Executive Summary

Q4 2024 revenue was $3.329B, down 5% YoY; Adjusted EBITDA (ex Special Items) was $1.052B with a 31.6% margin, improving sequentially from Q3’s $899M and 27.9% margin .
Diluted EPS was $0.09 versus $(2.03) YoY, aided by the absence of 2023 goodwill impairments; net income margin improved to 2.6% from (56.7%) YoY .
2025 guidance: Adjusted EBITDA $3.2–$3.4B, Free Cash Flow $700–$900M, net cash interest $1.2–$1.3B, capex $4.1–$4.3B, cash taxes $100–$200M; management expects an EBITDA inflection to growth in 2026 driven by cost takeout and mix shift .
Strategic AI/network catalysts continued in Q4: partnerships with Meta (PCF capacity expansion), AWS (PCF between Regions/Local Zones; AI-led ops), Google Cloud (Digital Twin/Vertex AI plus PCF), and Prometheus Hyperscale (sustainable AI DC routes) underpin LT TAM and potential utilization gains .

What Went Well and What Went Wrong

What Went Well

“Established Lumen as the trusted network for AI, inking $8.5 billion in closed sales,” reinforcing liquidity and deleveraging; customers asked to accelerate implementations .
Sequential profitability improvement: Adjusted EBITDA ex Special Items rose to $1.052B and margins to 31.6% in Q4 from $899M and 27.9% in Q3 .
Mass Markets fiber momentum: 42k net fiber adds in Q4; fiber subs ~1.077M and enabled fiber units 4.2M; fiber ARPU $61; record enablement of 500k homes in 2024 .

What Went Wrong

Top line declined 5% YoY to $3.329B; Business Segment Revenue down 5% YoY; Nurture and Harvest continued to contract (e.g., Nurture –15% YoY; Harvest –7%) .
Public Sector 2025 headwind: forced disconnects/migrations tied to wholesale TDM re-rating will drag 1H revenue despite prior Q4 growth; management emphasized margin-accretive decisions .
2025 EBITDA guide embeds ~$200M incremental costs (PCF team ramp, cloud shift OpEx, proactive legacy disconnects) and excludes ~$300M transformation costs; capex ramps to $4.1–$4.3B to execute PCF builds .

Financial Results

Metric	Q4 2023	Q3 2024	Q4 2024
Revenue ($USD Billions)	$3.517	$3.221	$3.329
Diluted EPS ($USD)	$(2.03)	$(0.15)	$0.09
Net Income (Loss) ($USD Billions)	$(1.995)	$(0.148)	$0.085
Net Income Margin (%)	(56.7%)	(4.6%)	2.6%
Adjusted EBITDA ex Special Items ($USD Billions)	$1.099	$0.899	$1.052
Adjusted EBITDA Margin ex Special Items (%)	31.2%	27.9%	31.6%
Free Cash Flow ex Cash Special Items ($USD Billions)	$0.050	$1.198	$(0.174)
Capital Expenditures ($USD Billions)	$0.821	$0.850	$0.915
Net Cash From Operating Activities ($USD Billions)	$0.784	$2.032	$0.688

Segment revenue and product categories (YoY comparison):

Sales Channel / Category	Q4 2023 ($MM)	Q4 2024 ($MM)	YoY Change (%)
Large Enterprise	894	845	(5%)
Mid-Market Enterprise	501	452	(10%)
Public Sector	497	554	11%
Wholesale	750	716	(5%)
International & Other	160	92	(43%)
Business Segment Total	2,802	2,659	(5%)
Mass Markets Segment	715	670	(6%)
Total Revenue	3,517	3,329	(5%)
Grow	1,085	1,175	8%
Nurture	832	704	(15%)
Harvest	620	574	(7%)
Other	265	206	(22%)

KPIs – Mass Markets broadband trajectory:

KPI	Q2 2024	Q3 2024	Q4 2024
Fiber broadband subs (000s)	992	1,035	1,077
Other broadband subs (000s)	1,666	1,566	1,469
Total broadband subs (000s)	2,658	2,601	2,546
Fiber enabled units (MM)	3.9	4.1	4.2
Total enabled units (MM)	21.9	22.0	22.0

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Adjusted EBITDA ($B)	FY2025	n/a	$3.2–$3.4	New
Free Cash Flow ($B)	FY2025	n/a	$0.7–$0.9	New
Net Cash Interest ($B)	FY2025	n/a	$1.2–$1.3	New
Capital Expenditures ($B)	FY2025	n/a	$4.1–$4.3	New
Cash Income Taxes ($B)	FY2025	n/a	$0.10–$0.20	New
GAAP Net Loss ($B)	FY2025	n/a	$(0.85) to $(1.655)	New
GAAP reconciliation components (Dep/Amort, Other exp., SBC)	FY2025	n/a	Dep/Amort $2.9–$3.1; Other exp. $1.3–$1.5; SBC $0.02–$0.04	New

Management also indicated 2025 EBITDA includes ~$200M incremental costs (PCF team, cloud OpEx shift, proactive legacy disconnects) and excludes ~$300M transformation costs; expects ~+$250M run-rate cost savings exiting 2025 and EBITDA growth in 2026 .

Earnings Call Themes & Trends

Topic	Q2 2024 (Prev-2)	Q3 2024 (Prev-1)	Q4 2024 (Current)	Trend
AI/PCF sales	Announced ~$5B PCF; visibility to ~$7B more; funding gap closed	Total PCF closed rose to ~$8.5B; customers asking to go faster	Backlog construction underway; hyperscalers pushing acceleration; PCF revenue minimal in 2025, ramps thereafter	Up
Cost takeout	Initiated $1B cost-out by end 2027; unify 4 networks to 1; portfolio/IT simplification	Reinforced plan; 2025 EBITDA at low end of 2024; FCF guide raised	$1B OpEx target; exit 2025 with ~$250M run-rate savings; EBITDA growth in 2026	Improving execution
Public Sector & TDM	Public Sector +8% YoY; wholesale harvest declining (TDM/private line)	Public Sector –4% YoY with lumpiness; wholesale down ~9% YoY	Q4 Public Sector +11% YoY; 1H25 drag from forced disconnects/migrations due to TDM re-rating	Near-term down, LT managed for margin
Mass Markets fiber	40k net adds; surpassed 1M subs in July; ARPU ~$62	Record 43k net adds; fiber subs >1M; penetration ~26%	42k net adds; fiber subs ~1.077M; ARPU $61; 500k enablements in 2024	Positive
Cloudifying telecom/NaaS	400+ NaaS customers; platform overlay on own network	>500 Lumen Digital NaaS adoptions; MEF award; enterprise demand for waves/IP	Building digital layer across 3 clouds; bypassing cross-connects; late-2025 customer offering	Building

Management Commentary

“We established Lumen as the trusted network for AI, inking $8.5 billion in closed sales… These deals helped us strengthen our free cash flow and enable us to self-fund our transformation.” – Kate Johnson, CEO .
“Our 2025 guidance for EBITDA is between $3.2 billion and $3.4 billion, and free cash flow is between $700 million and $900 million… we see Lumen returning to full year EBITDA growth in 2026.” – Kate Johnson .
“Grow products carried ~80% direct margin this quarter… Nurture ~67%, Harvest ~77%.” – Chris Stansbury, CFO .
“We’re increasing capacity and utilization simultaneously… total intercity fiber miles has the potential to go from 12M in ’22 to 47M by ’28.” – Kate Johnson .

Q&A Highlights

PCF funding and cash cadence: The ~$5B initial PCF bundle plus ~$3B subsequent deals close the funding gap and enable deleveraging; cash comes largely upfront while revenue amortizes over time; tax timing is front-end loaded .
2025 cadence/EBITDA composition: ~$200M EBITDA headwind (PCF team ramp, cloud OpEx replacing data center capex, proactive TDM disconnects); ~$300M transformation costs excluded from guidance; expect EBITDA >$3.5B in 2026 with growth thereafter .
Public Sector baseline: Q4 uptick included State of California PCF turn-ups; 1H25 drag from forced disconnects related to wholesale TDM re-rating; actions are margin-accretive .
Competitive dynamics/AI TAM: No slowdown in hyperscaler builds; customers asked to accelerate; Lumen’s network coverage, unique routes, and platform layer cited as moat; PCF pipeline includes new routes and enterprise inference demand .

Estimates Context

S&P Global consensus EPS, revenue, and EBITDA for Q4 2024 were unavailable due to request limits; management did not cite a beat/miss vs Street on the call [GetEstimates error].
Given the lack of accessible S&P consensus, we cannot quantify variance vs estimates for Q4; note that Adjusted EBITDA ex Special Items improved sequentially, while revenue declined YoY .

Key Takeaways for Investors

Sequential margin improvement and stronger Adjusted EBITDA ex Special Items signal early benefits from mix shift and cost actions despite ongoing legacy pressure; watch sustainability of 31.6% margin into 2025 as PCF OpEx ramps .
2025 is an investment year (capex $4.1–$4.3B) to execute PCF builds; near-term FCF positive ($700–$900M) but expect lumpiness from tax timing and build cadence .
Structural story hinges on 2026 EBITDA inflection via ~$250M run-rate savings exiting 2025 and LT $1B cost takeout; monitor ERP/ops platform milestones (quote-to-cash and procure-to-pay) and network unification progress .
AI backbone narrative is credible: multi-cloud PCF expansion with Meta, AWS, Google Cloud, Prometheus positions Lumen to increase capacity and utilization; track additional route announcements and utilization to ~70% target by 2028 .
Public Sector/Wholesale TDM headwinds in 1H25 are a known drag but margin-accretive disconnects reduce legacy burden; focus on Grow bucket momentum (waves/IP/dark fiber) and enterprise inference demand .
Mass Markets fiber remains a bright spot: continued net adds, enabled units growth, and ARPU stability provide optionality for strategic actions (JV/wholesale/divestiture) to accelerate deleveraging .
Trading lens: near-term catalysts are execution against PCF builds and cost takeout, plus clarity on transformation costs; medium-term thesis depends on 2026 EBITDA growth realization and AI-driven utilization ramp .

Additional Q4 2024 Press Releases Reviewed

Lumen and Meta Partner to Drive AI Network Expansion (PCF capacity for Meta’s AI) .
Lumen and AWS partner to unlock generative AI via enhanced network operations and PCF connectivity .
Lumen partners with Google Cloud for Digital Twin/Vertex AI and PCF network expansion .
Lumen partners with Prometheus Hyperscale to connect sustainable AI data centers with PCF and wavelength/DIA services .

Lumen Technologies, Inc. (LUMN)·Q4 2024 Earnings Summary