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Should LUMN Stock Be Part of Your Portfolio Post Q1 Earnings Miss?
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Key Takeaways
Lumen's Q1 2026 adjusted loss widened to 47 cents, as total revenues fell 9% to $2.899B.
Lumen says AI demand is lifting Private Connectivity Fabric; it has secured $13B in PCF deals so far.
Lumen targets $1B in cost savings by 2027 and will pay $475M cash for Alkira, closing in Q3 2026.
Lumen Technologies, Inc. (LUMN - Free Report) recently reported first-quarter 2026 results. The quarter was a messy one, with adjusted loss widening to 47 cents compared with the Zacks Consensus Estimate of a loss of 6 cents. The company had incurred a loss of 13 cents in the prior-year quarter.
Legacy revenue headwinds eroded quarterly revenues. Total revenues declined 9% to $2.899 billion, while Mass Markets revenues fell sharply, reflecting the impact of divestitures. Since the earnings announcement on May 5, LUMN stock has tanked 8.3% and closed yesterday at $8.46.
Lumen Technologies, Inc. Price, Consensus and EPS Surprise
Despite near-term pressures, the company’s narrative remains focused on growing AI opportunity, which is driving demand for its Private Connectivity Fabric (“PCF”) solutions. It has secured $13 billion in PCF deals so far.
The investment debate, therefore, is not just about the earnings miss. It is about whether Lumen’s transformation efforts will eventually offset legacy revenue erosion and boost margins and cash flows.
Let’s do a deep dive to understand what to do with LUMN stock after its first-quarter earnings report.
The Bull Case for LUMN
One of the positives for Lumen is its improving business mix. Strategic revenues were a key bright spot, reaching 51% of total business revenues in the quarter, up from 49% in the fourth quarter. Strategic revenues were $1.246 billion, up 9.4% year over year, while legacy revenues declined 13.5% to $1.198 billion. The shift reflects continued traction in newer offerings.
With about $13 billion in PCF deals, LUMN recognized revenues of $78 million associated with these deals. Management noted that about $32 million of that figure reflected a delivery milestone payment that is not expected to repeat in the second quarter. Digital revenues were $37 million, while other strategic revenues were $1,131 million. As AI demand surges, large companies across industries are urgently seeking fiber capacity, which is becoming highly valuable and potentially scarce.
These “prefunded deals” are helping Lumen to expand capacity and provide upfront capital for its business plan. It has already implemented 17 million intercity fiber miles in 2025 and expects network expansion to reach 58 million fiber miles by 2031. Investments in PCF are expected to create future revenue streams and strengthen Lumen’s position as a relevant infrastructure player going forward.
Lumen’s NaaS business is gaining traction as enterprises shift to on-demand connectivity to support AI and multi-cloud workloads. Active customers were up 25% sequentially in the first quarter. Active ports rose 35% sequentially, while services sold across ports increased 32% from the prior quarter. Lumen now has 2,500 NaaS customers, with more than 30% repeat purchasers. Management added that, among the existing customers, more than 60% of first-time adopters expanded their footprint rather than simply migrating legacy services.
Lumen’s acquisition of Alkira bolsters strategic efforts. 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, it will unify Lumen's on-net and off-net services, cloud on-ramps and Multi-Cloud Gateway into a single unified platform, compressing the digital platform roadmap meaningfully. Financially, Lumen will pay $475 million for the acquisition in an all-cash deal and expects the deal to close in the third quarter of 2026.
Image Source: Zacks Investment Research
Lumen continues to progress with its turnaround and is striving to boost operational efficiency. The company is anticipating $1 billion in cost savings on a run-rate basis by the end of 2027 through planned infrastructure simplification across the network, product portfolio and IT. It is also leveraging AI tech to drive intelligence and automation. The ERP program has progressed to Phase 2 with a unified ledger, positioning Lumen to drop legacy systems and drive efficiencies over time.
Balance sheet deleveraging has also caught investor attention. Following the fiber-to-the-home divestiture, Lumen reduced leverage below 4.0x and lowered annual interest expense by roughly $300 million. Long-term debt as of March 31, 2026, now stands at $12.9 billion, down from $17.5 billion as of Dec. 31, 2025. Reduction in annual interest expense is expected to unlock massive cash flow gains. Lumen refinanced its revolver with a new $825 million facility.
The Bear Case
Despite deleveraging, the debt still hovers around $13 billion, which is sizeable.
As Lumen shifts toward newer growth products like fiber and cloud-based offerings, the secular headwinds in the legacy business will continue to prove a strain on the top-line expansion, at least in the near term. More importantly, management (at the investor day) added that it does not expect a return to business revenue growth until 2028, implying at least two to three more years of structural decline.
Image Source: Zacks Investment Research
Free cash flow is now anticipated to be between $1.9 billion and $2.1 billion compared with the free cash flow (excluding cash special items) of $1.041 billion reported in 2025. Lumen raised its 2026 free cash flow guidance as cash proceeds of $729 million from the fiber-to-the-home divestiture are now being classified as cash flow from operations. Without that benefit, the quality of cash generation looks less straightforward.
Further, Lumen is investing heavily in its network and infrastructure, resulting in increases in capex. This could impact near-term profitability and limit financial flexibility if returns are delayed. 2026 capital expenditures are estimated to be between $3.2 billion and $3.4 billion. Moreover, focus on AI and cloudifying telecom is a positive, but these markets are rife with heavy competition, which could be a serious impediment to top-line expansion for Lumen.
LUMN Stock Performance
Lumen has gained 8.9% year to date, outperforming the 3.7% growth of its Diversified Communication Services industry. Over the past year, shares of LUMN have risen 92.7%, while in the past month, the stock has returned 13.1%.
Image Source: Zacks Investment Research
Some of its peers, such as Verizon Communications (VZ - Free Report) and AT&T (T - Free Report) , have gained 15.7% and 1.7% year to date, respectively, while Cogent Communications (CCOI - Free Report) is down 24.3%.
AT&T and Verizon are giants in the telecommunications space, while Cogent is a Tier 1 Internet Service Provider offering low-cost, high-speed Internet access, private network services and colocation services with ultra-low-latency data transmission.
LUMN Trades at a Discount
Going by its trailing 12-month price-to-sales ratio, it is trading at a multiple of 0.81X, much below the industry’s ratio of 1.67X.
Image Source: Zacks Investment Research
In comparison, Verizon, AT&T and Cogent are trading at multiples of 1.37, 1.34 and 0.81, respectively.
LUMN’s Investment Considerations
Lumen’s efforts at aligning itself with the massive growth of AI, cloud computing and digital telecom services show promise. Increasing PCF demand and deals with tech giants are creating a strong foundation for growth. Expansion into NaaS markets is an additional tailwind. Extensive cost cuts and discounted valuation make LUMN a compelling investment opportunity.
What to Do With Lumen Post Q1?
Lumen is not a clean turnaround yet. Lumen’s long-term story remains compelling, supported by growing PCF demand, expanding NaaS adoption and cost-efficiency initiatives. However, Lumen still faces shrinking legacy revenues, weak bottom-line performance and sizeable debt.
Existing investors may retain the stock, but new investors would be better off waiting for a favorable entry point.
View the Zacks #1 Rank List
Image: Bigstock
Should LUMN Stock Be Part of Your Portfolio Post Q1 Earnings Miss?
Key Takeaways
Lumen Technologies, Inc. (LUMN - Free Report) recently reported first-quarter 2026 results. The quarter was a messy one, with adjusted loss widening to 47 cents compared with the Zacks Consensus Estimate of a loss of 6 cents. The company had incurred a loss of 13 cents in the prior-year quarter.
Legacy revenue headwinds eroded quarterly revenues. Total revenues declined 9% to $2.899 billion, while Mass Markets revenues fell sharply, reflecting the impact of divestitures. Since the earnings announcement on May 5, LUMN stock has tanked 8.3% and closed yesterday at $8.46.
Lumen Technologies, Inc. Price, Consensus and EPS Surprise
Lumen Technologies, Inc. price-consensus-eps-surprise-chart | Lumen Technologies, Inc. Quote
Despite near-term pressures, the company’s narrative remains focused on growing AI opportunity, which is driving demand for its Private Connectivity Fabric (“PCF”) solutions. It has secured $13 billion in PCF deals so far.
The investment debate, therefore, is not just about the earnings miss. It is about whether Lumen’s transformation efforts will eventually offset legacy revenue erosion and boost margins and cash flows.
Let’s do a deep dive to understand what to do with LUMN stock after its first-quarter earnings report.
The Bull Case for LUMN
One of the positives for Lumen is its improving business mix. Strategic revenues were a key bright spot, reaching 51% of total business revenues in the quarter, up from 49% in the fourth quarter. Strategic revenues were $1.246 billion, up 9.4% year over year, while legacy revenues declined 13.5% to $1.198 billion. The shift reflects continued traction in newer offerings.
With about $13 billion in PCF deals, LUMN recognized revenues of $78 million associated with these deals. Management noted that about $32 million of that figure reflected a delivery milestone payment that is not expected to repeat in the second quarter. Digital revenues were $37 million, while other strategic revenues were $1,131 million. As AI demand surges, large companies across industries are urgently seeking fiber capacity, which is becoming highly valuable and potentially scarce.
These “prefunded deals” are helping Lumen to expand capacity and provide upfront capital for its business plan. It has already implemented 17 million intercity fiber miles in 2025 and expects network expansion to reach 58 million fiber miles by 2031. Investments in PCF are expected to create future revenue streams and strengthen Lumen’s position as a relevant infrastructure player going forward.
Lumen’s NaaS business is gaining traction as enterprises shift to on-demand connectivity to support AI and multi-cloud workloads. Active customers were up 25% sequentially in the first quarter. Active ports rose 35% sequentially, while services sold across ports increased 32% from the prior quarter. Lumen now has 2,500 NaaS customers, with more than 30% repeat purchasers. Management added that, among the existing customers, more than 60% of first-time adopters expanded their footprint rather than simply migrating legacy services.
Lumen’s acquisition of Alkira bolsters strategic efforts. 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, it will unify Lumen's on-net and off-net services, cloud on-ramps and Multi-Cloud Gateway into a single unified platform, compressing the digital platform roadmap meaningfully. Financially, Lumen will pay $475 million for the acquisition in an all-cash deal and expects the deal to close in the third quarter of 2026.
Image Source: Zacks Investment Research
Lumen continues to progress with its turnaround and is striving to boost operational efficiency. The company is anticipating $1 billion in cost savings on a run-rate basis by the end of 2027 through planned infrastructure simplification across the network, product portfolio and IT. It is also leveraging AI tech to drive intelligence and automation. The ERP program has progressed to Phase 2 with a unified ledger, positioning Lumen to drop legacy systems and drive efficiencies over time.
Balance sheet deleveraging has also caught investor attention. Following the fiber-to-the-home divestiture, Lumen reduced leverage below 4.0x and lowered annual interest expense by roughly $300 million. Long-term debt as of March 31, 2026, now stands at $12.9 billion, down from $17.5 billion as of Dec. 31, 2025. Reduction in annual interest expense is expected to unlock massive cash flow gains. Lumen refinanced its revolver with a new $825 million facility.
The Bear Case
Despite deleveraging, the debt still hovers around $13 billion, which is sizeable.
As Lumen shifts toward newer growth products like fiber and cloud-based offerings, the secular headwinds in the legacy business will continue to prove a strain on the top-line expansion, at least in the near term. More importantly, management (at the investor day) added that it does not expect a return to business revenue growth until 2028, implying at least two to three more years of structural decline.
Image Source: Zacks Investment Research
Free cash flow is now anticipated to be between $1.9 billion and $2.1 billion compared with the free cash flow (excluding cash special items) of $1.041 billion reported in 2025. Lumen raised its 2026 free cash flow guidance as cash proceeds of $729 million from the fiber-to-the-home divestiture are now being classified as cash flow from operations. Without that benefit, the quality of cash generation looks less straightforward.
Further, Lumen is investing heavily in its network and infrastructure, resulting in increases in capex. This could impact near-term profitability and limit financial flexibility if returns are delayed. 2026 capital expenditures are estimated to be between $3.2 billion and $3.4 billion. Moreover, focus on AI and cloudifying telecom is a positive, but these markets are rife with heavy competition, which could be a serious impediment to top-line expansion for Lumen.
LUMN Stock Performance
Lumen has gained 8.9% year to date, outperforming the 3.7% growth of its Diversified Communication Services industry. Over the past year, shares of LUMN have risen 92.7%, while in the past month, the stock has returned 13.1%.
Image Source: Zacks Investment Research
Some of its peers, such as Verizon Communications (VZ - Free Report) and AT&T (T - Free Report) , have gained 15.7% and 1.7% year to date, respectively, while Cogent Communications (CCOI - Free Report) is down 24.3%.
AT&T and Verizon are giants in the telecommunications space, while Cogent is a Tier 1 Internet Service Provider offering low-cost, high-speed Internet access, private network services and colocation services with ultra-low-latency data transmission.
LUMN Trades at a Discount
Going by its trailing 12-month price-to-sales ratio, it is trading at a multiple of 0.81X, much below the industry’s ratio of 1.67X.
Image Source: Zacks Investment Research
In comparison, Verizon, AT&T and Cogent are trading at multiples of 1.37, 1.34 and 0.81, respectively.
LUMN’s Investment Considerations
Lumen’s efforts at aligning itself with the massive growth of AI, cloud computing and digital telecom services show promise. Increasing PCF demand and deals with tech giants are creating a strong foundation for growth. Expansion into NaaS markets is an additional tailwind. Extensive cost cuts and discounted valuation make LUMN a compelling investment opportunity.
What to Do With Lumen Post Q1?
Lumen is not a clean turnaround yet. Lumen’s long-term story remains compelling, supported by growing PCF demand, expanding NaaS adoption and cost-efficiency initiatives. However, Lumen still faces shrinking legacy revenues, weak bottom-line performance and sizeable debt.
Existing investors may retain the stock, but new investors would be better off waiting for a favorable entry point.
At present, LUMN carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.