“Long Live The Crown” Stock Market (And Sentiment Results)

Crown Castle (CCI) Update

For newer readers, here’s a brief overview of the key drivers behind our Crown Castle thesis, the only pure-play U.S. tower REIT and a high-yield income name that becomes increasingly hard to ignore as rates come down and capital rotates back into yield:

Q2 Earnings Breakdown

10 Key Points

1) Q2 site rental revenue of $967M (-4.1% Y/Y) came in ahead of the ~$942M consensus, while adjusted EBITDA of $675M (-4% Y/Y) and AFFO of $1.13 per share (+11% Y/Y) topped the ~$659M and ~$0.95 estimates, respectively. The revenue and EBITDA declines were driven by the DISH (SATS) and Sprint churn, alongside a $3M decrease in amortization of prepaid rent and a $23M decrease in non-cash straight-line revenues, which together accounted for the full $41M revenue decline. AFFO per share grew 11% Y/Y, as the fiber sale proceeds drove a $35M Y/Y reduction in interest expense and a $14M increase in interest income.

2) CCI closed the $8.5B sale of its small cell and fiber solutions businesses on May 1, with EQT (EQT) acquiring the small cells business and Zayo acquiring the fiber solutions business, for $8.4B in net proceeds after ~$124M of preliminary purchase price adjustments. The transaction closed two months ahead of the prior June 30 assumption, with proceeds deployed exactly as promised, funding more than $7B of debt repayment and $1B of share repurchases at an average price of $88.66. The close completes CCI’s multi-year transformation into the only publicly traded pure-play US tower operator focused exclusively on the US market.

3) DISH terminations drove a $49M Y/Y headwind to site rental billings in the quarter, and with DISH Wireless now in bankruptcy, management has pivoted from its original lawsuit, now suspended, to pursuing its $3.5B contractual claim through the bankruptcy court. CCI has been appointed to the unsecured creditors committee and believes the bankruptcy path will resolve faster than a traditional lawsuit would have. A second recovery avenue runs through the FCC-mandated $2.4B escrow account tied to the EchoStar spectrum sales to AT&T (T) and SpaceX, which sits outside the normal bankruptcy waterfall and is earmarked for infrastructure vendors, where CCI believes it holds one of the largest claims. Full-year guidance continues to assume zero contribution from DISH.

4) Organic contribution to site rental billings was $38M in the quarter, or 3.9% organic growth, excluding the unfavorable $49M and $5M impacts from DISH terminations and Sprint cancellations, respectively. Growth rises to 4.2% once DISH is stripped from the prior-year base, an acceleration from 3.7% in Q2 2025 on a comparable basis. The underlying components were healthy across the board, with +$15M (1.8%) from core leasing activity, +$25M (2.7%) from escalators, and +$5M (0.5%) from other billings, partially offset by -$7M (-0.7%) from non-renewals. Management continues to view 2026 as the trough year for organic growth, with acceleration expected thereafter as Sprint churn rolls off and new spectrum deployments ramp.

5) Management addressed investor concerns around the satellite threat directly, making the case that direct-to-device offerings remain a complement rather than a substitute. ~90% of mobile usage occurs indoors or in vehicles, where satellite struggles given its need for a clear line of sight and a signal ~10,000x weaker than terrestrial. Satellite operators also access only tens of megahertz of spectrum versus hundreds for each major carrier, and a single beam covers 100 to 600 square miles versus 3 to 20 for a terrestrial cell site, meaning terrestrial sites support ~30x more users per megahertz of spectrum. When asked whether carriers had altered any rural coverage builds or renewals in response to recent satellite partnerships, management indicated they had not, a sign the perceived threat has yet to surface in customer behavior.

6) CCI ended the quarter at 6.3x net debt to EBITDA, squarely within its 6.0x to 6.5x investment-grade target, with net debt of $17.1B now sitting at a 100% fixed rate, a weighted average maturity of ~7 years, ~$4.5B of revolver availability, and ~$1.25B of cash. The ~$7.2B of debt repaid since last quarter was concentrated in the highest-cost, most rate-sensitive obligations, including ~$5B of floating-rate debt across the commercial paper program, revolver, and term loan, alongside $500M of open-market repurchases and $1.75B of maturing unsecured notes. Management reiterated its commitment to an investment-grade balance sheet and right-sized the revolver from $7B to $4.5B to better align with the leaner standalone business.

7) Total capex rose 48% Y/Y to $59M, split between $52M of discretionary and $7M of sustaining capex. The increase was driven almost entirely by a $20M step-up in land capex, with purchases of land interests more than doubling to $36M from $16M a year ago. CCI now owns the land under 43% of its towers (weighted by gross margin), and increasing that share is the primary lever behind management’s targeted 200+ bps of future margin improvement, supported by an ~11% land cost gap versus peers American Tower (AMT) and SBA (SBAC) that management aims to close over the next couple of years. Management emphasized the ground lease buyout program will remain financially disciplined, targeting paybacks that translate to returns well above its cost of capital. The step-up in land spend was also the primary driver of lower reported free cash flow in the quarter.

8) CCI paid ~$460M in common stock dividends during the quarter, or $1.0625 per share, unchanged on a per-share basis Y/Y and yielding ~5.6% at current prices. With the payout held flat and AFFO growing, coverage continues to improve, with management targeting a 75% to 80% payout ratio and expecting the dividend to grow in line with AFFO over time.

9) Management pointed to three drivers of long-term growth, starting with mobile data demand, where per-smartphone US consumption is projected to more than 2x over the next five years, from 25 to 52 gigabits per month, alongside a 3x increase in AI-driven uplink traffic. The spectrum pipeline is the largest to date, with at least 800 MHz set to be made available for commercial use in the coming years, including upper C-band and the 2027 auctions, plus another 165 MHz targeted for auction between 2026 and 2027. Edge compute is the newest opportunity, with CCI running trials to monetize its ~40,000 sites for smaller deployments requiring less than 0.2 MW of power, an incremental revenue stream that requires no capital investment on CCI’s part and uses the power and backhaul already in place at existing sites, at a time when large data centers face multi-year construction and power delays. Management described the edge trials as early but promising.

10) Management raised full-year 2026 guidance, lifting the site rental revenue midpoint to $3,855M from $3,850M, net income to $870M from $830M, diluted EPS to $2.02 from $1.94, and AFFO to $1,975M from $1,970M. Adjusted EBITDA held at $2,690M and AFFO per share remained at $4.59 (range of $4.53 to $4.65), as $15M of cost reductions and $5M of higher site rental revenue were offset by a $20M reduction in services contribution on softer carrier activity. Underlying organic growth guidance ticked up to 3.4% ex-churn, or 3.6% with DISH stripped from the prior-year base, and management reiterated 2026 as the low point for organic growth, noting that more than 90% of full-year organic growth is now contracted, compared to ~80% at the start of the year.

Earnings Call Highlights

General Market

The CNN “Fear and Greed Index” ticked down to 43 this week from 48 last week. You can learn how this indicator is calculated and how it works here: (Video Explanation)

The NAAIM (National Association of Active Investment Managers Index) (Video Explanation) ticked up to 95.64% equity exposure this week from 82.95% last week.

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