Corporations, governments, and individuals are highly reliant on the cloud to store data and access and deliver goods on a daily basis.

Due to this reliance, the smooth operation of the cloud—the backbone of the modern Internet—has become of utmost importance. This is why data center capex is expected to reach roughly $7 trillion by 2030.

With data center capex expected to surge in the next few years, demand for networking solutions and equipment will likewise rise.

Networking equipment like switches and routers connects thousands of servers inside a single data center and ensures the smooth flow of data across the cloud. As more businesses become reliant on the cloud, related networking solutions will become increasingly relevant.

That’s where Belden (BDC) comes in.

Belden is a supplier of end-to-end network solutions and products.

Belden has long been a legacy cable manufacturer. However, beginning in 2020, the company initiated a “solutions-oriented” pivot. And as part of this transformation, the company executed a slew of acquisitions over the past few years.

Notable additions include Voleatech, a firm that specialized in open-source firewall software and Precision Optical Transceivers, an optical transceiver manufacturer, both in 2024. In 2023, Belden also acquired CloudRail, a firm that specialized in interoperability solutions for the software and industrial automation industries.

Belden currently provides solutions to a wide range of industries which include automotive manufacturing, broadband, semiconductor manufacturing, chemical processing, consumer packaged goods, data centers, energy, healthcare, higher education, mass transit, hospitality, and warehousing and logistics.

Belden’s network-related offerings include network convergence, edge computing, and network slicing. Meanwhile its data-focused solutions include data interoperability, data contextualization, data anomaly detection, and data provisioning.

The company also has a vast catalogue of products to complement its wide range of network- and data-related offerings.

Belden’s product portfolio falls under multiple categories such as cables (ethernet, broadcast, electronic, audio, fiber optic, and others), connectors (fiber connectors and adaptors, copper connectors, etc.), I/O systems, industrial networking and cybersecurity, panels and patching systems, patch cords, and racks, cabinets, and cable management.

At present, Belden’s major segments include Automation Solutions, Smart Buildings, and Broadband and Telecommunications.

Belden’s transformation into a solutions-oriented network solutions provider has paid off thus far. Revenues improved from $1.7 billion in 2020 to a record-high of $2.7 billion last year.

The company’s Uniform return on assets (“ROA”) has likewise seen an improvement, rising from 11% in 2020 to 16% last year.

Despite Belden’s improvements to its business and exposure to surging cloud-related spending, investors are forecasting its returns to decline slightly to 13% by 2030.

This valuation largely underestimates just how networking solutions and equipment have become. As long as Belden can continue to execute on its solutions-oriented business strategy, it should be able to sustain and keep growing its returns moving forward.

Best regards,

Joel Litman & Rob Spivey
Chief Investment Officer &
Director of Research
at Valens Research

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