Lumen Q2 2025 presentation: AT&T deal, debt reduction highlight strategic shift

Lumen Technologies Inc (NYSE:LUMN) presented its second quarter 2025 results on July 31, revealing a significant strategic shift with the announcement of a $5.75 billion sale of its consumer fiber-to-the-home (FTTH) business to AT&T (NYSE:T). The presentation highlighted the company’s ongoing transformation toward enterprise services and AI infrastructure while addressing continued revenue challenges.

Quarterly Performance Highlights

Lumen reported total revenue of $3.09 billion for Q2 2025, representing a year-over-year decline of 5.4% and a sequential decrease of 2.8% from the previous quarter. Despite these challenges, the company emphasized solid adjusted EBITDA performance and improved free cash flow guidance.

"We’re guiding towards the high end of our adjusted EBITDA range due to strength in our modernization and simplification program," noted the company in its presentation materials.

The following slide summarizes Lumen’s key Q2 2025 highlights, including the AT&T deal and debt refinancing achievements:

Revenue performance varied significantly across business segments. While Public Sector showed strong growth of 8.2% year-over-year, other segments continued to face headwinds. North American Enterprise revenue declined by 2.4% year-over-year to $1.72 billion, while Mass Markets revenue fell 12.8% to $602 million.

The detailed breakdown of Lumen’s revenue performance across segments reveals both challenges and bright spots:

In the Mass Markets segment, fiber broadband revenue grew 19.9% year-over-year, now representing 47% of total broadband revenue compared to 38% a year earlier. However, this growth was offset by declines in other broadband (-17.8%) and voice services (-33.6%).

Strategic Initiatives

The most significant strategic development was the announced sale of Lumen’s Consumer FTTH business to AT&T for $5.75 billion. This transaction will allow the company to reduce leverage and sharpen its focus on enterprise services. The deal represents a major milestone in Lumen’s transformation journey toward becoming a more enterprise-focused connectivity provider.

Lumen also highlighted its positioning as a backbone for AI infrastructure, emphasizing its network expansion plans and partnerships with major cloud providers. The company’s strategy includes increasing total intercity fiber miles from 12 million in 2022 to a planned 47 million by 2028, while improving overall network utilization.

The following slide illustrates Lumen’s strategy for building network infrastructure to support AI:

The company is also making significant progress in its Network-as-a-Service (NaaS) offerings, with customer adoption increasing 35% year-over-year and fabric port sales growing 31%. Lumen’s NaaS capabilities have attracted numerous well-known brands, including Best Buy (NYSE:BBY), Pacific Life, Columbia, and Foot Locker (NYSE:FL).

Lumen’s "cloudification" strategy aims to transform traditional telecom infrastructure to enable more dynamic, scalable services:

The company also introduced its Connected Ecosystem, which integrates physical and digital assets to improve customer experience and drive commercial scale:

Detailed Financial Analysis

Lumen reported adjusted EBITDA of $725 million for Q2 2025. After accounting for special items totaling $152 million, adjusted EBITDA excluding special items was $877 million, representing a margin of 28.4%, down 250 basis points.

Free cash flow was negative at $209 million for the quarter, with capital expenditures of $891 million exceeding cash flow from operations of $570 million. However, the company has made significant progress in restructuring its debt profile.

Lumen’s debt maturity profile has evolved significantly, with total debt expected to decrease from $19.9 billion (4.3x leverage) to $13.5 billion (3.9x leverage) following the AT&T transaction:

Forward-Looking Statements

Lumen revised its 2025 financial outlook, maintaining its adjusted EBITDA guidance of $3.2 to $3.4 billion but now expecting to reach the high end of that range. The company significantly improved its free cash flow guidance to $1.2-$1.4 billion from the previous $700-900 million, driven primarily by a $400 million tax refund, lower capital expenditures, better EBITDA performance, and reduced interest expense.

The company’s stock closed at $4.46 on July 31, 2025, down 0.22% for the day, but rose 0.45% to $4.48 in after-hours trading following the earnings presentation. Lumen shares have traded between $2.51 and $10.33 over the past 52 weeks.

While revenue challenges persist, Lumen’s strategic repositioning through the AT&T deal, debt reduction efforts, and focus on high-growth areas like AI infrastructure and multi-cloud networking appear to be gaining traction with investors. The improved free cash flow outlook and progress on the company’s transformation initiatives suggest a potentially more stable financial foundation moving forward, despite ongoing competitive pressures in the telecommunications industry.

Full presentation:

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