Lumen Technologies

For the first time ever, Lumen's new strategic business is now bigger than its old legacy business, hitting 51 percent of total business revenue this quarter. Strategic revenue grew 9 percent year over year while the company also closed a deal to buy Alkira, a cloud-native networking company that supercharges their AI offering. The transformation is officially working.

Free cash flow more than doubled to 756 million dollars this quarter, up from 354 million dollars a year ago. Even better, Lumen just raised its full-year cash flow guidance to between 1.9 and 2.1 billion dollars, way up from the previous 1.2 to 1.4 billion. They also cut their debt-to-earnings ratio below 4 times for the first time in years.

Total revenue fell 9 percent to 2.9 billion dollars, dragged down by a brutal 31 percent collapse in their old Mass Markets phone business. Even their wholesale and mid-market enterprise segments shrank by 8 and 10 percent. The new business is growing, but not fast enough yet to make up for the old business dying.

Lumen still lost 200 million dollars this quarter, and their adjusted earnings actually slipped from 929 million to 849 million dollars. Profit margins on net income sit at negative 14 percent, meaning every dollar of sales still loses money. Until the AI fiber buildout starts paying off, the bottom line stays ugly.