Executive Summary

Q1 2025 delivered revenue stabilization with enterprise “Grow” products up 9.9% YoY, adjusted EBITDA margin ex-special items at 29.2%, and reiterated full-year guidance; management highlighted stronger balance sheet from a $2.4B term loan refinancing saving ~$55M annually .
Results vs consensus*: Revenue beat ($3.182B vs $3.121B), normalized EPS beat (-$0.13 vs -$0.27), adjusted EBITDA beat (~$929M vs ~$816M), but Free Cash Flow missed ($354M vs $690M) as PCF build timing made cash flows lumpy; management flagged FCF variability through large AI network builds .
Guidance maintained: 2025 Adjusted EBITDA $3.2–$3.4B, FCF $700–$900M, Net Cash Interest $1.2–$1.3B, CapEx $4.1–$4.3B, cash taxes $100–$200M .
Strategic catalysts: Google Cloud partnership enabling 400Gbps direct fiber access and Cloud WAN integration, reinforcing Lumen’s AI backbone positioning; platform adoption accelerated (customers +23% QoQ, services sold +29%, fabric port sales +26%) .
Narrative for investors: focus on AI-driven connectivity, cloudified telecom, enterprise mix shift (Grow now ~48% of NA enterprise revenue), and disciplined legacy rationalization (public sector headwinds from off‑net TDM disconnects, margin-accretive) .

Note: Estimates marked with * are values retrieved from S&P Global.

What Went Well and What Went Wrong

What Went Well

NA Enterprise Grow products revenue increased 9.9% YoY, driven by dark fiber, Waves, and IP; Grow now ~48% of NA enterprise revenue, indicating mix shift to higher-margin connectivity .
CFO highlighted refinancing of $2.4B term loans to 2032, cutting interest expense by ~$55M annually, and credit upgrades supporting better cost of capital; deleveraging continues .
Lumen announced Google Cloud partnership for direct 400Gbps fiber to customer locations and Cloud WAN integration, improving latency and simplifying multi-cloud networking .

What Went Wrong

Free Cash Flow ex-special items fell to $354M vs $518M in Q1 2024; management emphasized FCF lumpiness due to timing of large PCF builds and payments .
Public sector expected drag in 1H 2025 from forced disconnects of uneconomical off-net TDM services despite strong bookings; margin accretive but weighs on near-term revenue .
Adjusted EBITDA ex-special items declined YoY to $929M (from $977M) and margin compressed 50 bps, reflecting transformation costs and legacy revenue declines amidst modernization .

Financial Results

Metric	Q1 2024	Q4 2024	Q1 2025
Revenue ($USD Billions)	$3.290	$3.329	$3.182
Net Income (Loss) ($USD Millions)	$57	$85	$(201)
Diluted EPS ($USD)	$0.06	$0.09	$(0.20)
Diluted EPS (Ex-Special Items) ($USD)	$(0.04)	$0.09	$(0.13)
Adjusted EBITDA (Ex-Special Items) ($USD Millions)	$977	$1,052	$929
Adjusted EBITDA Margin (Ex-Special Items) (%)	29.7%	31.6%	29.2%
Free Cash Flow (Ex-Cash Special Items) ($USD Millions)	$518	$(174)	$354
Capital Expenditures ($USD Millions)	$713	$915	$791

Business and channel mix

Metric ($USD Millions)	Q1 2024	Q4 2024	Q1 2025
Business Segment Revenue	$2,591	$2,660	$2,524
Mass Markets Segment Revenue	$699	$669	$658
North America Enterprise Channels	$1,763	$1,851	$1,733
Large Enterprise	$765	$764	$737
Mid-Market Enterprise	$577	$531	$513
Public Sector	$421	$556	$483
Wholesale	$731	$717	$705
International & Other	$97	$92	$86

Business product categories

Product Category ($USD Millions)	Q1 2024	Q4 2024	Q1 2025
Grow	$1,059	$1,177	$1,136
Nurture	$776	$704	$666
Harvest	$582	$575	$534
Other	$174	$204	$188

Mass Markets KPIs

KPI	Q1 2024	Q4 2024	Q1 2025
Fiber Broadband Subscribers (thousands)	952	1,077	1,116
Other Broadband Subscribers (thousands)	1,758	1,469	1,392
Total Broadband Subscribers (thousands)	2,710	2,546	2,508
Fiber Broadband Enabled Units (millions)	3.8	4.2	4.3
Fiber Broadband ARPU ($)	—	$61	~$64

Platform adoption (QoQ)

Lumen Digital: customers +23%, services sold +29%, fabric port sales +26% .

Guidance Changes

Metric	Period	Previous Guidance (Q4 2024)	Current Guidance (Q1 2025)	Change
Adjusted EBITDA	FY 2025	$3.2–$3.4B	$3.2–$3.4B	Maintained
Free Cash Flow	FY 2025	$700–$900M	$700–$900M	Maintained
Net Cash Interest	FY 2025	$1.2–$1.3B	$1.2–$1.3B	Maintained
Capital Expenditures	FY 2025	$4.1–$4.3B	$4.1–$4.3B	Maintained
Cash Income Taxes	FY 2025	$100–$200M	$100–$200M	Maintained

Earnings Call Themes & Trends

Topic	Q3 2024 (Prev-2)	Q4 2024 (Prev-1)	Q1 2025 (Current)	Trend
AI backbone (PCF deals, capacity/Utilization)	Announced >$8B PCF sales; plan to expand to 47M intercity fiber miles by 2028	Emphasis on mix shift and capacity/utilization model	57 ILA sites under construction; first tranche of 24 on-time/on-budget; hyperscalers asking to accelerate	Strengthening execution
Cloudify telecom (Digital platform/NaaS)	>400 NaaS customers; MEF award	Digital layer on network; multi-cloud architecture bypassing cross-connects	Fabric ports concept; control center; layering services; adoption metrics rising	Adoption accelerating
Public sector dynamics	Expected growth in 2024; lumpiness	Q4 boost from California middle mile; warns off-net TDM disconnects in 1H 2025	Strong bookings; near-term drag from forced disconnects; accretive to margins	Mixed: bookings strong, revenue headwind
Mass Markets strategy	Record fiber net adds; exploration of JVs/wholesaling/divestitures	Capex cadence; consumer platform performing	Rumors addressed; focus on enterprise, potential separation when appropriate	Strategic review ongoing
Balance sheet	Debt exchange terming out maturities; funding gap closed by PCF inflows	Redeem ~$202M notes; cash $1.889B	Level 3 term loan refi: 2032 maturity, Term SOFR+4.25%, ~$55M interest savings	Further strengthened
Regulatory/macro	Connectivity TAM expanding with AI democratization	Investor day to detail new model	Google Cloud partnership; reduced latency; secure air-gapped integration	Improving partnerships

Management Commentary

“We beat consensus for revenue, EBITDA and free cash flow... North American business Grow revenue up 7.9% YoY and total North American business revenue down only 2.2% YoY” — Kate Johnson (CEO) .
“This transaction reduces our annual interest expense by approximately $55 million and extends the loan maturity... to 2032” — Chris Stansbury (CFO) .
“We’re partnering with Google Cloud to provide direct fiber access... 400 Gbps... and integrating with Cloud WAN, reducing latency by more than 40%” — Kate Johnson (CEO) .
“Free cash flow... will be lumpy quarter-to-quarter as we move through the large PCF builds” — Chris Stansbury (CFO) .
“Public sector revenue can be lumpy quarter-to-quarter... off-net TDM disconnects will be a drag... but EBITDA and margin accretive” — Chris Stansbury (CFO) .

Q&A Highlights

Grow revenue drivers: dark fiber (non‑PCF), Waves, IP; trend expected to continue as enterprises prepare for AI; Grow bucket now roughly half of sales .
Cloud economics vs telco: digital platform + fabric ports enable thousands of services per port, lowering marginal delivery costs; margin model to be detailed at Investor Day .
Capex cadence: ramp up through year; timing volatile at weekly/day level; guidance confidence maintained .
Public sector: near-term headwind from forced legacy off-net TDM disconnects; bookings strong; impact EBITDA-neutral to positive .
Consumer fiber rumors: reaffirm enterprise focus; no transaction announced; will update market when appropriate .

Estimates Context (Q1 2025 vs Wall Street Consensus)

Metric	Consensus*	Actual	Surprise
Revenue ($USD Millions)	3,120.7*	3,182	+61.3 (Beat)
Primary EPS (Normalized) ($)	-0.27*	-0.13	+0.14 (Beat)
Adjusted EBITDA (Ex-Special Items) ($USD Millions)	816.2*	929	+112.8 (Beat)
Free Cash Flow (Ex-Cash Special Items) ($USD Millions)	690*	354	-336.0 (Miss)

Values marked with * retrieved from S&P Global.

Key Takeaways for Investors

Revenue/EPS beat vs consensus and maintained FY25 outlook signal operational execution amid transformation; watch FCF variability as PCF build schedules drive quarterly lumpiness .
Mix shift to Grow products (dark fiber/Waves/IP) continues; Grow ~48% of NA enterprise revenue, supporting margin durability even as legacy Nurture/Harvest decline .
Balance sheet and liquidity strengthened via $2.4B refi to 2032 (SOFR+4.25%); ~$55M annual interest savings create incremental FCF headroom .
Strategic positioning in AI networking reinforced by Google Cloud partnership (400Gbps direct fiber, Cloud WAN integration); expect enterprise inference-phase demand to lift IP/Waves volumes .
Near-term risk: public sector revenue headwinds from off-net TDM disconnects, though EBITDA/margin accretive; monitor 1H trajectory and migration pace .
Mass Markets fiber KPIs strong (subs 1.116M, ARPU ~$64), but management’s focus remains enterprise; potential consumer fiber strategic options may surface if valuation/deleveraging attractive .
Trading implications: potential positive drift on AI backbone narrative and execution milestones; volatility around quarterly FCF prints likely until PCF build cadence normalizes .

Appendix: Additional Data Points

Total revenue down 3.3% YoY ($3.182B vs $3.290B), business segment down 2.6% YoY ($2.524B), mass markets down 5.9% YoY ($658M) .
Cash and equivalents $1.9B at quarter-end; CFO reiterated 2025 net cash interest $1.2–$1.3B .
Special items impacting adjusted EBITDA totaled $99M; adjusted EBITDA excl. special items $929M .
Fiber-enabled location adds: +101K QoQ; net fiber adds +39K QoQ .

Lumen Technologies, Inc. (LUMN)·Q1 2025 Earnings Summary