Lumen is driving network expansion to build the backbone of the AI economy

“We’re driving network expansion in several ways,” she explained. “We’re building new routes funded by our customers, often multi-tenant with great economics. We’re partnering with Corning to use their latest fiber innovations, allowing us to get as much as four times more capacity from existing and new routes, and we’re leveraging photonics innovation for up to two times greater fiber efficiency.”

Lumen intends to increase overall network capacity and attain 70% overall utilization of its network by 2028.

“The growth lever of building the backbone for AI represents a huge accretive opportunity for this company,” said Johnson. “We’re not only driving the strongest utilization of our network assets in the history of the company, we have unmatched capacity for growth at exactly the right time.”

Cloudifying telecom

Johnson reported that there are two factors inhibiting enterprise customers from moving workloads between locations, at the edge and multi-cloud, cost-efficiently and friction-free: legacy networks were not built for a multi-cloud world, and most traditional telecom companies aren’t building a platform to provide dynamic, frictionless experiences. To address this, Lumen has made itself customer number one.

“To enable our Quantum Fiber quote-to-cash process, for example, we utilize multiple cloud and SaaS providers,” explained Johnson. “Order processing workloads are hosted on one public cloud, leveraging its native capabilities for seamless flow-through provisioning. But once it’s processed, the data required for business operations and financial reporting is then transferred to our corporate data warehouse, which is hosted in a completely different public cloud. Using our own Lumen network fabric, which is now directly connected to three big public clouds in a virtual networking ecosystem, our Quantum Fiber quote-to-cash network architecture bypasses carrier-neutral facilities and eliminates physical cross-connects and their fees as well as reduces overall port usage. The outcome is a modern multi-cloud network architecture at a lower cost than traditional architectures with improved network speed, security, and reliability.”

Lumen plans to bring this architecture to customers in late 2025.

“How we cloudify ourselves to operate efficiently in a multi-cloud hybrid architecture world is informing how we innovate and commercialize our product and services portfolio for our customers,” said Johnson. “We’re creating an innovative networking ecosystem that will bring new value to enterprise CIOs in today’s multi-cloud AI-first world.”

Lumen estimates that these cloudifying efforts will give the company access to a total available market worth at least $15 billion.

Expanding fiber

In the fourth quarter, Lumen had revenues of $3.3 billion, down 5.3% year over year. Chris Stansbury, Lumen CFO, reported that the decline was due to the impact of divestitures, commercial agreements, and the sale of the content delivery network (CDN) business.

Business segment revenues in the quarter were $2.6 billion, down 5.1% year over year, and mass market revenues were $670 million, down 6.3%.

Fiber broadband revenues were $195 million in the quarter, a year-over-year growth of 18.9%. In the fourth quarter, Lumen increased fiber-enabled locations by 501,000 and had 42,000 net fiber adds. Lumen had 161,000 net fiber adds for the full year.

Of Lumen’s three product categories, the “grow” category saw revenues of $872 million, a 15.3% increase year over year; the “nurture” category had revenues of $486 million, a 16.2% year-over-year decrease, and the “harvest” category had revenues of $293 million, down 7.3% year over year.

Fourth quarter adjusted EBITDA was $1.05 billion.

For 2025, Lumen expects adjusted EBITDA to be between $3.2 billion and $3.4 billion and expects increased growth in the following years.

“Given anticipated improvements in sales performance, lower absolute declines in the legacy products, and the approximately $250 million in run rate savings exiting 2025, we see 2026 EBITDA being greater than $3.5 billion with growth in future years,” said Stansbury.

Lumen expects total CapEx in 2025 to be between $4.1 billion and $4.3 billion.

“The majority of the increase in CapEx from 2024 to 2025 is associated with the cost to execute against our signed PCF contracts,” said Stansbury. “We continue to see maintenance CapEx between $400 million and $600 million and Quantum Fiber CapEx at approximately $1 billion similar to 2024 as our homes passed target for 2025 is also 500,000.”