DY Q3 Deep Dive: Data Center Acquisition and Fiber Builds Drive Outperformance

Telecommunications company Dycom (NYSE:DY) beat Wall Street’s revenue expectations in Q3 CY2025, with sales up 14.1% year on year to $1.45 billion. The company expects next quarter’s revenue to be around $1.3 billion, close to analysts’ estimates. Its non-GAAP profit of $3.63 per share was 13% above analysts’ consensus estimates.

Is now the time to buy DY? Find out in our full research report (it’s free for active Edge members).

StockStory’s Take

Dycom’s third quarter was marked by strong execution in core fiber-to-the-home programs and significant momentum in data center-related projects, leading to results above Wall Street’s expectations and a positive market reaction. Management pointed to robust activity from both traditional carriers and hyperscale technology providers, with CEO Dan Peyovich highlighting, “Our strong market position is validated by deepening engagement across our customer base.” Growth was also supported by recurring service and maintenance contracts, which have become a durable revenue stream.

Looking ahead, management expects accelerated growth from new data center infrastructure demand and expanding fiber deployment, supported by the recently announced acquisition of Power Solutions. CEO Dan Peyovich stated that this move positions Dycom “at the center of the powerful secular trends driving growth in digital infrastructure services.” The company is also preparing to capitalize on government-funded broadband initiatives, with over half a billion dollars in verbal awards related to BEAD deployments, which are not yet reflected in the backlog but are expected to convert as project funding is released.

Key Insights from Management’s Remarks

Management attributed the quarter’s outperformance to heightened demand for fiber and data center infrastructure, alongside a growing base of recurring service and maintenance agreements.

• Data center demand surge: Dycom’s acquisition of Power Solutions is designed to meet rising needs for electrical and fiber infrastructure in the world’s largest data center market (the DMV region), with over 90% of Power Solutions’ revenue stemming from data center projects.
• Expansion of skilled workforce: The addition of over 2,800 Power Solutions employees brings Dycom’s combined skilled labor force to 19,000, strengthening the company’s ability to deliver on complex, large-scale projects.
• Broadening customer relationships: Dycom is extending its reach with major technology and hyperscale customers, leveraging Power Solutions’ established presence and cross-sell opportunities to deepen engagement with end users demanding advanced digital infrastructure.
• Recurring service and maintenance: Management highlighted new service and maintenance agreements totaling over $500 million, which provide stable and predictable revenue streams and reinforce Dycom’s status as a preferred provider.
• Operating leverage and margin gains: The company cited disciplined execution and growing scale in fiber and wireless programs as key contributors to margin expansion, supported by progress on operational improvements such as reducing days sales outstanding (DSOs) and completing the first phase of a new ERP system.

Drivers of Future Performance

Dycom’s outlook is shaped by persistent demand for digital infrastructure, new data center projects, and anticipated benefits from government broadband funding.

• Integration of Power Solutions: Management expects the acquisition to be immediately accretive to adjusted EBITDA margins and non-GAAP EPS, while enabling broader service offerings and expansion into additional high-growth regions beyond the DMV market.
• Fiber and broadband acceleration: The company anticipates increased revenue from large-scale fiber-to-the-home builds and BEAD-funded rural broadband initiatives, supported by a growing backlog of verbal awards that are poised to convert as states receive project funding.
• Sustained margin performance: Dycom projects continued margin improvement, driven by operating leverage in core business lines, new high-margin data center contracts, and a more capital-light service mix resulting from the acquisition.

Catalysts in Upcoming Quarters

Looking ahead, the StockStory team will be monitoring (1) the successful integration and geographic expansion of Power Solutions, (2) the conversion of verbal BEAD awards into backlog as federal broadband funding is released, and (3) sustained growth in service and maintenance agreements, which underpin Dycom’s recurring revenue base. We will also keep a close eye on margin trends as the company scales its data center and fiber operations.

Dycom currently trades at $330.44, up from $296.20 just before the earnings. In the wake of this quarter, is it a buy or sell? See for yourself in our full research report (it’s free for active Edge members).

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