BCE Inc. (BCE) Q4 2025 earnings review
Margins Hit 30-Year High, But Core Canadian Revenue Shrinks
BCE delivered a mixed Q4 2025. While the company achieved its 'highest Q4 Adjusted EBITDA margin in over 30 years' (41.6%) through aggressive cost-cutting and a shift to higher-margin services, the top line in the core Canadian telecom segment contracted 3.9%. The acquisition of Ziply Fiber (now 'Bell CTS U.S.') masked domestic weakness, contributing $232M in revenue and $100M in EBITDA. Full-year free cash flow (FCF) grew 10% to $3.18B, comfortably covering the dividend. However, the earnings recession continues: Adjusted EPS fell 12.7% in Q4 and guidance suggests a further 5-11% decline in FY2026 due to higher interest expenses and depreciation from the U.S. expansion.
🐂 Bull Case
Management successfully expanded Adjusted EBITDA margins by 100 bps to 41.6% in Q4 despite flat revenue. Operating costs fell 2.0% ($77M reduction), driven by workforce reductions and AI-enabled efficiencies. The target of $1.5B in savings by 2028 appears on track.
The new Bell CTS U.S. segment is performing ahead of expectations, generating $100M EBITDA in Q4 with a superior 43.1% margin. This provides a clear path for growth that the saturated Canadian market cannot offer.
🐻 Bear Case
Bell CTS Canada revenue declined 3.9% YoY in Q4. Product revenue collapsed 15% and Service revenue fell 1.1%. Without the U.S. acquisition, BCE is a shrinking business in nominal terms.
Adjusted EPS is guided down another 5-11% in 2026 (following a 7.9% drop in 2025). High interest expenses from the Ziply debt load and increased D&A are eating all operational gains, delaying earnings growth until at least 2027.
⚖️ Verdict: ⚪
Neutral. BCE is effectively managing a transition from a low-growth Canadian utility to a North American fiber player. The margin control and FCF generation ($3.2B) support the dividend, but the shrinking domestic top-line and multi-year EPS contraction limit upside potential.
Key Themes
U.S. Fiber (Ziply) Carrying the Growth
The Bell CTS U.S. segment (Ziply Fiber) is the sole driver of revenue expansion. In Q4, it contributed $232M revenue and $100M Adjusted EBITDA. Notably, the segment operates at a 43.1% margin, higher than the consolidated average. With a plan to reach ~3M fibre passings by 2028, this segment is critical to offsetting Canadian stagnation.
Product Revenue Collapse
A major headwind in Q4 was a 15.0% decline in Product Revenue ($965M vs $1,135M). This was driven by lower mobile device sales (customers holding phones longer/BYOD shift) and timing of wireline equipment deals. While lower-margin, this volume loss dragged down the total Canadian top line significantly.
Media: Digital pivot vs. Legacy Decay
Bell Media illustrates the painful transition. While Digital Revenues grew 3% (now 46% of mix) and Crave subs jumped 26% to 4.6M, it wasn't enough to offset an 11.1% plunge in traditional advertising revenue. Consequently, Media EBITDA fell 10.7%. The segment remains profitable but volatile.
Wireless Churn Improvement
Postpaid mobile phone churn improved 17 basis points to 1.49%. This is the third consecutive quarter of improvement, signaling that retention strategies (bundling, customer service investments) are stabilizing the user base despite intense competitive pricing pressure.
Dividend Payout Pressure
While the dividend ($1.75/share) is covered by Free Cash Flow (FCF payout ratio ~51%), it is becoming uncomfortably high relative to earnings. With 2026 EPS guided to ~$2.50-$2.65, the EPS payout ratio will remain elevated (~65-70%), limiting room for increases or deleveraging speed.
Other KPIs
Accelerating. Highest annual level in over 30 years. Q4 margin hit 41.6% (+100bps YoY). This confirms the effectiveness of the restructuring and cost-out programs initiated over the last 18 months.
Accelerating. Up 10.0% YoY. This was driven by lower capital expenditures ($3.7B vs $3.9B last year) and working capital improvements. 2026 guidance sees this growing another 4-10%.
Stable/Declining. Down from 16.0% in 2024. 2026 guidance points to <15%. As the major Canadian fibre build slows, capital is being reallocated to the U.S. build and debt management.
Guidance
Accelerating vs 2025 (+0.2%). Growth is almost entirely inorganic, driven by having a full year of Ziply Fiber contribution (vs 5 months in 2025). Bell CTS Canada expected to remain challenged.
Stable/Accelerating vs 2025 (+0.7%). Cost efficiencies and high-margin U.S. revenue will drive this. The midpoint (2%) implies margins will remain near record highs.
Decelerating/Negative. A deterioration from 2025's -7.9%. Management cites higher depreciation from U.S. assets, higher interest expense, and lower tax adjustments as the headwinds. This implies 2026 EPS of approx. $2.50 - $2.66.
Stable. Slightly lower midpoint than 2025's 10% growth, but remains robust. Driven by EBITDA flow-through and lower severance payments compared to 2025.
Key Questions
Canada CTS Turnaround
With Bell CTS Canada revenue down nearly 4% in Q4, and product revenue collapsing, what is the specific timeline for stabilizing the domestic top line? Is negative growth the new normal for Canada?
AI Revenue vs Enterprise Stagnation
You highlight a 31% increase in 'AI-powered solutions revenue,' yet overall Bell CTS Canada revenue is down. How large is this AI cohort in absolute dollars, and why isn't it moving the needle on the segment level yet?
EPS Inflection Point
With Adjusted EPS guided down for a second consecutive year (cumulative ~20% drop from 2024 levels), when do you model the cross-over point where EBITDA growth outpaces the drag from D&A and interest expense?