Zayo aims to maintain momentum after double-digit growth in ‘22

Zayo Group had a stellar year in 2022, posting its best-ever sales performance and best-ever churn in Q3. As the company heads into 2023, Zayo President Andres Irlando told Fierce the focus is on maintaining growth across all six of its primary segments while also bringing down capital spending levels, which have been elevated in recent years.

As a private company, Zayo doesn’t publicly report earnings. But Irlando revealed the company posted “double digit” year on year sales growth across all its segments – including strategic accounts, large enterprise, education, mid-market, channel and Europe – in 2022.  While it’s still early in the year, he noted it has continued to see growth across all six in 2023.

That includes its strategic accounts segment, which covers its hyperscale and other top clients. Growth among hyperscalers has continued unabated, despite a recent wave of layoffs which hit the big tech sector. Thus far, Irlando noted that those layoffs haven’t really been focused on big tech’s network or cloud divisions. And while hyperscalers are being “very intentional” with their spending, Zayo continues to see “very robust” demand from them as they continue to expand the cloud and move more content to the network edge.

Though he didn’t provide a revenue breakdown, Irlando said fiber connectivity remains the company’s “bread and butter,” with managed services becoming a complementary – though not significant – revenue stream.

Zayo is competing in the connectivity segment with the likes of Lumen Technologies and Windstream, among others. Irlando said it has spent the past several years investing both in the network and its IT systems as a means to set itself apart. While others are investing to add capacity to existing routes with 400G upgrades, Irlando claimed Zayo is one of the few that has also been adding new long haul dark fiber routes to meet demand.

He noted it completed four new routes last year and has another 11 projects in progress. “Others are doing it but as far as we can tell we’re doing it more extensively,” he said. It has also extended connectivity to South America with a new route into Sao Paulo, Brazil, and worked to amp up its cloud connectivity by bringing 1,400 data centers on-net.

All of this has come with a cost. Irlando said that since it went private in 2020, Zayo’s capital expenditures have been about 20% to 25% above historical averages. But with many of its network projects set to wrap up in the near term, he noted the operator is aiming to bring spending down to a level below historical amounts in 2023.

While it’s not expecting any other major changes this year, Irlando noted Zayo was built on M&A. It doesn’t have any deals on tap just yet, but will continue to look at opportunities to grow both organically and inorganically, he concluded.