Lumen Posts Narrower-Than-Expected Q2 Loss, Revenues Drop Y/Y

Strategic revenues remained a key bright spot, reaching 53% of total business revenues in the quarter, up from 51% in the first quarter. The metric was $1.289 billion, up 14.1% year over year, while legacy revenues declined 15.1% to $1.155 billion. The shift reflects continued traction in newer digital offerings. Within strategic, digital revenues came in at $39 million.

Strong adoption of Network-as-a-Service (NaaS), growing demand for AI-driven networking solutions and the completed Alkira acquisition (July) remained key highlights.

Alkira is a “cloud-native, carrier-agnostic” networking platform, which will extend Lumen’s programmable networking footprint into faster-growing east-west connectivity, including cloud-to-cloud and data center-interconnect. 

Management positioned Alkira as a control-plane software for cloud connectivity. Post the integration, Alkira will unify Lumen's on-net and off-net services, cloud on-ramps and Multi-Cloud Gateway into a single unified platform, compressing its digital platform roadmap meaningfully. 

With about $13 billion in PCF deals, LUMN recognized revenues of $91 million associated with these deals. Management noted that about $36 million of that figure reflected a California delivery milestone payment that was expected in the back half of the year. As AI demand surges, large companies across industries are urgently seeking fiber capacity, which is becoming highly valuable and potentially scarce. 

Total NaaS customer adoption up 22% sequentially in the first quarter. Active ports rose 34% sequentially, while services sold across ports increased 29% from the prior quarter. Lumen now has 3,000 NaaS customers.

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Following the results announcement, LUMN stock is up 1.3% in the pre-market session today. In the past year, shares of LUMN have jumped 79% against the Diversified Communications Services industry’s decline of 7.5%.

Looking at LUMN’s Quarterly Details

By segment, Business revenues fell 2% year over year to $2.444 billion, with North America business down 2% to $2.37 billion.

Revenues from Large Enterprises were up 4% to $794 million. Mid-Market Enterprise revenues declined 8% to $435 million. Public Sector revenues were up 1% to $490 million. Revenues of North America’s Enterprise Channels were marginally down to $1.719 billion. The metric for Wholesale decreased 5% to $653 million. 

Revenues from Mass Markets were down 40% year over year to $361 million, reflecting the impact of divestitures.

Management noted continued strength in higher-bandwidth networking products. Within North American enterprise channels, strategic 100 and 400-gig wave services posted nearly 11% year-over-year growth, while strategic wave sales increased almost 35%, supported by strong demand from AI infrastructure and cloud customers.

LUMN’s Margin Performance

Total operating expenses were down 22% year over year to $2.893 billion.

Operating loss was $88 million in contrast with loss of $603 million in the year-ago quarter. 

Adjusted EBITDA (excluding special items) slipped to $802 million from $877 million, reflecting expected revenue trends and the completion of the sale of fiber-to-the-home assets. Adjusted EBITDA margin excluding special items improved modestly to 28.6% from 28.4% a year earlier.

LUMN’s Cash Flow & Liquidity

In the second quarter, Lumen generated $971 million of net cash from operations compared with $570 million in the prior-year quarter.

Free cash flow (excluding cash special items) was $327 million, compared with an outflow of $209 million in the prior-year quarter. Capital expenditures excluding special items were $902 million.

As of June 30, 2026, the company had $1.876 billion in cash and cash equivalents with $13.15 billion of long-term debt compared with the respective figures of $1.625 billion and $12.925 billion as of March 31, 2026.

LUMN Reiterates 2026 Outlook

Lumen reiterated its full-year 2026 outlook, projecting adjusted EBITDA excluding special items between $3.1 billion and $3.3 billion.

Capital expenditures (excluding special items)  are estimated to be between $3.2 billion and $3.4 billion. 

Free cash flow is anticipated to be between $1.9 billion and $2.1 billion, compared with free cash flow (excluding cash special items) of $1.041 billion reported in 2025.

LUMN’s Zacks Rank

Lumen currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Recent Performance of Some of the Peers

AT&T T reported second-quarter fiscal 2026 results, with adjusted earnings of 65 cents per share, up 20.4% year over year and above the Zacks Consensus Estimate of 59 cents by 10.2%. Revenues increased 2.3% to $31.56 billion but missed the consensus mark of $32.04 billion by 1.5%. AT&T added more than 1 million Advanced Connectivity customers, including 646,000 Internet net additions and 432,000 postpaid phone net additions. Shares for T are down 15% in the past year. 

Rogers Communications Inc RCI reported second-quarter 2026 adjusted earnings of 83 cents per share, topping the Zacks Consensus Estimate and up 1.2% year over year. Revenues of $4.06 billion surpassed the consensus mark by 2.45% and increased 7.6% year over year In domestic currency (Canadian dollar), RCI’s total revenues increased 7.7% year over year to C$5.62 billion, primarily driven by growth in the Media businesses. Total service revenues increased 8% year over year to C$5.06 billion in the quarter. Shares for RCI are up 2.5% in the past year.

Verizon Communications VZ reported second quarter of 2026 adjusted earnings of $1.30 per share, up 6.6% year over year and ahead of the Zacks Consensus Estimate of $ 1.27. Revenues of $34.25 billion declined 0.7% year over year and lagged the consensus estimate of $35.26 billion.

Verizon amassed 184,000 retail postpaid phone net additions, 348,000 broadband net additions and record adjusted EBITDA while raising its full-year 2026 guidance for the second consecutive quarter. Shares for VZ are up 10.7% in the past year. 

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