Charter Communications shares experienced a dramatic decline of approximately 22% on Friday, following the release of first-quarter results that revealed a steeper-than-anticipated loss of internet subscribers. The stock was trading at $187.65, marking a drop of $54.13 from the previous close. This sharp selloff underscores growing concerns among cable investors who had hoped for signs of stabilization in the broadband market.
Broadband Losses Deepen
The company reported a loss of 120,000 internet customers during the first quarter, double the 59,000 lost in the same period last year. This figure significantly exceeded analyst expectations of 100,036 broadband customer losses, according to Visible Alpha data cited by Reuters. The total broadband subscriber base now stands at 29.6 million. The disappointing performance comes after Comcast reported a smaller-than-expected broadband loss of 65,000 customers, briefly raising hopes that the sector's worst subscriber pressure might be easing.
Revenue and Profitability
Charter's first-quarter revenue slipped 1% to $13.6 billion, slightly above the LSEG estimate of $13.55 billion. Net income attributable to shareholders fell to $1.16 billion from $1.22 billion a year earlier. However, diluted earnings per share rose to $9.17 from $8.42, aided by a reduction in outstanding shares. Adjusted EBITDA, a non-GAAP measure that excludes certain costs, declined 2.2% to $5.64 billion.
Segment Performance
While broadband struggled, other segments showed mixed results. Video subscriber losses narrowed sharply to 60,000 from 181,000 in the prior year. The mobile business added 368,000 lines, bringing the total to 12.1 million, though this fell short of the 431,920 additions analysts had predicted. Average revenue per user (ARPU) also came under pressure, with New Street Research analyst Vikash Harlalka noting weak broadband subscriber and ARPU results, though EBITDA was described as "fine."
Cox Acquisition Overhang
The disappointing results create an awkward backdrop for Charter's proposed $34.5 billion acquisition of Cox Communications. The deal, which aims to add scale as cable operators face competition from streaming, fiber, and fixed wireless services, has received FCC approval but still requires California's sign-off. Charter continues to target a summer close. Chief Financial Officer Jessica Fischer raised the estimated run-rate operating expense synergies to at least $800 million, up from $500 million, citing procurement and programming benefits.
Capital Expenditure and Cash Flow
Charter faces a heavy investment year, with capital expenditures rising to $2.9 billion in the quarter. The company still expects total capex of approximately $11.4 billion for 2026, excluding costs related to the Cox deal. Free cash flow, a key metric for investors, declined to $1.4 billion from $1.6 billion in the same period last year.
Management Commentary
Chief Executive Chris Winfrey expressed confidence in the company's competitive position, stating that Charter remains "confident about our ability to win in the marketplace." However, he acknowledged the pressure point, saying, "We are very focused on returning to broadband growth." The company may need to rely more heavily on promotions to stem subscriber losses, which could weigh on ARPU, margins, and free cash flow in the near term.
Market Context
The broadband sector has been under pressure from fixed wireless access (FWA) and fiber-to-the-home deployments, which have been capturing market share. Comcast's relatively better performance highlighted Charter's struggles, amplifying the market's negative reaction. The challenge for Charter is that scale from the Cox acquisition may not immediately address the subscriber growth issues, adding to investor uncertainty.
