BCE's Valuation Upgrade: Unpacking National Bank's Optimism Amid Fiber and AI Momentum

National Bank's recent revision of BCE's valuation metrics for 2025 signals a compelling shift in investor sentiment, driven by the telecom giant's strategic momentum in fiber expansion, AI innovation, and disciplined capital allocation. While BCE's Q2 2025 earnings report included a 11.27% EPS miss, the company's revenue beat, free cash flow growth, and transformative acquisitions have positioned it as a standout in a sector grappling with regulatory and competitive pressures. This article examines how National Bank's optimism reflects broader industry tailwinds and underappreciated growth drivers that could unlock significant value for BCE shareholders.

Fiber Expansion: A Catalyst for Long-Term Growth

BCE's acquisition of Zipline Fiber in 2024 has been a game-changer, adding 1.4 million fiber locations to its network and securing its position as the third-largest fiber Internet provider in North America. This move not only diversifies BCE's revenue streams but also taps into the explosive demand for high-speed connectivity in both residential and enterprise markets. With a target of 8 million fiber passings in the U.S. by 2025, BCE is leveraging its partnership with PSP Investments to accelerate infrastructure deployment while maintaining capital efficiency.

The fiber strategy is already paying off: Zipline Fiber reported 17% EBITDA growth in 2024, with projections of 20%+ in 2025. This momentum is critical in an industry where fiber adoption is outpacing traditional broadband, driven by remote work, streaming, and AI-driven applications. National Bank's revised metrics likely factor in BCE's ability to monetize this infrastructure through recurring revenue streams, particularly in underserved U.S. markets.

AI and Sovereign Computing: A Strategic Edge

BCE's Bell AI Fabric initiative is another cornerstone of its valuation upgrade. By positioning itself as the backbone of Canada's AI ecosystem, BCE is capitalizing on the global shift toward sovereign computing—where governments and enterprises prioritize data security and local infrastructure. The Bell AI Fabric, launched in Kamloops in partnership with Grok, offers high-performance, environmentally responsible AI services tailored to Canadian enterprises.

This move aligns with BCE's enterprise segment, which delivered record revenue growth in Q2 2025. The company's AI-powered solutions, including cybersecurity (via Stratagem) and cloud platforms (via Ateco), are differentiating it in a crowded market. National Bank analysts highlight BCE's unique advantages: a national fiber network, access to low-cost power, and deep enterprise relationships. These factors position BCE to capture a growing share of the AI market, where demand is projected to grow at over 20% annually.

Financial Discipline: A Foundation for Resilience

Despite the Q2 earnings miss, BCE's financial health remains robust. The company reduced capital expenditures by $500 million in 2025, targeting a net debt leverage ratio of 3.8x by year-end. This disciplined approach, combined with a 5% free cash flow increase in Q2, underscores BCE's ability to balance growth investments with shareholder returns.

BCE's 55-year dividend streak—currently offering a 5.54% yield—further enhances its appeal. National Bank's revised metrics likely reflect the company's capacity to sustain dividends while reinvesting in high-growth areas. With a FAIR financial health rating from InvestingPro and a beta of 0.65 (indicating lower volatility), BCE offers a rare combination of income security and growth potential.

Undervaluation and Market Opportunity

InvestingPro analysis suggests BCE is trading below its fair value, with a P/E ratio of 75.3x and an EV/EBITDA of 8.05x. While these multiples may seem elevated, they are justified by BCE's long-term growth drivers: fiber expansion, AI infrastructure, and enterprise services. National Bank's upward revision of valuation targets implies that the market is beginning to recognize these catalysts, but the stock still trades near its 52-week low.

Investment Implications

For investors, BCE presents a compelling case of undervaluation amid transformative growth. The company's strategic acquisitions, AI leadership, and disciplined capital management create a strong foundation for long-term value creation. While near-term earnings volatility is a risk, the fundamentals—particularly in fiber and AI—point to a significant upside.

Key Takeaways for Investors:
1. Entry Point Potential: BCE's current valuation offers an attractive entry point for investors seeking exposure to fiber and AI growth.
2. Diversification: The Zipline Fiber acquisition provides geographic and revenue diversification, reducing reliance on Canadian markets.
3. Income Focus: The 5.54% dividend yield appeals to income-focused investors, supported by BCE's financial resilience.
4. Long-Term Vision: BCE's focus on sovereign AI and enterprise services aligns with global trends, ensuring relevance in a rapidly evolving tech landscape.

In conclusion, National Bank's revised valuation metrics for BCE reflect a company poised to capitalize on industry tailwinds. By combining fiber expansion, AI innovation, and financial discipline, BCE is not just navigating challenges—it's redefining its role in the digital economy. For investors with a medium-term horizon, BCE's current valuation and strategic momentum make it a compelling addition to a diversified portfolio.