BDC Earnings Recap
Beat 7 of last 7 quarters
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Belden's record orders and hyperscaler wins signal accelerating demand for AI data center infrastructure, particularly in fiber connectivity for white space deployments. The RUCKUS acquisition expands Belden's full-stack networking capabilities, positioning it to capture the convergence of IT/OT and Physical AI, which could drive further demand for networking infrastructure across industrial and enterprise environments.
Belden delivered record Q2 revenue of $750M, up 12% YoY, and adjusted EPS of $2.34, up 24%, both above guidance. Orders hit a record $836M, up 19% YoY, with book-to-bill of 1.11x. The company closed an approximately $20M fiber connectivity win with a Tier-1 hyperscaler for AI data center white space and secured a specification win with a leading global retailer for autonomous docking door systems across U.S. distribution centers. RUCKUS Networks closed on July 1, immediately making Belden a full-stack networking platform with solutions mix crossing 20%, three years ahead of the 2028 target.
Management raised Q3 revenue guidance to $950M-$970M and adjusted EPS to $2.15-$2.30, reflecting the full-quarter contribution from RUCKUS Networks, which closed on July 1. They expect continued organic growth for the legacy business and see continued strength in automation, with double-digit growth expected in Q3. The company reaffirmed its deleveraging path, projecting net leverage of ~3.9x at Q3 end, declining to ~2.9x by end of 2027 and 1.5x by 2029, funded by over $500M in combined free cash flow over the next 18 months. Management highlighted accelerating momentum in AI data center and Physical AI opportunities, with the data center/AI business now at a $175M+ annual run rate and growing over 40% YoY. They expect solutions mix to continue expanding, and see incremental EBITDA margins above 30%.
“The second quarter was a strongest quarter in company history, and we are well positioned for what's ahead.”
on Record quarter
“We are not chasing this market. We are already inside it with the portfolio, the customer relationships and now with RUCKUS, the complete solution to win.”
on AI data center strategy
“We win on the robot today, and then we earn the right to the wired and wireless network backbone tomorrow.”
on Physical AI opportunity
What led to the fiber connectivity win in the hyperscale market for the white space and the opportunity ahead?
The win was driven by a product bundle with one hyperscaler, leveraging our standardized architecture and reliable supply chain. We are being selective, focusing on differentiated higher-margin opportunities. The broader data center business is up over 40% YoY and we see potential for it to grow from low single digits to double digits of total revenue over time.
Where does RUCKUS stand in the Wi-Fi 7 upgrade cycle and does the combination change the long-term business model?
Wi-Fi 7 is mid-cycle in enterprise markets like hospitality and healthcare, but early in industrial markets. RUCKUS was first to market with Wi-Fi 7. The business model remains similar, but organic growth could move from mid-single digits to high single digits.
Can you provide breadcrumbs on incremental margins going forward given RUCKUS's higher margins?
We are not changing the 25-30% incremental margin guidance, but it's realistic to be closer to the high end. RUCKUS is incredibly accretive when it grows organically.