Higher costs drag Converge Q2 earnings

From AB Capital's The Opening Bell: Three Moves

Event

Converge reported a weak 2Q26, with net income declining 16% YoY and 18% QoQ to P2.5 billion. 1H26 earnings reached just P5.5 billion (-8% YoY), equivalent to only 43% of our FY26 forecast and 42% of street expectations. Management also lowered FY26 revenue growth guidance to 4-6% from 8-10%.

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The key disappointment was the residential business. Revenue was largely flat, while the company unexpectedly posted 1,600 net subscriber losses in 2Q26, suggesting higher churn and contrasting sharply with GLO's 129,000 fiber net adds. Enterprise remained the standout, with revenue growing 14% YoY across SME and large corporates, but this was insufficient to offset weaker residential trends. Meanwhile, costs significantly outpaced revenue growth (cost of services +15%, opex +17% vs. revenue +2.5%), driving EBITDA margin down to 56.5% from 61.8% in 1Q26.

Catalyst

Stabilization in residential subscriber trends, improved fiber net adds, sustained enterprise growth, and evidence that management can defend its 58-59% EBITDA margin target despite slower revenue growth.

Action

Weak residential execution, rising churn, margin compression, and lower FY26 guidance point to a softer earnings outlook until subscriber growth and operating leverage begin to recover.

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