Lumen Technologies' NaaS: A SaaS-Driven Revolution in Telecom

In the ever-evolving landscape of digital infrastructure, Lumen Technologies (LUMN) has emerged as a formidable disruptor with its Network-as-a-Service (NaaS) platform. The recent milestone of surpassing 1,000 enterprise customers in August 2025 isn't just a number—it's a seismic shift in how businesses approach networking. This achievement signals product-market fit, recurring revenue potential, and a path to margin expansion that could redefine the telecom industry. For investors, this is a high-conviction play in the AI and cloud-driven infrastructure transition.

The Disruption of Traditional Telecom

Traditional telecom models are built on rigid, capital-intensive infrastructure and low-margin services like legacy voice and data. These models are increasingly obsolete in a world where enterprises demand agility, scalability, and AI-ready networks. Lumen's NaaS platform, launched in July 2023, flips this script. By offering on-demand services such as Internet On-Demand, Ethernet On-Demand, and IP VPN On-Demand, Lumen mirrors the consumption-based flexibility of SaaS. Customers can scale bandwidth up or down in real time, integrate with major cloud providers (AWS, Microsoft, Google), and access integrated security features like DDoS protection.

The contrast with traditional telecom is stark. In Q2 2025, Lumen's Business segment revenue fell 2.6% year-over-year, driven by declining demand for legacy services. Meanwhile, its NaaS platform grew 35% quarter-over-quarter in customer adoption and 31% in active ports. This isn't just growth—it's a structural shift. As Dave Shacochis, Lumen's SVP of Product Strategy, noted, “The rise of AI is creating a market moment for platforms like NaaS.” Enterprises are no longer building static networks; they're leasing dynamic, AI-optimized infrastructure.

SaaS-Like Margins and Scalability

The financial implications are equally compelling. Lumen's NaaS model boasts 80.4% direct margins, far outpacing traditional telecom segments like Ethernet (67.1%) and legacy voice (75.2%). This margin expansion is driven by automation, API-driven service delivery, and a consumption-based pricing model that reduces marginal costs. For context, SaaS companies like Snowflake or Datadog thrive on similar economics—high upfront infrastructure costs, but declining expenses as scale increases.

Lumen's Q2 2025 results underscore this potential. The company raised its 2025 free cash flow guidance to $1.2–$1.4 billion, driven by NaaS adoption and cost-cutting initiatives. CEO Kate Johnson emphasized a “maniacal focus on customer success,” with NaaS enabling enterprises to activate services “anytime, anywhere” and pay only for what they use. This aligns with the SaaS ethos of recurring revenue and customer retention. With 1,000 customers already on board, the path to $10,000+ clients—and the associated recurring revenue—is clear.

The Road to 2026: EBITDA Inflection and Margin Expansion

The real excitement lies in the future. Lumen expects an EBITDA inflection in 2026, driven by modernization savings and higher utilization of its 340,000 global fiber route miles. The company is investing in expanding its network to 47 million intercity fiber miles by 2028, reducing latency and enabling AI workloads. This infrastructure isn't just for show—it's a competitive moat.

Moreover, Lumen's Lumen Connected Ecosystem simplifies service management for enterprises, mirroring cloud platforms. This ecosystem approach—bundling networking with AI, security, and cloud solutions—creates cross-selling opportunities and locks in customers. For example, Churchill Downs used Lumen's Internet On-Demand to handle the Kentucky Derby's traffic surge, while Vanderbilt Medical Center leverages NaaS for secure SaaS integration. These use cases highlight the platform's versatility and long-term value.

Why This Is a High-Conviction Play

For investors, Lumen's NaaS represents a rare intersection of product-market fit, scalable margins, and strategic tailwinds. The 1,000-customer milestone validates the platform's appeal, while the 35% QoQ growth in active ports suggests accelerating adoption. Financially, the company is transitioning from a cost-heavy telecom operator to a high-margin SaaS-like business.

The risks? Execution on margin expansion and competition from hyperscalers. But Lumen's physical infrastructure—163,000 on-net buildings and 340,000 fiber route miles—gives it a unique edge. Unlike pure-play cloud providers, Lumen combines the agility of SaaS with the reliability of a global fiber network.

Final Call to Action

Lumen Technologies is at the forefront of the digital infrastructure transition. Its NaaS platform isn't just a product—it's a paradigm shift. For investors seeking exposure to the AI and cloud revolution, LUMN offers a compelling thesis: a telecom giant reinvented as a SaaS-driven infrastructure leader. With 1,000 customers under its belt and a clear path to margin expansion, this is a stock worth watching—and buying.