Shenandoah Telecommunications heads into its third-quarter report with an odd disconnect. Last quarter, management described something close to an inflection point: fiber became the majority of revenue for the first time, Glow Fiber posted record customer additions, and a newly signed agreement with a major hyperscaler opened a potential new avenue for growth. Yet since that upbeat call, the stock has fallen about 13% while the S&P 500 gained nearly 4%, and shares now sit near $10, just above their post-earnings low and far below the 200-day moving average around $13.50. The market is plainly doubting the fiber story, and this report is the next chance to settle the argument.
The Street expects revenue of about $94.7 million, up 5.5% from a year ago and a modest step up from the $93.5 million reported last quarter. That is steady, unspectacular growth that matches the pace of the second quarter. The consensus calls for a loss of $0.20 per share, unchanged from the year-ago period and somewhat wider than last quarter's $0.17 loss, so the bottom line is not where the bulls are focused. Management has reaffirmed its 2026 revenue outlook of $370 million to $377 million on four straight calls, and the full-year consensus of roughly $376 million sits near the top of that range. With about $185.7 million booked in the first half, the Street is effectively betting that second-half revenue accelerates enough to land close to the high end, which leaves little room for a soft quarter.
The more revealing test may be profitability. The company's adjusted EBITDA target of $131 million to $136 million implies a meaningful second-half step up after first-half EBITDA of about $63.7 million, roughly $34 million to $36 million per quarter versus $32 million last quarter. Management pointed to a workforce reduction of about 10% as a source of lower operating costs in the back half, and incremental margins of 73% in the second quarter showed how much of each new fiber dollar falls to the bottom line. A margin moving clearly beyond last quarter's 34.3% would support the company's longer-term 40% target and its path to positive free cash flow in 2027. A flat margin would make the full-year EBITDA range look stretched.
On the growth side, Glow Fiber needs to keep adding roughly 6,000 customers a quarter now that the build is 93% complete and all markets have launched. As construction winds down, the narrative shifts from building passings to filling them, so net adds and penetration matter more than ever. Any concrete progress on the hyperscaler agreement, even early commercial fiber bookings tied to data centers, would give the market a reason to look past near-term losses.
The counterweight is the legacy incumbent cable business. Data churn jumped to 1.73% last quarter, average revenue per user slipped to $81 with a new rural rate card trimming it further, and the subscriber base dipped to about 110,000. Management blamed seasonal moves, wired competition across roughly a third of its footprint and inflation-strained rural households. If churn eases back toward the mid-1% range, the second quarter looks like a seasonal blip. If it stays elevated, the erosion could start offsetting fiber gains.
Sentiment has cooled noticeably, with the bullish reading roughly halving from the prior quarter, so expectations are hardly euphoric. That lowers the bar somewhat, but the central question remains unchanged: can fiber growth and cost savings lift margins fast enough to outrun a shrinking rural base? A quarter that answers yes would challenge the stock's slide; one that does not would validate the market's skepticism.