• Total Revenue: Declined 3.3% to $3.182 billion.
• Business Segment Revenue: Declined 2.6% to $2.524 billion.
• Mass Market Segment Revenue: Declined 5.9% to $658 million.
• Adjusted EBITDA: $929 million with a 29.2% margin.
• Free Cash Flow: $354 million.
• North American Business Revenue: Declined 2.2% year-over-year.
• North American Enterprise Grow Revenue: Increased 9.9% year-over-year.
• Public Sector Revenue: Grew 14.7% year-over-year.
• Wholesale Revenue: Declined approximately 3.6% year-over-year.
• Fiber Broadband Revenue: Grew 22.9% year-over-year.
• Capital Expenditures: $791 million.
• Fiber-Enabled Homes: Added 101,000, totaling approximately 4.3 million.
• Quantum Fiber Customers: Added 39,000, totaling over 1.1 million.
• Fiber ARPU: $64.

• Warning! GuruFocus has detected 7 Warning Signs with LUMN.

Release Date: May 01, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Lumen Technologies Inc (NYSE:LUMN) achieved strong financial results, beating consensus for revenue, EBITDA, and free cash flow.
• The company reported a 7.9% year-over-year increase in North American business Grow revenue.
• Lumen Technologies Inc (NYSE:LUMN) successfully refinanced $2.4 billion in term loans, reducing annual interest expenses by approximately $55 million.
• The company is making significant progress in building the backbone for AI, with 57 ILA sites under construction and on track to complete the first tranche of 24 locations on time and on budget.
• Lumen Technologies Inc (NYSE:LUMN) is experiencing strong adoption of its Lumen Digital platform, with a 23% increase in new customers and a 26% increase in new fabric ports provisioned.

Negative Points

• Total reported revenue declined by 3.3% to $3.182 billion, with the business segment revenue declining by 2.6%.
• The Mass Market segment revenue decreased by 5.9% to $658 million.
• Adjusted EBITDA declined to $929 million from $977 million in the previous year, with a margin decrease of 50 basis points.
• Nurture products revenue decreased by 16.6% year-over-year, largely impacted by declines in VPN.
• Harvest product revenue decreased by 9.8% year-over-year, negatively impacted by declines in TDM-based voice services.

Q & A Highlights

Q: Can you provide additional context on the reasons for the 10% year-over-year growth in Grow revenue during the first quarter, and can this growth continue? Also, what about the legacy TDM revenue churn? A: Christopher Stansbury, CFO: The Grow revenue was driven by dark fiber deals unrelated to the $8.5 billion in PCF, primarily from large enterprises and public sectors. We expect these trends to continue as businesses prepare for AI. The Grow bucket now represents roughly half of our sales, indicating a positive trend. Regarding legacy TDM revenue, some churn occurred in Q1, and we are finalizing arrangements for the rest. From an EBITDA standpoint, it's neutral or positive, with expected margin improvements.

Q: How does cloud economics differ from traditional telco, and what are the margin differences? Can these strategies be applied to mass markets? A: Kathleen Johnson, CEO: The Lumen Digital platform enables cloud economics by allowing multiple services on one port, reducing marginal costs. It's early to predict margins, but adoption is promising. Chris Stansbury, CFO: We'll provide more details at our Investor Day in September. On fiber builds, progress is good, and economics remain consistent with initial expectations.

Q: How do you expect the conversion of the remaining $3.5 billion PCF pipeline, and what about the enterprise spending environment? A: Kathleen Johnson, CEO: Discussions are ongoing, with demand increasing due to AI-driven data needs. Enterprises seek partners for multi-cloud AI environments, and our offerings meet these needs. Despite market uncertainties, fiber networking is critical infrastructure for AI, and we expect continued investment.

Q: Can you provide more color on the public sector revenue and pricing of new digital platform services? A: Christopher Stansbury, CFO: No significant step-up in public sector revenue this quarter, but the sector remains strong. Kathleen Johnson, CEO: Our digital platform offers higher value, not just lower prices. We focus on total value of ownership, enhancing customer outcomes and reducing costs, which justifies our pricing.

Q: How are you differentiating your NaaS product, and what is the traction in the market? Also, can you clarify the public sector weakness? A: Kathleen Johnson, CEO: Our NaaS product is unique, integrating digital platform capabilities with our extensive network. Customers seek ease of use and high performance, which we provide. Christopher Stansbury, CFO: Public sector opportunities remain strong, and any off-net impacts will be isolated and not affect the bottom line.

Q: How does the Lumen connectivity platform disrupt the industry, and who is affected? A: Kathleen Johnson, CEO: The platform disrupts by offering direct fiber access, eliminating third-party cross-connect fees, and enhancing cloud connectivity. This impacts data center companies and benefits cloud service providers by increasing bandwidth consumption and accelerating revenue.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.