Lumen Technologies, Inc. Q1 FY2025 earnings call

Operational Excellence: Upgrading systems, simplifying product portfolio, unifying networks, and upgrading go-to-market teams. Strengthened balance sheet with term loan refinancing. Building the Backbone for AI: Progressing with $8.5 billion private connectivity fabric (PCF) projects, with 57 ILA sites under construction, on track for first tranche completion. Partnership with Google Cloud for direct fiber access. Cloudify Telecom (Digital Layer): Lumen Digital platform driving adoption, with 23% QOQ growth in new customers, 26% uptick in new Fabric Ports, and 29% QOQ growth in services sold. Focus on cloud voice services (LCC) leveraging network assets and IP infrastructure.

Total reported revenue declined 3.3% to $3.182 billion. Business segment revenue declined 2.6% to $2.524 billion, and mass market segment revenue declined 5.9% to $658 million. In the North America enterprise channel (excluding wholesale, international, and other), revenue declined 1.7%. North American Enterprise Grow revenue increased 9.9% year-over-year, driven by large enterprise, public sector, WAVE, and IP, and now represents over 48% of total North America enterprise revenue. Nurture products revenue decreased 16.6% year-over-year, largely impacted by VPN declines. Harvest product revenue decreased 9.8% year-over-year, negatively impacted by TDM-based voice declines. Other product revenue increased 8.4% year-over-year. For mass markets, fiber broadband revenue grew 22.9% year-over-year, with 101,000 fiber-enabled homes added, totaling ~4.3 million, and 39,000 quantum fiber customers added, bringing fiber subs to over 1.1 million. Fiber ARPU was $64.

2025 EBITDA guidance: Reiterated $3.2 billion to $3.4 billion. Confident in margin expansion and EBITDA returning to full-year growth in 2026 and beyond. 2026 EBITDA estimate: Greater than $3.5 billion, based on sales performance improvements, lower legacy product declines, and $250 million run rate savings by 2025.

Legacy Service Disconnects: Proactive disconnects of uneconomical legacy services, which may impact public sector revenue in the short term but are EBITDA and margin accretive. Market Uncertainty: Potential uncertainty in the market affecting PCF deals and enterprise spending, but long-term strategic investments in fiber networking are critical for AI economy competitiveness.

Q: Additional context on Grow revenue growth and legacy PDM churn A: Grow revenue driven by dark fiber deals not related to PCF, from large enterprise, public sector, WAVE, and IP; trends expected to continue. Legacy PDM revenue churn timing and remaining impact to be shared later.

Q: Cloud economics vs telco, fiber build progress A: Lumen Digital platform enables cloud economics with lower marginal costs through layering services on Fabric Ports; PCF builds progressing nicely with on-schedule and on-budget execution.

Q: PCF pipeline conversion, public sector risk A: PCF pipeline in active discussions, progressing with enterprise demand for private connectivity; public sector strong with modernization and return to office trends, no immediate risk from government cuts.

Q: NAS product differentiation, public sector weakness A: NAS product differentiates via unique ecosystem, digital platform, and direct fiber access; public sector team performing strongly with strong booking trends, no immediate negative impact.

Q: CapEx cadence, public sector context A: CapEx volatile quarter-to-quarter but confident in annual guidance; public sector modernization and return to office trends positive, no significant weakness from government cuts.

Q: NAS product disruption, public sector context A: NAS product disrupts industry by offering easier digital experience, higher bandwidth consumption, and direct fiber access; public sector team performing strongly with strong booking trends, no immediate negative impact.