BCE (BCE) Q2 2026 earnings review
Media and Ziply Mask Core Canadian Telecom Weakness
BCE delivered 1.5% YoY total revenue growth and 1.0% Adjusted EBITDA growth in Q2 2026. This stability was driven by the integration of the Ziply Fiber acquisition in the U.S. and a strong advertising rebound in the media division fueled by the FIFA World Cup. However, beneath the consolidated surface, the core Canadian telecommunications segment contracted. Furthermore, a massive 41.5% YoY surge in capital expenditures—driven by U.S. fiber expansion and domestic AI data center builds—caused Free Cash Flow to decline 9.5%. Management's pivot toward geographic diversification and enterprise AI is executing well, but it is coming at a high capital cost while the legacy cash-cow business erodes.
🐂 Bull Case
The Ziply Fiber acquisition is providing a predictable, unregulated growth engine. U.S. operations contributed positively to both top and bottom lines, helping to fully offset the revenue declines experienced in the Canadian wireline business.
After quarters of struggling with traditional advertising headwinds, Bell Media surged back to 8.9% revenue growth and expanded margins, proving the value of premium sports rights (FIFA World Cup) and its growing Crave streaming base.
🐻 Bear Case
Bell CTS Canada suffered a 4.0% revenue decline and a 3.1% drop in Adjusted EBITDA. Wireless ARPU is deteriorating, and product revenues collapsed 16.3%, signaling that the legacy cash engine is under severe pressure.
Capital intensity shot up to 17.5% as the company poured money into U.S. fiber and massive AI data centers. This dragged Free Cash Flow down 9.5%, raising questions about the long-term sustainability of aggressive dividend growth alongside such heavy capital requirements.
⚖️ Verdict: ⚪
Neutral. Management deserves credit for finding new growth vectors in AI and U.S. fiber, but the legacy Canadian telecommunications business is showing real signs of fatigue with declining ARPU and shrinking margins. The heavy CapEx required to fund the new strategy is eating directly into free cash flow.
Key Themes
Bell Media Rebounds on FIFA World Cup
Reversing recent softness, operating revenues surged 8.9% YoY to $918M. This was driven by a 5.3% increase in advertising revenues largely attributed to the exclusive broadcast of the 2026 FIFA World Cup. Subscriber revenues also accelerated 6.7% due to DTC streaming growth from Crave and the adoption of ad-supported subscription tiers. Adjusted EBITDA for the segment grew a healthy 3.8%.
U.S. Fiber (Ziply) Anchors Connectivity Growth
Bell CTS U.S. is proving to be a reliable buffer against Canadian weakness. The segment contributed $234M in revenue and $95M in Adjusted EBITDA (40.6% margin) in Q2. The division added 9,612 residential FTTH net subscribers, benefiting from the continued aggressive expansion of the fiber footprint in the U.S. Pacific Northwest.
AI Infrastructure Rollout Accelerating
Bell is aggressively advancing its 'sovereign AI' strategy. The company announced construction partnerships for a massive 300 MW AI data center in Saskatchewan and inked an infrastructure agreement with Cohere, Hypertec, and BUZZ HPC for its Bell AI Fabric facility in Merritt, B.C. Revenues from AI-powered solutions (Ateko, Bell Cyber) continue to scale, representing a critical pivot toward enterprise technology services.
Core Canadian Telecom Contraction
There is a glaring contradiction in the results: while consolidated Adjusted EBITDA grew 1.0%, the legacy Bell CTS Canada segment is quietly shrinking. Operating revenues dropped 4.0% YoY to $5.12B, and Adjusted EBITDA declined 3.1%. Product revenues fell a steep 16.3%, and wireline voice revenues dropped 5.8%. Without the inorganic boost from Ziply and the cyclical boost from Media, BCE's core engine is in reverse.
Free Cash Flow Squeezed by Surging CapEx
Consolidated capital expenditures spiked 41.5% YoY to $1.08B, pushing capital intensity up a massive 500 basis points to 17.5%. This was driven by $163M in U.S. FTTH investments and a $145M increase in Canadian investments to support new AI data centers. Consequently, Free Cash Flow decelerated 9.5% YoY to $1.04B.
Wireless KPIs Deteriorating Amid Macro Softness
Total mobile phone net activations decelerated 39.0% YoY to 57,627. A massive 67.9% drop in prepaid net adds was explicitly attributed to macroeconomic factors: limited population growth and a decline in international students in Canada. Furthermore, blended ARPU declined 2.3% YoY to $56.30 due to competitive pricing pressures and the non-recurrence of 2025 G7 Summit revenues.
Other KPIs
Accelerating. Consolidated FTTH net additions grew 14.5% YoY. However, this masks a 5.5% YoY decline in Canadian FTTH net adds (45,271). The overall growth was entirely driven by the addition of 9,612 net adds from the Ziply U.S. footprint, highlighting the strategic necessity of the acquisition.
Accelerating. Up 11.0% YoY from $1,947 million in Q2 2025. The strong underlying cash generation was driven by lower severance payments, reduced income taxes, and slightly higher EBITDA, demonstrating solid working capital management even as capital expenditures surged.
Guidance
Stable. With YTD 2026 revenue tracking at +2.7% YoY, BCE is comfortably in the middle of its annual guidance range. The steady contribution of Ziply and the strong Q2 from Bell Media provide a solid buffer against the 2.0% YTD contraction in Bell CTS Canada.
Stable. YTD Adjusted EBITDA is up 1.9%, aligning perfectly with the midpoint of the FY26 target range. Margins have compressed slightly (down 0.3 pts YTD to 43.2%) due to the lower-margin profile of the Ziply acquisition and high content costs in Bell Media, but absolute dollar growth remains intact.
Key Questions
Macro Impact on Prepaid Wireless
You cited limited population growth and a drop in international students as key drivers for the massive 68% drop in prepaid net adds. Do you view this as a permanent structural headwind for the Canadian wireless market, and how are you adjusting your marketing spend in response?
Peak Capital Intensity
Capital intensity surged to 17.5% this quarter. With the $1.3B expected spend on the Saskatchewan AI facility this year, what is the peak capital intensity we should expect, and at what point does it start pressuring the dividend payout ratio?
Canadian FTTH Deceleration
Canadian FTTH net adds declined 5.5% YoY. Is this deceleration primarily due to reaching the end of the easy low-hanging fruit in your footprint, or are you seeing increased competitive intensity from cable providers offering aggressive pricing?