While aware of the uncertainty surrounding the BEAD program, Clearfield sees opportunities to assist its community broadband and Tier 3 service provider customers, who will use the funding to enhance broadband in difficult-to-reach parts of the country.
Speaking to investors during Clearfield's first quarter earnings call, CEO Cheri Beranek said the BEAD program will lay a new broadband foundation.
“We continue to view the BEAD program as a meaningful long-term growth catalyst, particularly for community broadband and Tier 3 service providers,” she said.
Beranek added that Clearfield could benefit from the upcoming network build season as its customers use the FCC’s Enhanced Alternative Connect America Cost Model (E-ACAM) program.
“While E-ACAM and BEAD funding cannot be applied to the same service addresses, providers can leverage both programs across different areas of their networks, enabling broader and more efficient network expansion,” she said. “Because of the BEAD and E-ACAM government programs, combined with a return to a more normal ordering pattern for the overall industry, we believe Clearfield is well-positioned to benefit from these opportunities.”
Anticipating fiber opportunities
Another potential challenge vendors like Clearfield could face in pursuing BEAD opportunities is a call by lawmakers to streamline the program, which does not favor a fiber-centric strategy.
Proposed legislation like the SPEED for BEAD Act proposes a "technology-neutral" approach, allowing states to use various technologies (including fiber, fixed wireless, and satellite) for BEAD projects, rather than favoring fiber exclusively. This could lead to faster deployments in areas where fiber installation is not feasible or cost-effective.
In March, Congressman Richard Hudson (R-NC), who serves as Chairman of the Communications and Technology Subcommittee on the House Energy and Commerce Committee, led Republican members of the subcommittee in introducing the Streamlining Program Efficiency and Expanding Deployment (SPEED) for the BEAD Act.
However, Beranek maintains that fiber-based implementations leveraging BEAD funding will still be the dominant medium for delivering broadband.
“Despite political shifts and increased discussion around technology neutrality, we believe most BEAD funding will ultimately support fiber-based infrastructure,” she said. “As such, we expect BEAD to contribute materially to Clearfield’s revenue in fiscal 2026.”
Moreover, Clearfield points out that industry forecasts support the notion that fiber broadband will continue to grow.
RVA projects the fiber industry to grow at a 12.5% compound annual growth rate over the next five years, with approximately one-third of new households expected to gain access to multiple fiber providers.
Similarly, industry analysts anticipate that the annual number of homes connected will outpace homes passed through 2028.
“We believe Clearfield is well-positioned to benefit from these industry trends,” Beranek said.
U-shaped recovery ahead
With growth across its key markets during the quarter, Clearfield maintains that this is a sign that the overall telecom and networking markets are emerging from the inventory glut that was prevalent throughout 2023 and 2024.
“Our outperformance was driven by strong customer demand across all of our Clearfield segment end markets and solid execution by our talented employees, as we converted early quarter quoting activity into Q2 revenue at a faster pace and higher rate than anticipated,” the company said in its letter to shareholders. “These results are consistent with our expectation of a U-shaped recovery. We continue to execute on our strategy and strengthen our alignment with customer ordering plans as the industry moves to a normalized cadence heading into the upcoming build season.”
Net sales in the company’s primary market, Community Broadband, comprised 38% of net sales in the second quarter of fiscal 2025. Clearfield generated net sales of $18 million in Community Broadband, up 12% from the prior year's second quarter.
“Sequentially, Community Broadband experienced an uptick of 36% from the first quarter, due to increased customer demand, an early start to the build season, and overall reduced inventory levels held by our customers across the market,” Clearfield said in its letter to shareholders.
Clearfield also saw an uptick in MSO and the Large Regional Service Provider market. MSO sales were $7.6 million in the second quarter, comprising 16% of net sales and increasing by approximately 53% from the prior year's second quarter.
It noted that the MSO business experienced a sequential uptick of 37% from the first quarter, driven by higher volumes from portfolio customers in this market. And while some of its MSO customers still carry elevated inventory levels, Clearfield said it “anticipates a return to more typical inventory positions over the next year.”
Large Regional Service Provider market sales were $11.3 million in the second quarter, which comprised 24% of net sales and increased by approximately 255% from the prior year's second quarter. Clearfield said that its Large Regional Service Provider business experienced a sequential uptick of 54% over the first quarter, driven by increased customer demand, an early start to the build season, and overall reduced inventory levels held by our customers across the market.
Clearfield cautioned that it continues “to expect quarter-to-quarter variability in this market due to shifts in product mix and evolving deployment timelines and strategies.”
Finally, net sales in the National Carrier market were $2.2 million in the second quarter, which comprised 5% of the quarter's net sales and increased by about 6% from the prior year's second quarter. Due to what it said was lumpiness in stocking programs, Clearfield’s National Carrier business declined 19% sequentially.
Clearfield reported sales of $47.2 million, up 28% over the same period in the prior year and above its guidance range. Clearfield segment net sales were up 47% year over year. The company said it maintains its fiscal 2025 net sales outlook from $170 million to $185 million.
However, Clearfield cautioned that due to “economic instability as well as the evolving tariff situation that originated early in our third quarter, we are not raising our net sales guidance despite our strong first half performance.”
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Sean Buckley
Sean is responsible for establishing and executing the editorial strategies of Lightwave and Broadband Technology Report across their websites, email newsletters, events, and other information products.