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SEC filingMixed Q1: site leasing revenue grew 5.9% on international expansion, but net income fell 16.3% on higher interest expense and domestic churn from Sprint/EchoStar.
Revenue for the first quarter of 2026 was $703.4 million, a 5.9% increase from $664.2 million in the prior year period. This growth was primarily driven by international site leasing, reflecting contributions from acquisitions and organic expansion. Gross profit rose 6.1% to $664.0 million, maintaining a high gross margin of 94.4%, underscoring the scalability of the tower portfolio.
Operating income increased 2.4% to $342.8 million, supported by higher segment operating profit and a decrease in asset impairment and decommission costs, partially offset by higher depreciation, accretion, and amortization. However, net income declined 16.3% to $184.8 million, and diluted EPS fell 14.7% to $1.74, as interest expense rose significantly due to higher debt levels and interest rates. The company noted that higher interest rates have impacted and are expected to continue to impact its growth rate and future operating results.
Net cash provided by operating activities was $255.1 million, down from $301.2 million in the prior year. Capital expenditures increased to $48.4 million from $46.2 million, resulting in free cash flow of $206.7 million. The company's capital allocation strategy focuses on portfolio growth, stock repurchases, and returning cash to shareholders through dividends. Management believes that cash on hand, available credit facility capacity, and operating cash flows will be sufficient to service debt over the next twelve months.
Domestic site leasing revenue faced headwinds from churn related to Sprint and EchoStar, partially offset by new leases and escalators. Site development operating income decreased due to lower segment operating profit driven by higher construction costs and reduced carrier activity. Other operating expenses increased primarily due to higher selling, general, and administrative expenses.
The company faces ongoing risks from higher interest rates, which may reduce wireless carriers' capital expenditure capacity and adversely affect future revenue growth. Despite these challenges, SBA Communications continues to invest in its portfolio and maintain a disciplined capital allocation strategy aimed at increasing shareholder value.