Lumen Technologies Q1 Earnings Call Highlights

Key Points

• Lumen’s Q1 results were in line with expectations, with revenue and EBITDA meeting guidance and total business revenue down 3.2% year over year to $2.44 billion. Management said the company is still on track with its full-year commitments and continuing to improve its revenue mix.
• Network-as-a-Service adoption is accelerating, with first-quarter customer adoption up 25% sequentially and active ports and services rising sharply. Lumen now has nearly 2,500 NaaS customers, and management highlighted major wins with a financial services firm and a logistics company.
• Lumen is using its balance-sheet gains to boost cash flow and growth, raising 2026 free cash flow guidance to $1.9 billion–$2.1 billion after closing its fiber-to-the-home sale to AT&T. The company also announced plans to acquire Alkira for $475 million to expand cloud-to-cloud and data center connectivity capabilities.

Lumen Technologies NYSE: LUMN said first-quarter 2026 results were in line with its expectations as management highlighted improving revenue mix, continued adoption of its network-as-a-service offerings and a planned acquisition intended to expand its cloud connectivity capabilities.

Chief Executive Officer Kate Johnson said the company is positioning its network for enterprise customers building AI-driven infrastructure, emphasizing the need to move large amounts of data securely and predictably across distributed environments. She said Lumen is combining physical fiber assets, a programmable network and an ecosystem of cloud, application and partner connections into a platform designed to simplify enterprise networking.

“Lumen’s delivered a solid performance during the first quarter with revenue and EBITDA in line with expectations,” Johnson said. She added that the company remains on track to deliver the commitments discussed at its recent Investor Day, including investments in long-haul capacity, metro expansion, data center interconnect and cloud adjacency.

Lumen Plans Alkira Acquisition to Expand Cloud Connectivity

Lumen announced its intent to acquire software company Alkira, which Johnson said is expected to extend Lumen’s programmable network into east-west cloud connectivity, including data center-to-data center and cloud-to-cloud traffic. She described that area as the fastest-growing part of the enterprise networking market.

President and Chief Financial Officer Chris Stansbury said Lumen plans to finance the $475 million transaction with cash on hand and expects the deal to close in the third quarter. He said the transaction is expected to be immaterial to financials and neutral to margins in the near term, but accretive to both as the platform scales.

Stansbury said Lumen had previously indicated it would consider technology acquisitions only if they enhanced the company’s product portfolio, came at a reasonable valuation and were accretive to broader financials. “Alkira checked all those boxes,” he said.

Johnson said Lumen does not plan to “absorb” Alkira in a way that slows the company, but instead intends to enable and accelerate Alkira by bringing Lumen’s network as an underlay and directing Lumen’s customer pipeline toward Alkira’s platform. In response to an analyst question, she said integration will include use of Lumen’s digital and ERP platforms where appropriate, but emphasized that “Alkira stays Alkira” because of its engineering team, customer focus and speed.

Network-as-a-Service Adoption Continues to Grow

Johnson said Lumen continued to see strong adoption of its NaaS services in the quarter, with particular strength in off-net and large enterprise adoption. She said first-quarter customer adoption grew 25% sequentially, active ports increased 35% and active services rose 32%.

The company now has nearly 2,500 NaaS customers, according to Johnson, with more than 30% making repeat purchases. More than 20% of first-time NaaS adopters in the quarter were new to Lumen, while more than 60% of existing Lumen customers adopting NaaS for the first time were expanding their footprint rather than migrating away from older services.

Johnson also cited two large NaaS wins: a global financial services firm committing to a more than 600-site branch upgrade, and a global logistics firm deploying Lumen NaaS at 300 sites. She said those wins demonstrate the role of programmable networks in enabling AI-powered business transformation.

Lumen also pointed to recent cloud partnerships. Johnson said AWS and Lumen launched AWS Interconnect – last mile, which allows enterprises to establish private direct connections from on-premises locations to AWS. She also said Google announced private connectivity discovery through Google Cloud Marketplace, with an upcoming preview of API-provisioned on-premises-to-cloud connectivity powered by Lumen.

First-Quarter Financial Results

Stansbury said Lumen’s total revenue was in line with company expectations and ahead of consensus, while its revenue mix continued to improve. Total business revenue declined 3.2% year over year to $2.44 billion. North American enterprise revenue, including wholesale, declined 0.8% year over year.

Strategic revenue accounted for 51% of total business revenue in the quarter, up from 49% in the fourth quarter. Digital revenue was $37 million, in line with expectations, and included NaaS, security products and cloud voice services.

Lumen reported first-quarter PCF revenue of $78 million tied to previously announced PCF deals. Stansbury said approximately $32 million of that was a delivery milestone payment anticipated in the company’s 2026 projections and will not recur in the second quarter. During the question-and-answer session, he said a smaller milestone payment is expected in the third quarter, with additional details to come at that time.

Adjusted EBITDA, excluding special items, was $849 million, compared with approximately $929 million in the year-earlier quarter. Stansbury said the decline reflected expected revenue trends, higher health care costs and the sale of Lumen’s fiber-to-the-home assets.

Special items affecting adjusted EBITDA totaled negative $430 million in the quarter and included the gain on the fiber-to-the-home transaction, severance, transaction and separation costs, and modernization and simplification initiatives. The one-time gain from the fiber-to-the-home sale was $596 million.

Capital expenditures, excluding special items, were approximately $859 million, including about $161 million related to PCF deals.

Balance Sheet and Guidance

Stansbury said Lumen strengthened its balance sheet by closing the fiber-to-the-home sale to AT&T, reducing leverage below 4x and lowering annual interest expense by nearly $300 million. He also cited the refinancing of the company’s revolver with a new $825 million facility and progress toward simplifying Lumen’s reporting structure.

Lumen raised its 2026 free cash flow guidance to a range of $1.9 billion to $2.1 billion, from $1.2 billion to $1.4 billion. Stansbury said the increase reflects $729 million of proceeds from the fiber-to-the-home deal being classified as cash flow from operations. First-quarter free cash flow was $756 million, excluding special items.

Stansbury said the cash proceeds from the divestiture were primarily used to pay down debt in the first quarter. Lumen also received roughly $870 million in cash associated with PCF deals. He cautioned that free cash flow will remain “lumpy” from quarter to quarter, while trends remain consistent with full-year guidance.

During the Q&A session, Stansbury said Lumen is not disclosing quarterly cost-savings figures and did not raise EBITDA guidance despite a stronger-than-consensus quarter. He noted that first-quarter EBITDA included roughly one month of contribution from the divested fiber-to-the-home business.

Management said Lumen remains on track to meet full-year guidance and continues to focus on execution, including PCF builds, digital revenue visibility, ERP implementation and modernization efforts.

About Lumen Technologies NYSE: LUMN

Lumen Technologies is a multinational technology company specializing in integrated network, edge cloud, security and collaboration services for enterprise and public sector clients. The company's core offerings include high-capacity fiber and IP-based connectivity, managed edge computing solutions designed to accelerate applications and data processing closer to end users, and cybersecurity services ranging from DDoS protection to unified threat management. Through its unified portfolio, Lumen enables organizations to support digital transformation initiatives, modernize infrastructure and enhance operational resilience.

Leveraging one of the largest fiber footprints in North America, as well as infrastructure in Latin America and parts of Europe, Lumen connects customers across more than 60 countries.

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