For any safe harbor statements.
Hello? Is it on now?
We're good now.
Thank you very much.
We're going to have to start over.
Nah, we're good.
Should we? 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. If you could please reference our website for our safe harbor statement.
Great.
With that, I'm excited 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 talking 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 hallway 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?
Yeah, 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 120-125 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 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-home passing growth, you have another couple of years probably beyond that of revenue growth. So we still see a ton of revenue growth in the future as we tee up into looking at next year for us.
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.
Yeah, that's an interesting aspect. So we, obviously, on our side, we track the number of homes passed each year, and we have a sort of a build-up. 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 your guys' revenue. So from our standpoint, we'd love to hear, so what are you seeing? I mean, is there some sort of difference in sort of number of feet per home that we should expect over the next five years? Does it grow 10% a year or 20% a year or something like that?
Yeah, unfortunately, it's not exactly that clean, but you're exactly right, John. So you have a combination of the lot lines just get longer, wider, right?
Really out of the more rural areas.
Yeah. So there's not a ton of, if you look kind of across all the homes that are going to get 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 are going 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 in detail is every home is unique. Every passing is unique. And our customers are looking across large swaths, 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. 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, but you've 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 feet 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 feet per home, but it's more buried versus aerial? I would imagine the aerials would be the dense suburbs and the cities, right? And then maybe as we go out into those rural areas, we're already seeing more feet per home. You're also seeing more buried.
Yeah. 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 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 it across that 10, 11, 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? 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 is there a middle of the pack that we're missing that's also building? And maybe even smaller guys that are completely under the 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-home work across that entire space. We did see a lot of the co-ops and some of the smaller, really some of the smaller carriers really thinking about BEAD and how that's going to play into the more rural footprints if they're in the rural footprints. That did slow down a little bit as BEAD kind of gets to where we are now. We do believe that'll come back. But really across it all, it comes back to the idea that 125-ish million homes are going to get passed because broadband is becoming a necessity.
It's becoming 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.
Yeah. I think that sort of the biggest incremental change we could see. We kind of know AT&T's plan with Lumen. That's the latest. Verizon, if anything, with the new CEO, if anything, they might not do as much of a build as sort of Batya 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 a company like, and I don't know if these are Lumos or Metronet or 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? I mean, if there's suddenly, I mean, these companies like Lumos, Metronet, and anything smaller, these companies are running into 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 2026, is that good for you guys?
Yeah. We look at all of that consolidation, all of that capital infusion as a positive because it usually is going to come with, 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 two 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.
That just creates a tremendous platform for us to step in. All the companies that you mentioned are all customers of ours. We're all excited to continue to help their builds go forward.
So I was skipping around a little bit, but 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? That doesn't make sense, especially with the 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? And maybe how does BEAD play into that? Maybe that'll be the next follow-up.
So I come back to that kind of 100, 125 is about 80%.
Okay, got it.
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 two-thirds that are going to be fiber or cable.
Of the original build plan for BEAD, which was like 5.5 million, right?
Now the total number is four, and then you have two-thirds that'll be fiber, which amounts to it's over three-quarters, I think, even a little more than that of the actual spend. But to the point, there's a place for that, for LEO to make sense. If you look across the country, again, I think that 100, 125 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 this, really, the speed and all the things that we talked about early on, the 10, 11, 12 million passings per year, that there's going to be a slower fade when you get into the 2030s. That's not to say some customers won't finish by 2030. We think they will.
But if you look across that whole 125, we think that's more like seven-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. The consolidation, whether that's Charter or 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. We think those are all positives. 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 one gig symmetrical, moving to DOCSIS 4.0, that all requires physical plant upgrades. So we're.
You guys are involved in that too, the mid-splits and stuff?
Yeah, exactly right. So we're actively involved there, and that's great work for us. So as they continue to do that, 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 have talked about, is a very large part of their plants 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 takes a skilled workforce, right? That 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 did 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, they certainly are for Charter, or at least that's the plan, I think you talked about. But so it sounds like you can do it for the cable companies, a combination of in-region and out-of-region work. But maybe talk about the entire spend. What does cable spend look like these days versus maybe five years ago? And then how has that shifted between in-region and out-of-region?
Yeah. 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 in large part. Comcast, on the other hand, is, I believe, the largest BEAD 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 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 their footprints.
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 within their footprint to compete with fiber? There's a lot of people that believe that that's coming.
Yeah. 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 calls, right? The challenge is 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. It could very well solve for it. On the other hand, as they continue to push fiber further into 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 we talked about the big fiber guys, the smaller fiber guys, and all the cable guys. What about the really small guys? The name, 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 oncoming, there was a tremendous amount of activity, and I get the impression that the funding is getting more difficult. How's that community's sort of spending profile?
Yeah. I think if we talk specific to overbuilders or people that are building, we have seen that smaller overbuilders have been challenged. They've 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 CLEC, 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's 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, 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, 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 feet per home and more variable residential, but 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?
Yeah. 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, that kind of typical, call it three and a half-ish kind of range per year. Excuse me. I think overall on the builds, 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 the 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 three years because we want to make sure we have certainty." And so there's a win for us to get that time. And then, of course, price is always going to be competitive. Our customers, I mean, they look at our large customers. They know what a foot of fiber costs, 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.
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 of 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.
Yeah. 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 Fiber Connect. I forget which one it was, but they were talking about, I think the number was like 300,000. People expected 300,000 sort of workers we were going to need to eventually deploy all this fiber. I mean, first of all, I would say BEAD probably wasn't the program we thought it would be in terms of the number of homes where it 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 all this AI compute build. These 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 the shortages going forward?
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. There's a lot of things that we have a line of sight to that we don't talk about publicly. 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, that path leads directly through the skilled workforce. 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 that 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 four or five years, it's only going to be increasing. You add to that now, BEAD coming online, and we think that there'll 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 focus BEAD?
Yeah, fiber to the home and the HFC stuff. That's right.
And the HFC stuff. And then what does that translate into in terms of incremental new homes added per year to our build numbers? We just don't have any BEAD in it, I don't think.
I don't have the math off the top of my head, but four million homes at two-thirds and some kind of ramp that gets you from 2026 and getting on plane into calendar 2027.
Got it. Okay.
Something like that. I think it's probably going to take a little more than four years, more like five years to get it all done. But you have to put that on top of an already overheated fiber to the home build. Now you have rural markets, yes, but you have all the states lined up to really be starting at 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 and middle-mile routes, that we size that at $20 billion of market opportunity over the next five years, back half loaded. Well, where does that put it? Right on top of the same thing.
So if you think about calendar 2027 going to calendar 2028, I think you're going to see a lot of strain on the skilled workforce.
When you talk about the skilled workforce, I know very, 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? 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. Do you guys, I mean, first of all, is that the same labor pool, number one? I guess we're going to get to that as a complete different section, but are you guys involved in that inside?
Happy to talk about that. I'm a huge advocate. 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 go to college, whether they might become an electrician, or whether they might bring them into fiber 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 telecommunication 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 has compared to going to college? Because as we just talked about, there's massive opportunity in the skilled workforce over the next decade with everything 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 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.
Yeah, 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. It's going to be scaled to 1.2 gigawatts, if I'm correct. They have 8,000 workers there a day, every day on that site. 8,000. And there's a ton of these gigawatt-type projects all over the country right now. So that's just a lot of people. So yeah, things are going to get worse if they 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 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 the 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 a 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's the timing on that? First of all, I love the shot clock thing. I remember following the SEC for years for these deal approvals. They'd 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.
Makes no sense. Yeah. What's the timing on potential change to the sort of regulatory, to the permitting? You said there's some federal action.
There is, yeah. 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 a ton. 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 the money was really sort of starting to flow in 2026. 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, I'll say, six months, but we used to, I mean, going back three years.
It's been a four-year consolidation.
Yeah, exactly. I guess we just got tired of it or something. I don't know, but we were writing about it and following each state. But I guess of all the states, remind me of the process. So I think they had to rebid, right? When 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's going to be allocated?
We do. So there was the benefit of the bargain round that they 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 NIST 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 $500 million 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 timeline. They want to make sure that they have the people on their team that can go deliver and execute.
Okay. All right. So that's a lot of focus on the fiber to the home opportunity. That's 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 think of the long-haul fiber, is that all driven by data centers and the data center build-out, or are there other aspects to it?
Largely, largely. You have infrastructure that's been there for 25, 30 years. The capacity isn't 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's been very vocal about that. 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 sized about $20 billion. And that's just addressable for us. It doesn't include the supply of the materials.
To get done in that $20 billion is really about the next five years, but it's not limited to that. We think it's going to continue probably for the next decade.
I hate to ask you this 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 Sam Altman's saying at any given day or what all the big hyperscalers. He's talking about 250 gigawatts over the next, I think it's eight years. I think there's no way they're going to spend the $ trillions needed to do that. But the $20 billion market size that what kind of, I think it's very hard to know this, but that can't assume that all this build-out that people are talking that all the.
It does not even come close to assuming all that, and we think it's very conservative. That's quite literally lines 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 and perspective where we've talked to a number of the hyperscalers, a lot of the carriers, and so we can aggregate all that because, again, we think it's important that the industry understands how much is coming through because it needs to get, it has to be prepared for.
This $20 billion is a 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 five years.
Right, and it's got very little, very little kind of all this future-state stuff that you're talking about, not even remotely included.
Okay. And where do you guys fit in the ecosystem? So obviously, Lumen is the 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. I think that's 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.
Yeah. And again, it comes back to the skilled workforce. And these are the same men and women that are doing the fiber to the home work 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. It takes a ton of planning, took 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 hyperscalers going to move? How is it going to ebb and flow? This is not a big spend for them. $20 billion over five years against, it's not a big number, but this is a highly time-constrained, right?
This is probably a decade plus of getting these networks built to the capacity that they need.
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 following 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 or sort of have the conditions for their own behind-the-meter solutions. How does that affect your economics and the sort of the opportunity?
Yeah. That's only going to increase the market opportunity. And again, we're not, our kind of the Dycom cell, 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 on the telecommunication side or whether it's 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.
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 these synergies?
Exciting deal for us. A large deal for us. 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 the Power Solutions folks to our team.
It makes a lot of sense. It's sort of vertical. 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 multi-year basis and sort of what the main priorities are from a capital allocation standpoint?
Yeah. 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 two range around two times. And this Power Solutions deal is one that we can bring that down quite quickly, somewhere in 12-18 months. We'll be back below two times. So the fundamentals are still there, but I would certainly, we are looking for additional M&A opportunities in the space and think that it'll be part of the future in addition to organic growth.
Great. Dan, this is great. Appreciate you being here.
Good, John. Really appreciate it.