BCE Inc. (BCE) | The Buildout — AI Infrastructure
The Verdict
BCE is Canada's largest communications company, providing wireless, internet, TV and media to consumers, businesses and government across Canada and, through Ziply Fiber, in the U.S. Pacific Northwest. Its AI exposure sits in Bell Business Markets: enterprise AI-powered solutions under Ateko and Bell Cyber, and Bell AI Fabric data centres that lease powered space to AI tenants. BCE supplies the power, fibre and enterprise relationships; it does not make the chips, servers or models. It is a landlord and integrator, not a technology provider.
| Market Cap | — |
| Revenue (TTM) | $17.8B |
| Revenue Growth | +1.8% |
| EBITDA Margin (TTM) | 65.2% |
| Net Debt | $29.1B |
| Earnings Beats | 5 of 7 |
| P/E (TTM) | — |
| EV/EBITDA (TTM) | — |
What We Like
- AI-powered solutions revenue reached ~$700M in FY2025, up ~60% y/y, with a stated goal of $1.5B by 2028.
- Bell AI Fabric has 335 MW contracted against the 373 MW assumed in its plan to 2028, which management says is about 90% of the plan.
- Roughly $400M of tenant setup fees and prepayments partially fund the build; about $100M arrived in Q2 2026 and flowed into free cash flow.
- The core is run for margin: Bell CTS Canada adjusted EBITDA margin was 46.1% in Q2 2026, up 40 bps y/y, with operating costs down 4.7%.
- Leverage fell to ~3.7x from ~3.8x at Q4 2025, and $6.6B of a $7B non-core disposition program is delivered.
What We’re Watching
- AI data centre revenue is a 2027 event — Saskatchewan first phase H1 2027, full run-rate end-2027 — and D&A is expected to ramp ahead of revenue.
- The two Saskatchewan tenants are unnamed, with no disclosed lease terms, duration, per-MW economics or credit quality.
- 2026 adjusted EPS is guided to $2.50–$2.65, 5–11% below FY2025, on higher D&A and interest expense.
- Ziply revenue was broadly flat sequentially and management declines to date a revenue inflection.
The thesis is intact but unproven. The core telco is holding margins, the AI data centre plan is largely contracted for 2028, and management reconfirmed all 2026 guidance with no changes. But the AI revenue does not arrive until 2027, the tenant contracts behind it are undisclosed, and EPS is guided lower. The open question is whether the contracted megawatts convert to revenue on schedule and whether the unnamed tenant base holds — the capital is being spent either way.
Earnings Beat
In Q2 2026 BCE reported revenue of $4,352.7M and an EBITDA margin of 43.7%. Adjusted EPS was $0.65, up $0.02 y/y, on higher adjusted EBITDA and the absence of prior-year noncash hedge losses. CapEx rose $317M y/y on the Ziply fibre build and Bell AI Fabric construction, and postpaid churn improved to 1.02%, the lowest quarterly level since Q2 2023.
| Metric | Q2 FY2026 | Q1 FY2026 | Q2 FY2025 | YoY |
|---|---|---|---|---|
| Revenue | $4.4B | $4.4B | $4.5B | −2.7% |
| Gross margin | 30.9% | 30.0% | 68.6% | -3770bps |
| EBITDA | $1.9B | $1.9B | $2.0B | −3.1% |
| EPS | $0.45 | $0.50 | $0.49 | −7.7% |
| Postpaid churn | 1.02% | n/a | 1.06% | −3.8% |
I'll take that temporary margin pressure for future revenue growth. I think that's a very good trade.— Curtis Millen, CFO, 2026-08-06
Management tone: Management stayed confident and repetitive, leaning on its 'no surprises' framing while stating that 2026 guidance was reconfirmed. The tone shifted from announcement to execution on AI Fabric — piling complete, structural steel underway, first tenant payment received. On forward revenue timing, including the Ziply inflection and wireless ARPU, management reframed or declined to predict, and it declined to give near-term Ziply location counts.
Management Guidance
BCE reconfirmed its 2026 guidance targets with no changes and did not restate the numerical ranges on the second-quarter call. It reiterated 3.5x net debt leverage by end-2027 (from ~3.7x), $1.5B of cost savings by 2028, ~15% FCF-after-lease CAGR through 2028, AI-powered solutions revenue of $1.5B by 2028, and ~3M Ziply fibre locations by end-2028. The only intra-year variance disclosed was CapEx cash timing — Saskatchewan spend slipped to Q3/Q4 with the construction timeline unchanged.
Trajectory
The code-computed signals call revenue accelerating, with trailing four-quarter average growth of +3.1%, and margins compressing. Underneath, the mix is shifting: Bell Media revenue rose 8.9% on streaming and FIFA, Internet revenue rose 14.2% on fibre, and wireless product revenue fell 6.6% by design. FY2025 set a slow base — service revenue +0.6%, adjusted EBITDA +0.7% at a 43.6% margin — while adjusted EPS fell 7.9% on higher D&A and interest. Management's framing is that the Canadian core is run for profitability while capital moves to AI Fabric and U.S. fibre.
The Model
The model projects FY+1 revenue of $18,075.0M and EBITDA of $7,872M, a 43.55% margin, rising to FY+2 revenue of $18,750.0M and EBITDA of $8,250M, a 44.0% margin. The near term rests on a stable core plus the start of the AI Fabric revenue ramp, which management says begins in 2027, and the Ziply fibre build. FY+2 assumes those ramps continue and that the EBITDA margin holds near 44%.
| Metric | FY2025 | Next FY (E) | Following FY (E) |
|---|---|---|---|
| Revenue | $17.6B | $18.1B | $18.8B |
| YoY Growth | — | +2.7% | +3.7% |
| EBITDA | $11.5B | $7.9B | $8.2B |
| EBITDA Margin | 65.6% | 43.5% | 44.0% |
Projections are the median of 4 independent model runs.
BCE reconfirmed its 2026 guidance targets with no changes and did not restate the numerical ranges on the second-quarter call. It reiterated 3.5x net debt leverage by end-2027 (from ~3.7x), $1.5B of cost savings by 2028, ~15% FCF-after-lease CAGR through 2028, AI-powered solutions revenue of $1.5B by 2028, and ~3M Ziply fibre locations by end-2028. The only intra-year variance disclosed was CapEx cash timing — Saskatchewan spend slipped to Q3/Q4 with the construction timeline unchanged.
What Could Go Right — and Wrong
- AI Fabric reaches its 2028 plan of 373 contracted megawatts and the Saskatchewan halls come online on schedule, converting sold megawatts into revenue from H1 2027.
- Ziply fibre net adds convert into revenue growth, turning the U.S. segment from a CapEx sink into a growth engine.
- Sovereign AI workloads land as contractual business, adding demand beyond the current plan.
- Tenant prepayments continue toward the ~$400M total, keeping the build partly customer-funded.
- Bell Media sustains digital and streaming growth as Crave scales its 5.1M subscriber base.
- A construction slip moves Saskatchewan's first phase past H1 2027, pushing the AI revenue ramp and the free cash flow path.
- An anchor tenant changes plans or renegotiates; the two Saskatchewan tenants are unnamed with no disclosed terms.
- Supply-chain tightness inflates the ~$1.3B Saskatchewan CapEx or delays equipment delivery.
- A renewed wireless price war weighs on ARPU, which fell ~0.2% y/y ex-G7 in Q2 2026.
- EBITDA growth stalls or the pending LMR disposition slips, breaking the path to 3.5x leverage by end-2027.
Looking Ahead
Over the next 12 months BCE's milestones are mostly physical: Winnipeg's AI Fabric facility in service in H2 2026, Merritt Phase 2 in early 2027, and the first Saskatchewan phase in H1 2027. The company guides to 2026 revenue growth of 1–5% and reconfirmed every target, with the H2-weighted CapEx build and Ziply's fibre ramp as the swing factors. Ziply revenue has been broadly flat while the build runs, and management has not dated an inflection.
- H2 2026Winnipeg AI Fabric opens — Manitoba AI data centre enters service.
- H2 2026Ziply build ramp — Fibre build accelerates into 2027 as permits and approvals land.
- Early 2027Merritt Phase 2 online — Cohere, BUZZ HPC and Hypertec-backed facility expected.
- H1 2027Saskatchewan first phase — First phase of the 300 MW facility starts operations.
- End-2027Full Saskatchewan run-rate — All four data halls generating revenue, two tenants.
- End-2027Leverage target — 3.5x net debt leverage, down from ~3.7x now.
Financials
Annual Summary
| Metric | FY2024 | FY2025 | TTM | YoY |
|---|---|---|---|---|
| Revenue | $17.7B | $17.6B | $17.8B | -0.7% |
| Gross Margin | 58.7% | 45.0% | 25.1% | 1,370bps |
| EBITDA | $7.7B | $11.5B | $11.6B | +50.1% |
| EBITDA Margin | 43.4% | 65.6% | 65.2% | +2,219bps |
| Net Income | $228M | $4.5B | $4.5B | +1888.4% |
| Free Cash Flow | $1.8B | $2.2B | $1.9B | — |
| Net Cash | — | — | — | — |
Key Ratios (Trailing)
- P/E TTM—
- EV/EBITDA TTM—
- EV/Revenue TTM—
- Price/FCF TTM—
- Gross Margin (TTM)25.1%
- EBITDA Margin (TTM)65.2%
- Net Margin (TTM)25.3%
- ROIC13.3%
- FCF Conversion16.3%
- SBC / Revenue0.0%
The Company
BCE is Canada's largest communications company, providing wireless, internet, TV and media to residential, business, wholesale and government customers. It reports in three segments: Bell CTS Canada (wireless and wireline across Canada), Bell CTS U.S. (Ziply Fiber, in the U.S. Pacific Northwest), and Bell Media (video, audio, out-of-home advertising and digital media). Its AI-facing work sits inside Bell Business Markets — enterprise AI-powered solutions under Ateko and Bell Cyber, and Bell AI Fabric data centres.
BCE builds and operates its own facilities rather than re-selling others'. Bell AI Fabric spans multiple provinces, starting with a 300 MW Saskatchewan facility, a Winnipeg site and Merritt, British Columbia. Fibe Internet runs up to 8 Gbps symmetrical over FTTP, and head office is in Verdun, Québec.
Business Segments
Competitive Landscape
BCE competes on two fronts. In telecom it is described as Canada's largest communications company, competing with other carriers. In AI it is a colocation landlord, competing for tenants with neoclouds, hyperscalers and Canadian colocation providers. The evidence treats BCE's AI capacity as replaceable on the compute itself, while the power, network and enterprise relationships are what it controls.
- Named in the wiring file as offering Canadian telco AI infrastructure and sovereign compute.
- Named in the wiring file as a GPU neocloud competitor.
- Named in the wiring file as AI cloud compute competitors.
- eStruxtureNamed in the wiring file as a Canadian data center colocation competitor.
Supply Chain
BCE builds its own power, fibre and data centre capacity and buys network and AI hardware from outside vendors. Its 40-F names only Nokia and Ericsson as 5G equipment suppliers.
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