Key Takeaways: After narrowly avoiding bankruptcy, Lumen Technologies shed assets and reduced debt. The company is currently focused on moving into high-growth businesses such as AI networking and cloud services. Fiber networks are a big advantage. Lumen plans to layer a digital services platform on top of that to give customers the ability to process large amounts of data on demand with minimal latency and unparalleled speeds. Lumen is a story for patient investors. Transformation can take years to materialize, but once successful, growth goes from linear to exponential. For years, Lumen Technologies has been preparing for a reality that has yet to arrive. The company has invested billions of dollars to build an extensive fiber optic network. Capital spending reduced profits and weighed down stock prices to the point where they were measured in pennies. It was in debt and on the verge of sinking, but Lumen survived, but WorldCom and others did not. The advent of artificial intelligence has created a voracious demand for computing power, putting Lumen in a sweet spot. The company wants to leverage its fiber optic network and layer a digital service platform on top of it. Pitched as a “network-as-a-service,” the highly scalable product provides on-demand flexibility and speed for customers to link AI data centers to consumers and businesses. Lumen’s agreement with AWS Interconnect announced Wednesday highlights how the company’s last-mile and metro network infrastructure will make it faster and easier for businesses to connect to the cloud, turning a process that once took weeks and required multiple providers into a quick, automated setup that can be completed in minutes. Shares soared more than 10% in afternoon trading. A new management team and revamped board are guiding Lumen to stabilize its finances and pivot to high-growth areas such as AI networking, cloud infrastructure, network security, and other business services. Lumen sold its consumer business to AT&T earlier this year, allowing the company to pay down debt, cut costs and move further away from its traditional communications business. As Lumen continues on this path, it’s likely to attract new investor groups and create further demand for its stock. Investors who believe in the company’s future trends rather than its unfortunate past may be rewarded. The company outlined its multi-year plan at an investor briefing in February and said it expects profit before interest and taxes to start increasing this year. Revenue growth should return by 2028. Profit margins should expand steadily. Significant operating cash flow could support the company’s transition and reduce capital spending, potentially supporting the stock price. Lumen stock has nearly doubled from distressed levels over the past year. The stock price has increased slightly since the beginning of the year. From Copper to Fiber The Monroe, Louisiana-based company’s roots date back to 1930, when William Clark and Marie Williams bought Oak Ridge Telephone Company, which had just 75 subscribers, for $500. Over the next few decades, the name changed to reflect its evolution. Century Telephone Enterprises became CenturyTel and then CenturyLink. At the same time, it grew through mergers and acquisitions, including Embarq (2008), Qwest (2010), and Level 3 (2016). Eventually, the company became the second largest telecommunications provider in the United States. We rebranded again in 2020. The new company name, Lumen Technologies, reflects the transition from traditional copper-based services to fiber. Lumen sold its existing local communications business to Apollo Funds in 2022 and completed the $5.75 billion sale of its mass-market fiber optic business to AT&T in February. Most of the proceeds from AT&T were used to pay down debt, resulting in net debt-to-EBITDA leverage of less than 4x. This followed a $15 billion debt restructuring completed in early 2024 that saw Lumen’s stock price drop to about $1 per share. Total interest expense was reduced by $500 million and the company’s credit rating improved. “We had the largest out-of-court debt restructuring in the history of corporate America,” CEO Kate Johnson said on the WSJ Leadership Institute podcast in December 2025. “A lot of people said, ‘It would have been easier if we just went to Chapter 11,’ but we knew we had a deal that fundamentally changed our position on the other side of the restructuring because every hyperscaler needed this fiber.” Restoring value Johnson added that when he joined the company in 2022, he felt it was his mission to recover commoditized assets and restore their value. Approximately 50% of Lumen’s revenue comes from its traditional businesses, including voice, leased lines, traditional VPN and Ethernet for businesses, and voice and DSL services over copper that primarily serve rural retail customers. Speaking at the Raymond James Investor Conference on March 2, Chief Financial Officer Christopher Stansbury said that while revenue from the company’s voice and DSL consumer copper business has been declining by “low double digits” each year, the business is not worth selling because of the “low single digit” valuation multiple. Instead, he said, the business “wastes a huge amount of cash, which allows us to invest in our aspirations as a company.” Lumen’s new high-growth businesses include a $13 billion private connectivity fabric (PCF) deal to build custom, future-ready networks for the AI era for hyperscalers such as Amazon, Google Cloud, Meta, and Microsoft. PCF proceeds will provide a financial bridge for Lumen as it builds its digital services business. The business has revenue of $117 million in 2025 and is expected to grow to $500 million to $600 million by 2028. Digital Services are software tools and features that run on Lumen’s network and provide customers with an easy way to manage and adjust their connectivity. By placing computing power close to customers and providing a high-capacity fiber backbone, Lumen is able to offer customers something no other company can: ultra-low latency. Latency is valuable because it determines how fast data can move and be directly processed, enabling the responsiveness and effective functioning of real-time AI applications (such as voice agents). This is Lumen’s unique competitive moat. No other company can offer Lumen’s digital layer combined with the massive capacity of its fiber network. And no company can easily build it. ‘The point of explosive growth’ Lumen is a very different company now than it was four years ago, and it will be a very different company four years from now. By 2030, Lumen expects high-growth strategic businesses to account for 70% of its revenue, up from about 50% today. Adjusted EBITDA margin is expected to expand from 27.1% in 2025 to the mid-30s in 2030. Digital revenue is expected to increase from $800 million to $900 million by 2030. Lumen’s growth projections to 2028 are based on linear assumptions, so there is room for upside if network effects occur due to widespread adoption of the platform. “If you think about all the major disruptive technologies that we’ve gone through, it’s our belief that they go through periods of growth and then explosive growth. We think this will follow a similar path. We just don’t want to predict where the explosive growth point will occur,” CFO Stansberry said March 3, speaking at Morgan Stanley’s TMT conference. Jeff Sharitz joined Cisco as chief revenue officer in February. Cisco uses a subscription-based sales model that emphasizes customer business outcomes, ecosystem co-selling, and recurring recurring revenue rather than one-time transactions. “If you think about the connected ecosystem and Cisco’s sales model, you might understand what we’re trying to accomplish here,” Johnson said of Sharitz’s arrival. The board has also been refreshed. Starting in 2022, five new directors have been added to the 10-member Board of Directors. Two directors have retired and one additional director has been nominated for election at the annual general meeting in May. Mr. Johnson reaffirmed his confidence in Lumen’s prospects in early February by purchasing about $500,000 in stock to bring his effective ownership to 1.2%. Dan Hagan is also a major shareholder with a 5.3% stake. Mr. Hagan is known for investing in unpopular deep-value stocks with high cash flow yields, such as Jackson Financial, AMC Networks, Lincoln National and Goodyear. As the company continues to transform, its investor base is also likely to expand. TD Cowen analyst Gregory Williams wrote in a recent note that Lumen’s debt problems, which have been a focus for years, appear to have been permanently resolved as the company’s maturity profile has smoothed out and gross leverage has fallen to around 3.8x (making the stock investable to a broader base of long-only managers). Raymond James analyst Frank Roussin sees a return to top-line growth expected in 2028 as “the next factor needed to drive broader investor support.” Valuation Until then, Lumen’s strong cash flow makes the stock attractive on a valuation basis compared to peers AT&T and Verizon. Lumen has lower forward price-to-free cash flow and price-to-sales ratios in both 2026 and 2027 estimates. This is due in part to Lumen’s proprietary PCF transactions, which Bank of America analyst Michael Fink said “will continue to be a strong tailwind for (free cash flow) over the medium term.” At the end of 2025, Lumen had a net operating loss of approximately $982 million that could be used to offset future federal taxable income. Not all investors are aware of this benefit. Analysts have a constructive view on Lumen, but they don’t yet agree on the long-term outlook. According to LSEG, there were only two buy ratings, 10 hold ratings, and two underperform ratings, with an average price target of $7.54, 5% below the stock’s price at Tuesday’s close. Investors need to take a long-term view, as Lumen’s story will not unfold this year, but rather over the next four to five years. Those companies could be rewarded if Lumen’s unique digital platform, located on a robust fiber network, becomes the go-to networking solution for AI deployments. Correction: The company name was misspelled in the previous heading.
