Q2 2026 Lumen Technologies Inc Earnings Call Transcript
Key Points
- Strategic revenue grew 14% year-over-year, now representing 53% of total business revenue, up from 45% in the prior year quarter.
- NaaS adoption accelerated, with total customers exceeding 3,000, new customer adoption up 22% quarter-over-quarter, and over 20% of new adopters being brand new to Lumen.
- The acquisition of Alkira strengthens Lumen's position in enterprise networking for AI, enabling faster multi-cloud connectivity and reducing implementation time from months to days.
- 100 and 400 gig wave revenue grew nearly 11% year-over-year in North American enterprise, with sales up almost 35%, indicating strong demand and market share gains.
- The company is on track to achieve $700 million in modernization and simplification savings this year and $1 billion next year, supporting EBITDA inflection.
- PCF deals continue to monetize underutilized assets, with $91 million in revenue in Q2 and $476 million in cash received, while preserving capital for higher-return digital investments.
- Total business revenue declined 1.8% year-over-year to $2.44 billion, with North America total business down 1.6%.
- Adjusted EBITDA fell to $802 million in Q2 from $877 million in the prior year quarter, impacted by the fiber-to-the-home sale and expected revenue declines.
- Digital revenue remains small at $39 million in Q2, with only a $2 million sequential increase, indicating a slow ramp despite strong adoption metrics.
- Legacy revenue continues to decline at 15% year-over-year, and the company is phasing out enterprise voice products, which may lead to customer churn and regulatory challenges.
- The company is not chasing new PCF deals with subpar returns, as new builds have returns at or below cost of capital, limiting growth opportunities in that area.
- Special items impacting adjusted EBITDA totaled $204 million in Q2, primarily from modernization and transaction costs, weighing on profitability.
Greetings, and welcome to Lumen Technologies second-quarter 2026 earnings call. (Operator Instructions) As a reminder, this conference is being recorded Tuesday, August 4, 2026. Your speakers for today are Kate Johnson, CEO; and Chris Stansbury, CFO.
I would now like to turn the conference over to Jim Breen, Senior Vice President of Investor Relations. Please go ahead.
Good afternoon, everyone, and thank you for joining Lumen Technologies' second quarter 2026 earnings call. Before we begin, I'd like to remind everyone that today's presentation will include forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements reflect our current expectations, assumptions and projections about future events and financial performance. Actual results may differ materially from those expressed or implied in these forward-looking statements due to a number of risks and uncertainties.
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