Lumen Technologies (LUMN) investor relations material

Revenue growth strategy and business transformation

• Half of revenue now comes from growing segments, with a path to overall growth by 2028–2029 driven by digital and PCF deals, each contributing about $500 million.

• Legacy business will decline faster than growth segments for the next 1–2 years, but digital adoption is accelerating, especially in network-as-a-service, which is growing at 30% quarter-on-quarter.

• Network-as-a-service platform is unique, scalable, and allows self-provisioning, with over 1,500 customers and no direct competitors investing at the same scale.

• Pricing strategy is evolving, with potential for stickier pricing due to unique infrastructure and lack of peer replication.

• Growth in waves, security, and dark fiber products is strong, with increasing demand for higher-capacity connections and improved provisioning times.

AI infrastructure, market positioning, and customer trends

• AI infrastructure build-out is fundamentally different from the telecom bubble, with well-capitalized buyers and real use cases driving demand.

• The network is not being overbuilt; investments are prepaid by customers, reducing financial risk.

• Demand from new AI model developers and GPU-as-a-service companies is growing, with contracts tailored to customer profiles.

• Shift from AI training to inference is underway, increasing the need for flexible, self-provisioned network access.

• Ecosystem partnerships are expanding, with tech providers integrating APIs into the network to enhance their products.

Capital allocation, cost transformation, and financial outlook

• Most CapEx is focused on blowing fiber through existing conduit and building inline amplifiers, with some new route builds; PCF and non-PCF cash flows will be separated.

• Core business CapEx (excluding fiber to the home and PCF) is about $2 billion annually, with $400–$500 million for maintenance and the rest for metro expansions and rapid routes.

• Sale of fiber assets to AT&T will reduce debt by $4.8 billion and lower interest expense, with a long-term wind-down of rural copper and DSL assets.

• Cost transformation focuses on tech debt reduction, IT modernization, and AI-driven efficiency, targeting $1 billion in exit run rate savings by 2027.

• Balance sheet simplification and further deleveraging are priorities, with potential for share repurchases once leverage is reduced to low threes.