Dycom reported $664.6 million in contract revenue for its fiscal third quarter, well ahead of Wall Street estimates and the $492.4 million it reported for the year-ago quarter. The company contributed much of that growth to top customers like AT&T (NYSE: T), Comcast (NASDAQ: CMCSA) and Verizon (NYSE: VZ) ramping up wireline deployments to meet increasing network capacity demands.
As analysts predicted, AT&T's accelerated fiber build that comes as part of the company needing to meet the network expansion conditions of AT&T's DirecTV acquisition, has made the telecom giant a significant growth customer for Dycom. In the most recent quarter, AT&T contracts contributed 26.8 percent of Dycom's revenue, making it far and away Dycom's largest customer in terms of revenue.
Comcast's continued fiber expansion led the MSO to contribute 14.4 percent of Dycom's contract revenue, enough to make Comcast Dycom's second biggest customer now. Verizon also remained in the top five for revenue for Dycom's customers, contributing 10.4 percent.
Wells Fargo analyst Jennifer Fritzsche said Dycom's big quarter shows the company is ahead of competitors in capitalizing on the fiber buildout boom.
"We think this beat is a clear indication that its top customers are significantly accelerating their fiber deployments and that DY is capturing the largest market share in servicing these projects," said Fritzsche in a research note.
Dycom CEO Steven Nielsen was encouraged by Verizon's recent announcement regarding plans to build out and offer FiOS service in Boston, a contract that extended Dycom's work with the company by five years, which Nielsen said extends Dycom's FiOS working relationship to 18 years in total.
"That's about as long a cycle as you can see in this business," Nielsen said today during an earnings call.
Overall, Dycom contributed its growth to telecoms deploying FTTx, cable companies deploying fiber to small and medium businesses, and operators meeting commitments involved with the FCC's CAF II program.
Nielsen also sounded positive about Charter Communications' (NASDAQ: CHTR) recent completion of its acquisitions of Time Warner Cable and Bright House Networks. Both Charter and TWC had fallen out of Dycom's top five customer rankings in terms of revenue but Nielsen said Dycom is already seeing activity ramp up around Charter's commitment to overbuild telecom broadband competitors as part of its merger conditions.
- see this earnings release
AT&T's, Comcast's ongoing fiber builds to provide positive near-term revenue drivers for Dycom
Verizon's network expansions help drive up Dycom's Q2 2016 contract revenues to $559M