Lumen Reports Better-Than-Expected Q4 Earnings, Revenues Down Y/Y

Core Insights - Lumen Technologies reported a fourth-quarter 2025 adjusted earnings of 23 cents per share, exceeding the Zacks Consensus Estimate of a loss of 21 cents, while total revenues were $3.041 billion, down 8.7% year over year and missing estimates by 1.4% [2][8] Financial Performance - The company achieved a full-year revenue of $12.4 billion, reflecting a 5% decline [2] - Adjusted EBITDA for the fourth quarter decreased to $767 million from $1.052 billion, with respective margins of 25.2% and 31.6% [12] - Operating loss was $200 million compared to an operating income of $154 million in the prior year [12] Revenue Breakdown - Business revenues fell 8.8% year over year to $2.425 billion [10] - Revenues from Large Enterprises declined 1% to $758 million, Mid-Market Enterprise revenues decreased 11% to $472 million, and Public Sector revenues were down 18% to $457 million [11] - Revenues from Mass Markets decreased by 7.9% year over year to $616 million [11] Strategic Developments - Lumen secured $13 billion in PCF deals by the end of 2025, recognizing revenues of $41 million in Q4 and $116 million for the full year [3] - The company reported a 29% quarter-over-quarter growth in active customers for its NaaS platform [4] - Lumen completed the $5.75 billion cash sale of its Mass Markets fiber business to AT&T, impacting over one million fiber customers [5] Cost Management - The company achieved $400 million in run-rate cost benefits in 2025, exceeding its target of $350 million, with expectations of $700 million in 2026 and $1 billion by the end of 2027 [5] - Total debt was reduced to less than $13 billion, down more than $5 billion since January 2025, resulting in a reduction of annual interest expense by nearly $500 million [6] Cash Flow and Liquidity - Lumen generated $562 million of net cash from operations in Q4, down from $688 million in the prior year [13] - Free cash outflow was $765 million, significantly higher than $174 million in the previous year, affected by a delay in a $400 million tax refund [13] - As of December 31, 2025, the company had $1 billion in cash and cash equivalents [14] Future Outlook - Management anticipates adjusted EBITDA growth in 2026, predicting a range between $3.1 billion and $3.3 billion [15] - Capital expenditures are estimated to be between $3.2 billion and $3.4 billion, a reduction from $4.367 billion in 2025 [17] - Free cash flow is expected to be between $1.2 billion and $1.4 billion, compared to $1.041 billion reported in 2025 [18]