Dycom Industries, Inc. (DY) Earnings Call Transcript & Summary

Okay. Good afternoon, everyone. I'm John Hodulik from UBS Equity Research. And I'm very pleased to introduce our next speaker, Dan Peyovich, the President and Chief Executive Officer of Dycom Industries. Dan, thanks for being here.

Thanks for having me. A quick note, I might make forward-looking statements today. You could please reference our website for our safe harbor statement. Great. With that, I'm to talk, John. Thanks for having me.

Fantastic. As we do every time this year, I think the best way to start off is maybe talk a little bit about the sort of key highlights from the year and what the priorities are for the company as we look out into 2026.

It's been a big significant growth year for us. And for folks that aren't entirely familiar with our story. We're across all 50 states. We do both wireline and wireless infrastructure for the major telecommunications and cable customers and most recently, have expanded more into the data center side from a power space. So it's an exciting time. There's a lot of opportunity coming through. And we've been very pleased with the work that we've done across the business, and I'm sure we'll get into more details as we go today, John.

Great. As we were talking about in the before we came in, our estimates show that fiber-to-the-home construction in the United States is set to continue to ramp, just given the efforts of AT&T, Verizon and T-Mobile. What's your view on the pace of fiber construction in the U.S. over the next few years?

Yes. I think that we often hear that people believe because it's been going on for some time now that it's already reached some kind of pinnacle or it's already starting to decelerate when, in fact, the opposite is true. Most of the customers that we have today are continuing to ramp their programs. There's obviously a lot of bullishness around getting fiber deployed. The number, if you take the passings collectively across our customers, if you look at the total homes in America, it gets to about 80% roughly or about 120 million, 125 million passings. So there's still a ton of work to do, and that's going to continue to ramp in the coming years. And I think there's a few points that I want to make really clear. One, as you said, the passings, the number of passings per year are going to continue to grow over the next several years. You certainly have -- AT&T has been very vocal about their continued growth. You have many other customers that fall into that as well. But you have to think about the revenue opportunity for Dycom as being a little bit separated from that. We don't price by the home, we price by the foot. And as you move across in time, you're generally across the space going to be more expensive. So if you've got several years of still fiber-to-the-home passing growth, you have several -- another couple of years probably beyond that of revenue opportunity. So we still see a ton of revenue growth in the future as we tee up into looking at next year for us and not giving an outlook yet, but really fiber-to-the-home is going to be a key driver as we continue our growth in the years to come.

That's an interesting aspect. So we -- obviously, on our side, we track number of homes passed each year. We have a sort of a buildup. But you're saying it's not just the number of homes, but it's sort of the sort of distance covered per home that actually drives you guys revenue. So from our standpoint, we'd love to hear what are you seeing. I mean, is there some sort of difference in sort of a number of feet per home that we should see -- we should expect over the next 5 years? Does it grow 10% a year, 20% a year or something like that?

Yes. It's -- unfortunately, it's not exactly that clean, but that's -- you're exactly right, John. So you have a combination of the lot lines just get longer, wider, right?

Building out in more rural areas.

Yes. So there's not a ton of -- if you look kind of across all the homes that are getting passed, there's not a ton of 40-foot [ aerial ] lot lines left, right? Those got hit early on. Those are obviously less expensive. You also have -- are going to more to buried work, right? So you're going more underground as time goes on, it's obviously more expensive in the mix. But again, I think one of the things that often gets more summarized and not looked at it in detail is every home is unique, every passing is unique. And our customers are looking across large swath, right? So there might be some that are shorter lot lines that maybe it's just a part of a given area, and there are some that are longer. There's a mix of how much is buried compared to how much is aerial. And all of that comes together into how they build and think about their programs. And of course, we spend a lot of time with them planning around that. Our point is if you look at that in aggregate, it's going to generally grow over time, right? You're just -- you're not going to prioritize and do expensive first, less expensive later. You're going to generally prioritize it in that way. So you have to look at those curves a little bit independently. And I think it's really easy to talk about passings. I think it's a great way to have the conversation. You got to make sure that you reflect back on that revenue continuing to increase beyond that.

So not only the number of homes passed, you just introduced a new variable and then also fee per home going up, but then the aerial versus buried. Is there a correlation that as we move into the rural areas, not only is it more fee per home, but it's more buried versus aerial? I would imagine the aerials would be the dense suburbs in the cities, right? And then maybe as we go out to those rural areas where we're already seeing more fee per home, you're also seeing more buried.

Yes. And not to take everybody too far down the rabbit hole, but it also depends on how we're going to approach the buried work, right? If we're going to bore, that's going to be more expensive than if we can plow. But it really does -- it is quite neighborhood dependent. I mean you would be quite -- you'd be surprised some neighborhoods that end up being buried compared to some that are still aerial. So it really is a blend. It's really hard to take it and put it in any particular category. That's why I'm saying you really need to kind of stack across that 10 million, 11 million or 12 million home count that you talked about that it's just going to generally increase.

And then in terms of the build-out, we talk a lot about the big guys, right? Like we just mentioned AT&T, Verizon, T-Mobile. What about the smaller guys? Like those are the guys that are a little bit under the radar screen. And we try to track some of those guys that hit a certain level, but like is there like a middle of the pack that we're missing that's also building and maybe even smaller guys that are completely under radar screen that may use Dycom for their build-out?

Absolutely. And again, I think something unique to Dycom is we work across the whole spectrum. We work from some of the smallest cooperatives in the country to obviously some of the largest carriers. And you do see that, right? We continue to see growth opportunities, continue to do work, continue to do fiber-to-the-homework across that entire space. We did see a lot of the co-ops and really some of the smaller carriers really thinking about BEAD and how that's going to play into the more rural footprint if they're in the rural footprint. That did slow down a little bit as BEAD comes -- kind of gets to where we are now, we do believe that will come back. But really, across it all, it comes back to that -- the idea that 125-ish million homes are going to get passed because broadband has become a necessity, it's become a utility. And not only that, the penetration -- or because of that, the penetration is very strong and the returns that our customers, big or small, are getting -- they just make sense. And so we see that continuing, and I think that's what you see in the build cycle to come.

Yes. I think the sort of the biggest incremental change we could see -- we kind of know AT&T's plan with Lumen as the latest. Verizon, if anything, with the new CEO, if anything, they might not be -- they might not do as much of a build as sort of [indiscernible] and I were excited for, just given their sort of new capital focus. But it definitely sounds like T-Mobile is going to do more. It also sounds like BCE is sort of ready for the next deal or next couple of deals. When you -- when a company like -- and I don't know if you -- if these are -- if [ Lumos ] or Metro are a customer of yours, but they are so when you get that injection, when that transaction happens, and we expect more transactions with T-Mobile; does construction accelerate when that -- I mean, if there's suddenly -- I mean, these companies like [ Lumos ] mentioned and smaller, these companies are running to some additional headwinds from a financing standpoint and things like that. But when they get the investment or when BCE comes in and buys one of these smaller companies, which, again, both of these things we think are going to happen in '26; is that good for you guys?

Yes. We look at all of that consolidation, all that capital infusion as a positive because usually, it's going to come with -- you look at consolidation, it's generally going to come with some increase in capital expenditure. And not just that, the customers are generally going to look for as the programs get larger, as they get more complex, that favors us. I often say complexity favors Dycom because they don't want to take 2 companies' worth of supply chain partners and have twice as many. They want to look for consolidation. We're the largest, right? We have an opportunity to be there. And then to your point, yes, right? They're doing that because they're looking at the growth opportunity. They're doing that because they see the need to get broadband to get fiber to all the homes across America, and that just creates a tremendous platform for us to step in. So all the companies that you mentioned are all customers of ours, and we're all excited to continue to help their builds go forward.

So skipping around a little bit, but -- and I think this conversation sort of is intertwined with the BEAD program, but how far -- you said 125 million homes. I mean, obviously, there are some homes that can't get built, right? It just -- it doesn't make sense, especially with these LEO programs. It's obviously a much more efficient way of getting broadband to people. How many -- or what percentage of sort of occupied homes do you think get built with fiber over a sort of reasonable 5- to 10-year period? Maybe how does BEAD play into that? Maybe that will be the...

So I come back to that kind of 125 is about 80%. BEAD as it's gone through the different permutations of where we are today, and I completely agree, there were a lot of homes that just made sense for LEO to serve, and you saw that come through BEAD; you still have 2/3 that are going to be fiber or cable...

Of the original build plan for BEAD, which is like 5.5 million, right?

Well, yes, now the total number is 4 million, and then you have 2/3 that will be fiber, which amounts to -- it's over 3/4, I think even a little more than that of the actual spend. But there's a place -- to the point, there's a place for that for LEO to make sense. If you look across the country, again, I think that, that 100, 125 million makes sense. We do think that it's going to take time to get all the way there that you're going to -- once you get through the really the speed and all the things that we talked about early on, the 10 million, 11 million, 12 million passings per year, that there's going to be a slower fade when you get into the 2030s. And that's not to say some customers won't finish by 2030. We think they will. But if you look across that whole 125 million, we think that's more like 7-plus years out to get that completed.

Got it. Makes sense. And then sort of the other side of the ledger is cable. We had Optimum speak here, and it sounds like they're sort of more measured, given some of the balance sheet issues that they have. What are the sort of prospects of a -- first of all, how big of a source of business is the cable companies? And then what are the prospects of them being bigger customers as they are seeing more competition in broadband and potentially take the next step in terms of upgrading their networks?

Significant. We do a large amount of work for Comcast, a large amount of work for Charter, many other of our cable customers. And the consolidation, whether that's Charter Cox, again, we think that those favor us as they continue to expand those footprints and think about how they consolidate and what that looks like over time. So we think those are all positives. And then, of course, you have all the work that's being done, whether it's the high split or mid-split work, this idea of getting to 1 gig symmetrical moving to DOCSIS 4.0, that all requires physical plant upgrades. And so...

Those are involved in that split.

Yes, exactly right. So we're actively involved there, and that's great work for us. So as they continue to do that, we said -- I said last week, we have one fiber connection that's going to go to 80% of homes in America. We think that there's going to be another connection that's considered equivalent by the consumer, right? Now that could very well be DOCSIS 4.0, it could be another fiber connection. Fiber, as our cable customers talked about, is a very large part of their plans today. So we don't know exactly how that's going to play out. But our point for Dycom is that, that's all work that has to get done, right? That's going to take a skilled workforce, right? It takes the ability that we have. We have the breadth, we have the scale in order to do that. So it sets us up well to help walk them through that path. So again, a lot of activity with our cable customers. We do a lot of RDOF work for Charter that's starting to come down now. But we do see continued opportunities as they continue to really work towards getting those higher speeds.

Right. It does seem like we had Chris Winfrey here yesterday. And so it does seem like the rural builds are slowing a little bit. I mean certainly are for Charter. It's at least that's the plan. I think you talked about -- but -- so it sounds like you can do for the cable companies, a combination of in region and out of region work. But that is the -- maybe talk about the entire spend? What does cable spend look like these days versus maybe 5 years ago? And then -- how has that shifted between in-region and out region.

Yes. I think customer by customer, everybody knows from the earnings calls, they're generally decelerating their CapEx spend. And Charter specifically is because they're coming off of RDOF is in large part. Comcast on the other hand is the, I believe, the largest speed winner, right? And that's going to be HFC probably likely a large part fiber plant that they'll be deploying there. So it is a little bit of a difference as you go through that. And again, the work that we're doing for them, it varies depending on the market. But it's both, one, service and maintenance, which we haven't spent a lot of time talking about. That's a huge part of the work we do for our cable customers as it is for a lot of our customers, but definitely the upgrade work as well. So it's not just about the work that they're doing in rural America. There's still a lot of work to be done inside the footprint.

And do you think that eventually, we're not going to hold you to it. And we're not going to tell the cable companies you said this. But do you think eventually they got to go fiber-to-the-home for within their footprint to compete with fiber. I would -- there's a lot of people that believe that, that's coming.

Yes. I mean that's not our area to be experts in. I think it goes back to what I said. And this is just what they've been saying on their call, right? the challenges from a consumer perspective, consumers are looking for the word fiber today. Now as they bring the speeds up and DOCSIS 4.0 comes on and the speeds do everything that the consumer needs, that could very well solve. We could very well sell for it. On the other hand, as they continue to push fiber for their infrastructure that could solve as well. From our standpoint, obviously, we're rooting for all of our customers to win. But importantly for us, we want to be in a place where we can help them in whatever that build is.

Right. So I was talking about the big fiber guys, the smaller fiber guys and the cable guys. What about the -- like the really small guys. The company -- and there's dozens of these out there that most are not household names, people haven't heard of. What's that sort of community doing as it relates to -- because I would say a couple of years ago, especially with BEAD coming, there is a tremendous amount of activity. I think -- and I get the impression that the funding is getting more difficult. What's -- how's that community's sort of spending profile?

Yes. I think if we talk specific to overbuilders or people that are building we have seen that smaller overbuilders have been challenged. They have been challenged from a financing perspective because those builds are difficult to do if you're coming in and you've got to build the [ CO ] you've got to build all the backhaul. It's in a place that maybe you don't have all the relationships locally with. And never mind that a lot of the customers that are in those spaces are coming to build on their ILEC footprint. So we have seen -- a few years ago that was very busy, very active. There's a lot of people making bets there. we have certainly seen that wane. There's been folks that have been successful in doing it, and we can name a few. I mean, GigaPower with AT&T, Google has obviously been doing that for some time. You have MetroNet and Lumos. So there are folks that are doing well there. But I think the smaller ones that are going kind of market by market, at least we're not seeing as much of them today.

Right. That makes sense. Okay. And getting back to the sort of cost for fiber construction. Can you give us a sense for sort of the costs you -- the increases that you've been seeing? What's the sort of -- or maybe for you, what's the sort of the average cost of a sort of fiber build versus what it was a few years ago. What kind of -- and I think you laid it out well in terms of more fee per home and more variable versus aerial. But there -- first of all, are there other sources of I guess, inflation in the cost per build? And just how has that trended? And how do you expect it to trend?

Yes. It's very hard to talk about it in generalities. Every customer is different. The contract vehicle and how it's coming through is a little bit different. But I think importantly, one, labor has settled down from an annual increase perspective, we're in a much more normal space, kind of typical, call it, 3.5-ish kind of range for a year. I think overall, on the build, they have settled from a pricing perspective. Our job with our customers is to get well ahead of these things. And so we're trying to have conversations with customers. And I think what we're seeing, and this is important to your question. What we're seeing today is -- and this doesn't matter if it's a carrier customer or the hyperscaler customers that we're spending a lot of time with, what everybody is thinking about today is a skilled workforce. And the skilled workforce is what's going to drive these solutions. And everybody really wants to make sure that they get the skilled workforce locked up. And so our conversations and a lot of the dialogue we're having is, "Hey, Dycom, we want to get you signed up for 3 years because we want to make sure we have certainty." And so there's a win for us. get that time. And then, of course, price is always going to be competitive. Our customers -- I mean, if you look at our large customers, they know what a foot of fiber cost, right? I mean they've been doing it a long time. They've got a lot of metrics. So we feel really good about where we're at. I would point to that we've had significant margin expansion across the year. And I think what's really important for people to understand is that's not just from raising prices and I would say, really not from raising prices at all. That's from, one, operating leverage. But two, we've really been working hard on the efficiencies in the business. We've been very strategic about that. We've been very vocal about the opportunity there, and you're seeing that come through. We think that, one, that builds a more durable business if we're improving the efficiency, and we're improving the margins innately. But two, that's a win for our customers, right? If we can be more effective, more efficient for them, more cost efficient, more labor efficient, that's a positive. We'll probably talk a little bit more about labor. But I think coming back to labor is going to be a really important point because I think that's part of the conversation that needs to happen in the coming years.

Yes. I mean I think let's stay on this path now. I mean I remember just a couple of years, again, pre-BEAD there's a lot of worries. I was at FiberConnect. I forget which one it was, but they were talking about -- I think the number was like 300 -- people expected 300,000 sort of workers we're going to need to eventually deploy this fiber. I mean it is -- first of all, I would say BEAD probably didn't -- wasn't the program we thought it would be in terms of the number of homes that we originally started and how much of it was fiber. But is there still worries about sourcing labor, especially now. I mean, so we cover the data centers and obvious AI compute build, these guys the thousands of people to build out these sort of gigawatt scale sites. Is labor an issue for you guys now and do you foresee it to be shortages going forward.

So for us, we've been very strategic about how we've been building our labor as we're looking forward and talking to our customers. And there's a lot of things that we have line of sight to that we don't talk about publicly. And that's on all parts of the business, right? Again, carrier customers, hyperscaler customers. There is a lot of network that has to get built. There's a lot of miles of fiber that have to get built. In order to do that, there's -- that path leads directly to the skilled workforce. So our job is to be years in front of that, and we've been heavily investing in our organization. Our strategy and what we've been doing is you really have to build up that first-level supervisor and that first level manager and that enables you to bring more people into the workforce more quickly. If you don't spend time there, you're going to struggle over time. So we feel really good about our growth path. We feel really good about -- again, we're spending a lot of time with our customers to make sure that we're both aligned on what they need us to do in the coming years, so we can get down locked up and be in a good spot. If you think about it from an industry perspective, though, I think there's going to be a lot of challenges, John. You have the fiber-to-the-home, which is going gangbusters. And if you think about that for the next 4 or 5 years, it's only going to be increasing. You add to that now BEAD coming online, and we think that it will start to be revenue in Q2 of next year, we think that, that's around $18 billion of addressable market.

How much does that mean in terms of -- so $18 billion in addressable market for the total fiber-to-the-home focused BEAD.

Yes, fiber-to-the-home and the HFC. That's right.

The HFC stuff. And then what does that translate into in terms of incremental new homes added per year to our build numbers, which just don't have any BEAD in it, I don't think.

I don't have the math on my head, but 4 million homes at 2/3 and some kind of ramp that gets you from '26 and getting on playing into calendar '27, something like that. I think it's probably going to take a little more than 4 years, more like 5 years to get it all done. But you have to put that on top of an already overheated fiber-to-home build. Now you have rural markets, yes, but you have all the states lined up to really be starting it effectively the same time. And you have a lot of the sub-grantees who are going to be lined up to be starting at really the same time. That's going to put a ton of pressure on the ecosystem. And then if you add into that, what's happening with the hyperscalers in these long-haul middle mile routes that we size that at $20 billion of market opportunity over the next 5 years back half loaded. Well, where does that put it right on top of the same thing. So if you think about calendar '27 going to calendar '28. I think you're going to see a lot of strain on the skilled workforce.

And when you talk about skilled workforce, and I know very little about this. Are the skills and basically the people you need that are involved in fiber-to-the-home. Are they the same guys with the same skill sets as building fiber to a data center or even wiring a data center. You know what I mean that all the connectivity through the data center distribution within the building, distributing to each rack. I mean the amount of connectivity and fiber that needs to be laid, not just to the data centers, but within the data centers is astounding. And do you guys -- I mean, first of all, is that the same labor pool, number one? And I guess we're going to get to that the complete different section, but are you guys involved in that?

Happy to talk about that. A huge advocate. I love talking about the skilled workforce. It's where I started. The answer is, yes, you are competing, but that's at about when kids are in about eighth grade, right? That's when you're going to start competing about whether they're going to college, whether they might become an electrician, or whether they bring them into fiber or telecommunications infrastructure or they might go a different other route. So it's really kind of starting that early. But at some point in time, yes, we're competing to bring labor in on the telecommunications side. We might be competing with McDonald's or Walmart or other types of infrastructure or skilled trades. It can be the full spectrum. And the question is, how do you create more capacity there. How do you really change the paradigm that we have today and the stigma around moving into the skilled workforce and what opportunity that is compared to going to college because as we just talked about, there's massive opportunity in the skilled workforce over the next decade with anything that has to come online. And these are challenging, very rewarding careers both financially and personally. So all of our job is to really continue to push to get more people into that. But I think as all those come together, at some point, they do compete with each other, right? At some point you are, you have a limited number of people who want to go out and work with their tools that you have a lot of industries that are in a growth cycle at the same time.

Yes. It's amazing. We were at our tech conference last week. We met with the Crusoe guys about the Stargate site down in Abilene, Texas. So it's going to be scaled to 1.2 gigawatts, if I'm correct. You have 8,000 workers there a day every day on that site, 8,000. And there's...

A big number.

There's a ton of these gigawatt-type projects all over the country right now. So that's just a lot of people. So yes, things are going to get worse than get better. Can we talk about other bottlenecks in terms of building fiber-to-the-home and sort of how they've trended outside of labor. I mean what are the other -- I think permitting is always one of the things that is an issue. Is that sort of -- is that a bit of a governor on your guys' growth?

Permitting has been a challenge over the last few years. It has been the primary bottleneck. Many of our customers would have gone faster, but for permitting. It definitely is there when you start to ramp, but it's always in front of you. And it's our job in many of these -- with many of our customers, it's our job to really be in front of that to be helping with that. There is a policy that's coming through the new administration that is targeted to help with that. I do think on the Federal level and on the state, as you think about environmental permits or working around railroads or going on rivers that can help. I think when you get to a local municipality, it's really tough to change that. These local municipalities have limited funding, they've got limited staffing and resources. So you can put a shot clock on them, but I'm not exactly sure how that plays through. And I was saying earlier, showing up with a truck and digging up the street on day 31 just because you can doesn't mean you should. So I think that has to happen. I do think that as we look at all of the work that has to get done, permits are going to continue to be a bottleneck. But I am very glad to see that there is now efforts and work around it and a lot of conversation that should help free it up.

What is the timing on that? First of all, I love the shot clock thing. I remember following the SEC for years with these deal approvals, they have the shot clock, but then they would stop the shot clock. So why do we even have a shot clock if we can stop the [ shot clock. ]

It's a piece of the shot clock.

Yes. What's the timing on potential change to the sort of regulatory the permitting, you said there's some Federal action.

There is, yes. There's a number of policy documents that are coming through. I couldn't give you the exact timing other than their inflow today. Certainly, the hope is that they're getting in front of a lot of these things like BEAD. I mean I think BEAD is one of the momentum pieces behind it. couldn't be specific to that. But to the point, you can put shot clocks, you can put all these things in front. At the same time, at the end of the day, you've got people that got to go do work. And you got to figure out how to open up that conversation. What we really need is clarity and consistency. What you don't want is when you think you're going to get a permit and you don't, right? So as long as we can improve the system and the process so we know and we don't just get held up for no reason for a long period of time. I think that's going to help the time and it does feel like that's going to be coming to the system.

And just finishing up on BEAD. So I think you said that money has really sort of started to flow in '26. And then can you lay out sort of your expectations for sort of how that scales. What's the biggest year in terms of the BEAD build? I mean, first of all, I have to say I haven't been following it as much in the last, say, 6 months, but we used to -- I mean going back 3 years.

It's been a 4-year.

Yes exactly. I guess we just got tired of it or something. I don't know, but we were writing about it following each state. But I guess if all the states approved -- remind me of the process here, I think they had to rebid, right? With the Trump administration came in and all the states have rebid, so do we know who the winners are in each state and when the money is going to be allocated?

We do. So there was a benefit of the bargain around that needed to go through. They needed to get NTIA approval. 29 states as of my last check, 29 states have had that NTIA approval. They just need to get funding [ from this. ] Now that's the last step. One has gotten the funding, Louisiana. It's anticipated that the approved states, and there'll be more approvals, but the approved states will get funding sometime before the end of the year, maybe even before Christmas, because that was NTIA. So all of that is positive momentum, right? It's all positive indicators. And again, that's why we're having a lot of conversations. We talked about on our last earnings call, we have over $0.5 billion in verbal BEAD awards, which doesn't mean anything until it's on paper, but the point is it goes back to this concern around the skilled workforce. People are really worried about having the labor in front of these builds. They're committing to pricing, they're committing to a time line. They want to make sure that they have the people on their team that can go deliver and execute.

Okay. Right. So that's a lot of focus on the fiber-to-the-home opportunity, still a lot left. And frankly, the biggest year is still ahead of you, at least based on our math. But let's pivot to the long-haul fiber opportunity. First of all, I guess, is it all driven by -- when I look -- think of the long-haul fiber, is that all driven by data centers and the data center buildout? Or is there other aspects to it.

Largely. Largely. You have infrastructure that's been there for 25, 30 years. The capacity is even close to what they're looking for today. And very importantly, the latency is not even in the ballpark. And they also need redundancy. So if something does get hit in the field, you don't want to take down their entire cloud, their entire network. So they are looking for redundancy as well. So the primary driver behind that, absolutely. You've heard many of our customers be very vocal about that. Lumen has been very vocal about it. But it really is about connecting ultimately data center to data center across the country, you're talking about tens of thousands of miles. And that's a market opportunity that I said before, we size is about $20 billion, and that's just addressable for us. It doesn't include the supplies of materials. To get done in -- that $20 billion is really about the next 5 years, but it's not limited to that. We think it's going to continue probably for the next decade.

And I hate to ask you because no one knows the answer to this, but that $20 billion number. So we follow the data centers, we try to extrapolate based on what like Sam Altman is saying at any given day or what all the big hyperscalers, he's talking about 250 gigawatts over the next I think it's 8 years. I think there's no way they're going to spend the trillions of dollars needed to do that. But like the $20 billion market size, what kind of -- I think it's very hard to know this, but like that can't assume that all this build-out that people are talking -- that all these.

That's not even come close to assuming all that. And we think it's very conservative. That's quite literally lined on paper. That's from a lot of conversations. And of course, respecting confidentiality of all of our customers. But we have a unique view perspective where we're talking to a number of hyperscalers, a lot of the carriers and so we can aggregate all that because, again, we think it's important that the industry understand how much is coming through because it needs to get -- you got to -- it has to be prepared for.

So this is -- this $20 billion of fiber spend for deals that you guys are for AI compute infrastructure that you feel you have a line of sight to getting built out over the next 5 years.

Right. And it's got very little kind of -- all the future state stuff that you're talking about, not even remotely included.

Okay. And where do you guys sit in the ecosystem? So like obviously, Lumen is a big one. Zayo is another builder. We actually had the Optimum -- I can't get used to the Optimum guys in here talking about LightPath and I think they've had some builds. I guess you guys are sort of contractors for all these builds. You guys are actually doing the work that these guys are signing up for.

Yes. And again, it comes back to the skilled workforce. And these are the same men and women that are doing the fiber-to-the-homework that could do this work. Similar type of equipment, sometimes it's larger. But yes, at the end of the day, we're there to help them get these highly complex. These routes are much more complex than fiber-to-the-home, takes a ton of planning, takes a ton of foresight in order to get it done. And they're going to take a long time. And I think what a lot of people think about is how is the CapEx from the hyperscaler is going to move, how is it going to ebb and flow. This is not a big spend for them, $20 billion over 5 years against -- it's not a big number, but this is a highly time constraint, right? This is probably a decade plus of getting these networks built to the capacity that they need.

And it seems like the data center, maybe this is sort of similar to what you're seeing on the fiber-to-the-home world. But from probably the data centers for a while you had sort of core data center markets, Northern Virginia, maybe Silicon Valley, maybe Chicago. The fact that they're sort of spreading to more tertiary and secondary markets, frankly, where they can get power and -- or sort of have the conditions for their own behind-the-meter [indiscernible] solutions. How does that affect your economics and the sort of size -- the opportunity?

Yes, that's only going to increase that market opportunity. And again, we're not -- our kind of the Dycom sell, if you will, is we're here in the middle of digital infrastructure. We've got a skilled workforce, whether that's what we're doing in telecommunication side or whether what we've added in with Power Solutions on doing data center electrical work. There's a ton of infrastructure that has to get built that's completely absent of AI, just as we consume more data, right? And that's where we've positioned ourselves, but also positioned ourselves to take advantage of AI and the influx that certainly is going to come through. We'll all see exactly what it looks like. But I do think it's really important for those two things to get separated. There's a huge amount of infrastructure that has to get built even if a lot of this AI and these huge spending numbers don't come through.

And you mentioned Power Solutions. Can you talk about the recent deal to acquire Power Solutions and sort of how it helps you further your efforts in the data center area and sort of expectations for the integration process and any synergies with that?

Exciting deal for us, a large deal for us, a wonderful business, been there for 27 years, building data centers in the DMV. So the Washington, D.C., Virginia, Maryland market. This, again, is really just an extension of our platform. Hyperscalers have pulled us into their campuses. We're doing fiber within their campuses themselves. This is quite literally just crossing a wall. So skilled workforce, different skilled workforce, not fungible with our current crews. But at the end of the day, you're solving for the same equation, right? How do we build a skilled workforce for these very complex tasks that have to happen over time. And for us, it gives us tremendous opportunities to further our relationships with the hyperscalers on both sides, right? So something that we're really excited about. We think it's going to be fantastic for our shareholders and just want to welcome our solutions folks to our team.

It makes a lot of sense. It's sort of vertical is you're just going deeper with your data center customers? All right. And maybe to wrap up here. Could you talk a little bit about sort of how you guys think about operating leverage for the company on a sort of multiyear basis and sort of what the main priorities are from a capital allocation standpoint?

Yes. So our capital allocation fundamentals haven't changed, right? We're going to fund organic growth first. Obviously, M&A has taken a forefront. We do anticipate doing further deals in the same space as Power Solutions in the future. But as far as how we think about net leverage, that's unchanged. We're not going to change the paradigm overall. So we're only going to do that where we can quickly bring it back down into that range around 2x. And this Power Solutions deal is one that we can bring that down quite quickly, somewhere in 12 to 18 months, we're back below 2x. So the fundamentals are still there, but I would certainly -- we are looking for additional M&A opportunities in the space and I think that will be part of the future in additional organic growth.

Great. Dan, this is great. Appreciate you being here.

Really appreciate it. Thanks.