Data center AI demands are driving CommScope's enterprise fiber business

“We are very excited about the market projections for the data center business and our positioning in this market,” said Treadway during CommScope’s fourth-quarter earnings call. “The demand in our enterprise fiber business is not solely driven by growth in data centers, but the complexity of new AI-focused data centers that require five to ten times the amount of our cabling and connectivity solutions versus the traditional data centers. CommScope is well positioned in the data center markets with the breadth of products and capacity to meet the service and quality requirements.”

CommScope’s other CCS business units, Broadband and Structured Cable, have also seen an increase in demand. Treadway reported that demand is matching deployment rates and customers in both businesses have normalized inventory.

CommScope also expects BEAD funding to have a positive effect on broadband revenues but doesn’t plan to see a meaningful impact until 2026.

“Outside of BEAD, demand drivers over the next few years are strong,” said Treadway. “and we are investing to grow share internationally.”

Anticipating network upgrades

In the fourth quarter, CommScope had core net sales of $1.17 billion, up 27% year over year, and core adjusted EBITDA of $240 million, up 69% year over year, which Treadway attributed to strength in the Networking, Intelligent Cellular & Security Solutions (NICS) businesses as well as the CSS business.

CommScope’s core NICS business, which excludes distributed antenna systems (DAS), had quarterly net sales of $154.2 million, up 13% year over year. Core NICS adjusted EBITDA was $26.1 million, up 285% year over year, which Treadway attributed to RUCKUS revenues.

“We feel that the challenges in the first half with channel inventory are behind us as inventory levels have normalized,” said Treadway. “As the business moves back to historical seasonality, we believe the RUCKUS business is well positioned for growth in 2025.”

CommScope’s Access Network Solutions (ANS) business had quarterly net sales of 260.9 million, up 11.8% year over year. Treadway reported that the segment is well-positioned to take advantage of service providers upgrading their next-generation networks.

“The real question,” he said, “remains the timing and magnitude of the upcoming upgrade cycle for our customers.”

Moving past inventory challenges

Executive vice president and CFO Kyle Lorentzen reported that, for the full year, CommScope had net sales from continuing operations of $4.2 billion, a decrease of 8% from the prior year. Adjusted EBITDA was $700 million, a 5% increase.

For Core CommScope, which excludes the Outdoor Wireless Networks (OWN) and DAS businesses, the company reported adjusted EBITDA of $756 million for the full year of 2024. For the fourth quarter, Core CommScope reported core adjusted EBITDA of $240 million, a 69% increase year over year. Lorentzen reported that these results included a one-time inventory charge of $18 million in the ANS business, without which adjusted EBITDA would have been $258 million.

Net sales from continuing operations were $1.1 billion in the fourth quarter, up 27% year over year. Adjusted EBITDA from continuing operations was $223 million, up 87%.

Core CommScope backlog ended the quarter at $977 million.

“In all of our businesses, we are back to normalized backlog levels with short lead times,” said Lorentzen, “and we now expect our core businesses to align closer to historic quarterly order trends.”

CCS net sales in the fourth quarter were $754 million, up 36% year over year. CCS adjusted EBITDA was $176 million, up 110% year over year.

“Although we expect CCS adjusted EBITDA as a percentage of revenue to remain strong, we would not expect it to remain at this level for the first quarter of 2025 as we return to normal seasonality and lower activity levels in the first and fourth quarters,” said Lorentzen. “The CCS revenue increase was driven by all product lines with hyperscale and cloud data centers seeing the strongest growth.”

Fourth quarter net sales for the OWN and DAS businesses, the divesture of which was completed in the first quarter of 2025, were $333 million, an increase of 27% year over year.

CommScope generated $278 million from cash flow from operations and free cash flow of $271 million in the quarter. 

CommScope expects 2025 adjusted EBITDA to be between $1 billion and $1.05 billion.

"We believe that many of our customer inventory challenges are behind us, and demand is growing in all of our segments,” said Treadway. “We have made significant investments in our product offerings and capacity over the last several years and are in a great position to take advantage of the projected stronger markets."