Lumen’s third quarter results demonstrated continued progress in its digital transformation, with revenue and adjusted EBITDA both surpassing Wall Street expectations. Management highlighted the expansion of its private connectivity fabric and network-as-a-service (NaaS) platforms as core drivers, with CEO Kate Johnson emphasizing, “We signed an additional $1-plus billion in private connectivity fabric deals since our last update.” Despite ongoing declines in legacy telecom revenue, the company’s newer digital offerings and cost management initiatives helped offset these pressures. The market response was muted, reflecting a wait-and-see approach as Lumen pivots toward a more digital and AI-driven business model.
Is now the time to buy LUMN? Find out in our full research report (it’s free for active Edge members).
Lumen (LUMN) Q3 CY2025 Highlights:
- Revenue: $3.09 billion vs analyst estimates of $3.06 billion (4.2% year-on-year decline, 0.9% beat)
- Adjusted EPS: -$0.20 vs analyst estimates of -$0.27 (25% beat)
- Adjusted EBITDA: $787 million vs analyst estimates of $761.7 million (25.5% margin, 3.3% beat)
- EBITDA guidance for the full year is $3.3 billion at the midpoint, below analyst estimates of $3.37 billion
- Operating Margin: -3.8%, down from 3.9% in the same quarter last year
- Market Capitalization: $11.14 billion
While we enjoy listening to the management's commentary, our favorite part of earnings calls are the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.
Our Top 5 Analyst Questions From Lumen’s Q3 Earnings Call
- Michael Rollins (Citi) asked about the margin profile of new connectivity fabric deals and the sustainability of Grow revenue growth. CEO Kathleen Johnson said margins were consistent with prior deals, and CFO Chris Stansbury noted that while PCF contributes, core products like dark fiber and IP are also key drivers.
- Sebastiano Petti (JPMorgan) questioned the bridge between 2025 and 2026 EBITDA as transformation costs persist. Stansbury identified improved business mix and ongoing cost reductions as the main drivers for future EBITDA stabilization.
- Frank Louthan (Raymond James) sought details on the revenue impact and timing from recent ecosystem partnerships. Johnson explained these are tied to the connected ecosystem and are expected to accelerate digital revenue growth but will be reported as part of overall digital capabilities.
- Gregory Williams (TD Cowen) asked if the recent stock strength would prompt equity issuance. Stansbury said the focus remains on balance sheet improvement, with equity actions considered only as part of a broader capital strategy.
- Jonathan Atkin (RBC Capital Markets) inquired about investments required for digital platform growth and the potential for M&A. Johnson said investments are already planned within operating budgets and that the company will evaluate tuck-in acquisitions as opportunities arise.
Catalysts in Upcoming Quarters
In the coming quarters, our team will be monitoring (1) the pace of NaaS and digital port adoption as new products like IoD off-net and Project Berkeley scale, (2) progress on cost reduction and balance sheet deleveraging, especially following the AT&T fiber-to-the-home transaction, and (3) the ability to offset legacy service declines with growth in AI-driven and ecosystem partnership revenues. The onboarding of additional partners and expansion of the connected ecosystem will also be key indicators.
Lumen currently trades at $10.96, up from $10.34 just before the earnings. Is the company at an inflection point that warrants a buy or sell? The answer lies in our full research report (it’s free for active Edge members).
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