Lumen Technologies (NYSE:LUMN) executives used the company’s fourth-quarter and full-year 2025 earnings call to highlight a major portfolio shift, a reshaped balance sheet, and accelerating activity tied to its strategy to become the “trusted network for AI.” Management also issued 2026 guidance that incorporates the Feb. 2 closing of its fiber-to-the-home divestiture to AT&T.
AT&T transaction closes and reshapes financial profile
Chief Executive Officer Kate Johnson said the company closed its transaction with AT&T the day before the call, calling it a “defining moment” that completes Lumen’s pivot to a “simpler, stronger, enterprise-focused technology infrastructure company.” Johnson said Lumen received $4.8 billion in net proceeds and, together with cash on hand, used the funds to pay off all super priority bonds within 24 hours. She also noted Lumen paid off its second-lien debt in the prior month.
The divestiture also changes Lumen’s investment needs. Johnson said the sale reduces annual capital expenditures by more than $1 billion as the company stops fiber-to-the-home builds and reallocates capital toward digital network services.
2025 results: revenue declines, cost actions, and PCF progress
Stansbury said fourth-quarter revenue and adjusted EBITDA were in line with expectations and updated 2025 guidance. Total reported revenue declined 8.7% year over year to $3.041 billion. Business segment revenue declined 8.8% to $2.425 billion, and mass market segment revenue declined 7.9% to $616 million.
Adjusted EBITDA for the quarter was $767 million, representing a 25.2% margin, compared with roughly $1.052 billion in the year-ago quarter. Stansbury attributed the year-over-year decline largely to “expected revenue trends,” including one-time items in the fourth quarter of 2024, as well as increased healthcare costs and higher cloud migration costs. Special items impacting adjusted EBITDA totaled $280 million, including severance, transaction separation costs, and modernization and simplification initiatives.
Free cash flow for the quarter, excluding special items, was negative $765 million. Management said the result was negatively impacted by a delay in a $400 million tax refund, now expected in the first half of 2026.
On cost initiatives, Johnson said Lumen exceeded its increased target for cost reduction, ending 2025 with more than $400 million in run-rate savings. She said Lumen is targeting another $300 million of cost reductions exiting 2026, bringing run-rate savings to $700 million and supporting a longer-term goal of $1 billion of cost-out exiting 2027.
Strategic focus: PCF buildouts, network upgrades, and NaaS adoption
Management repeatedly pointed to pre-funded capacity expansion agreements, which the company refers to as PCF. Johnson said Lumen signed roughly $2.5 billion of new PCF deals in the fourth quarter, bringing the total to nearly $13 billion. Stansbury said Lumen signed almost $4.5 billion in new PCF deals over the past 12 months.
Stansbury said Lumen recognized approximately $41 million of PCF-related revenue in the fourth quarter and $116 million for full-year 2025. In Q&A, management indicated the cash collection structure remains consistent with prior descriptions, with Stansbury saying it is reasonable to assume roughly a 90% upfront cash component and about 10% as projects are lit, with revenue recognition occurring when the fiber is lit.
Johnson said Lumen met a 2025 goal of implementing 17 million intercity fiber miles, and said the new PCF deals expand planned network expansion to 58 million fiber miles by 2031. She also outlined three network upgrade priorities:
- Building 400G RapidRoute Waves across 36 routes (with more planned)
- Enabling 400G services for data centers across key markets
- Expanding metro connectivity to link critical routes, data centers, and cities
Johnson said Lumen expanded its partnership with Corning to secure priority access to newer fiber technology.
On Lumen’s network-as-a-service (NaaS) business, Johnson said the company delivered another strong quarter of adoption, with active customers up 29% quarter over quarter, NaaS fiber ports deployed up 31%, and services sold up 26%. She also highlighted early traction in Off-Net NaaS Internet On-Demand, saying more than 900 Off-Net ports have been sold so far.
In Q&A, Johnson and Stansbury emphasized that management is modeling digital growth conservatively, with Stansbury characterizing their approach as “linear” even though adoption could ultimately follow a “J-curve.” They also said NaaS churn is “dramatically less” than churn in traditional sales, though they did not provide specific figures.
New reporting approach and 2026 guidance
Stansbury said Lumen introduced a new reporting view that separates results into “strategic” and “legacy” categories, replacing the company’s prior framing of “grow, nurture, and harvest.” He said the strategic bucket includes future-oriented offerings the company is investing in, while certain product lines in decline were moved into legacy, including portions of lower-capacity connectivity. He also cited examples of digitally delivered products moved into strategic, such as Ethernet on Demand and VPN on Demand.
For 2026, Lumen guided to adjusted EBITDA of $3.1 billion to $3.3 billion, which includes the impact of the AT&T transaction closing. Stansbury said the company expects adjusted EBITDA to “inflect to growth” in 2026, though he added during Q&A that it is not expected to be growth in every quarter. Management said a pro forma 8-K would be filed the day after the call to provide more detail.
Other 2026 guidance items included:
- Capital expenditures of $3.2 billion to $3.4 billion, including an estimated $1 billion tied to PCF deals
- Free cash flow of $1.2 billion to $1.4 billion
- Net cash interest expense of $650 million to $750 million
- Taxes expected to be a cash inflow of $350 million to $450 million, inclusive of the delayed tax refund but exclusive of divestiture taxes
Management repeatedly pointed investors to an Investor Day on Feb. 25, where it expects to provide additional detail on PCF impacts, longer-range financials, and the company’s broader plan.
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.
