UNIT Credit: KPIs in a Good Place, But Capex and Leverage Still Set the Pace

Research evidence excerpt

UNIT Credit: KPIs in a Good Place, But Capex and Leverage Still Set the Pace

Update

July 31, 2026 06:59 PM GMT

Morgan Stanley & Co. LLCMTMT Credit Research | North America David M Hamburger

Credit Analyst

UNIT Credit: KPIs in a Good David.Hamburger@morganstanley.comJuliana Gonzalez +1 212 761-1580

Juliana.Gonzalez.Montalvo@morganstanley.com +1 212 761-0918

Place, But Capex and Leverage

Still Set the Pace

2Q26 revenue and adjusted EBITDA both came in above our

estimates, and FY26 revenue and adjusted EBITDA guidance

both moved up $25mn at each end of the range. Operationally, it

was another record quarter for Kinetic KPIs, with consumer fiber

net adds and fiber homes passed accelerating, and Fiber

Infrastructure bookings and hyperscaler IRRs both hitting new

highs. However, the print did not resolve the core credit

questions we noted after 1Q26.

Reported net leverage (the company's own ex-ABS metric) rose to 5.88x from 5.41x

in 1Q26, and on our fuller metric, which layers in preferred and the growing ABS

stack, net leverage rose to 7.0x from 6.5x. Cash fell to $609mn from $983mn and

Kinetic net capex guidance moved $100mn higher. Management also highlighted a

deceleration in hyperscaler bookings into 3Q26, with some builds possibly slipping

modestly from 2026 into 2027, while Kinetic consumer fiber ARPU fell 2.6% in the

quarter and is guided to a similar decline in 3Q before an expected return to growth

in 4Q. We see 2Q26 as supportive of the long-term fiber thesis but far from a clean

signal of deleveraging for the overall story.

What We're Watching into 3Q26 and Year-End

• Leverage trajectory and balance sheet actions: Reported (ex-ABS) net

leverage rose to 5.88x from 5.41x, as did our fuller net debt/LTM Adjusted