than previously expected. * Higher than expected controllable operating costs, including fuel and medical expenses, have pressured full year 2026 EBITDA, leading to a downward revision to full year guidance. * The Cox transaction closing was delayed longer than expected by the California regulatory process, leading to higher than expected transition costs in the first half of 2026. * Starlink satellite internet poses a potential competitive threat, though no meaningful customer share loss has been observed to date, even in Charter's subsidized rural footprint. * Leverage remains elevated post the Cox and Liberty Broadband transactions, requiring multi-year deleveraging efforts to reach the new 3.5x target leverage ratio.

Analyst Q&A

• Q: What is the updated 2026 outlook for broadband ARPU, and what is Charter's current wireless traffic Wi-Fi offload percentage compared to Comcast's 90%? /

  A: Broadband ARPU will improve sequentially in Q3 2026, as aggressive Q1 retention offers normalized by June 2026. A late Q3 cost pass-through will provide further ARPU tailwinds, and overall customer relationship ARPU (excluding programmer allocation) will grow for full year 2026. Management does not focus on individual product ARPU, prioritizing total penetration and overall relationship value. Charter's Wi-Fi offload rate was 88% before a one-time 1 percentage point pullback from higher 5G traffic growth, and it expects to return to a trajectory toward 89% as CBRS deployment continues, aligned with industry trends.

• Q: Why did management lower 2026 EBITDA guidance, and is there any truth to reports of a potential Starlink partnership with Charter? /

  A: EBITDA was revised lower due to worse-than-expected broadband subscriber and ARPU results from retention offers that underperformed expectations, plus higher-than-anticipated inflation in controllable costs like fuel and medical. Management is actively implementing additional cost cutting initiatives to outperform the new trajectory. Charter regularly talks to many industry players about opportunities to improve products, lower customer costs, and innovate, but there is nothing to announce regarding any Starlink partnership at this time.

• Q: Could Charter partner with a new fourth wireless network builder (like SpaceX) to monetize its existing Wi-Fi and offload architecture, and how do Cox's current market trends compare to Charter's? /

  A: Charter is committed to its current capital-light mobile MVNO model with Verizon and T-Mobile, and has no plans to change its established CapEx trajectory to invest in building a full national wireless network. Charter is open to innovative wholesale opportunities to monetize its existing network capabilities (including Wi-Fi offload and CBRS) with third parties (including EV companies, Amazon, and even other mobile operators) if they create incremental shareholder value without distracting from core retail priorities. Cox's subscriber and revenue trends are currently slightly weaker than Charter's, with no material change since the transaction was signed. The core integration playbook remains unchanged, and the closing delay has let Charter prepare more thoroughly to deploy Spectrum pricing and bundling to drive growth in Cox markets.

• Q: Is there any plan for Charter to invest in a partnership to build out a fourth full wireless network, and what is the traffic mix split between residential private Wi-Fi and public/community hotspots/CBRS? /

  A: There are no current plans for Charter to invest in building a new full wireless network, and any potential opportunities would be pursued off of Charter's balance sheet without altering the existing multi-year capital plan. The vast majority of offloaded traffic still comes from customers' residential home Wi-Fi, followed by out-of-home Wi-Fi across the shared cable operator footprint. CBRS deployment is still in early days, but its share of offloaded traffic is growing gradually, with cross-operator CBRS access benefitting all participating cable providers.