Level 3's Ethernet, cloud connectivity growth could help it top Q1 earnings expectations

Level 3's aggressive rollout of Ethernet and cloud interconnection strategy should enable the service provider to surpass first quarter earnings expectations, analysts say.

The service provider will announce its first quarter earnings on Thursday morning before the market opens.

Zacks Financial Services has set the consensus estimates for Level 3 Communications at 45 cents per share, but the firm says the service provider could surpass that mark.

Expanding Ethernet and its supporting fiber network has been a major focus for Level 3. Following its acquisition of tw telecom, a deal that immediately enhanced its U.S. fiber metro footprint, the service provider continued to ramp up its Ethernet service presence in the United States, Latin America and EMEA.

Additionally, Level 3 allows business customers to allocate bandwidth on demand with their SDN-based Adaptive Network Control Solutions portfolio.

"With the global Ethernet market in focus, Level 3 Communications has been rapidly increasing its fiber presence in Latin America as well as the European, Middle Eastern and Asian (EMEA) countries," said Zacks. "Apart from geographical network expansion, Level 3 Communications is also enhancing its bandwidth capability and flexibility to enable customer MNCs to adjust bandwidth according to their requirements."

Ethernet is only one part of Level 3's growth strategy. The service provider has been aggressively expanding its interconnection agreements with a number of large cloud service providers.

The service provider recently achieved Advanced Partner in the Amazon Web Services Partner Network (APN) status, for example. It also has established agreements with Microsoft and other cloud players.

During its previous quarter, Ethernet was certainly a large element of its Core Network Services (CNS) growth.

Fourth quarter 2015 CNS revenue grew 6 percent year-over-year to $1.94 billion from $1.89 billion. Within the mix, it saw mixed results, with $529 million in wholesale revenues down from $537 million, while Enterprise rose 6 percent to $1.4 billion.

For more:
- see Zack's Financial Services post

Special Report: Verizon and Frontier begin new transitions: Tracking wireline telecom earnings in Q1 2016

Related articles:
Level 3 gains advanced partner status on AWS Partner Network
Colt, AT&T, and Level 3 gain Ethernet share in 2015, says research firm
Level 3 says dark fiber is part of service set, not the only solution for business, wholesale customers
Level 3 says cable companies' limited resources make it tough to compete in enterprise services

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