Can Lumen Achieve Its $1B Cost Reduction Target by 2027?

Lumen Technologies, Inc. LUMN is advancing a structured cost transformation plan aimed at achieving $1 billion in run-rate cost reductions by the end of 2027. On the last earnings call, management highlighted that the company delivered more than $400 million in cost savings in 2025, exceeding its prior targets and establishing a strong foundation for future reductions.

Management outlined a clear trajectory for continued savings, targeting an additional $300 million in cost reductions by the end of 2026. This would bring total run-rate savings to approximately $700 million, positioning the company on track to meet its three-year $1 billion cost-out objective. These savings are being driven through a combination of modernization and simplification initiatives across the business.

Operational efficiency is also being enhanced through system and process improvements. On the last earnings call, management stated that the launch of a new ERP system was designed to streamline accounting processes and reduce long-standing complexity. Additionally, the company has restructured its reporting framework into strategic and legacy segments, enabling more focused investment in growth areas while managing legacy operations for cost efficiency.

The cost program includes transformation-related expenses, with approximately $400 million expected in 2026 as part of the multiyear initiative. Despite these costs, management emphasized that the business is fully funded and capable of executing its strategy without requiring additional borrowing.

Cost optimization and an improved revenue mix support its guidance of $3.1–$3.3 billion adjusted EBITDA for 2026. LUMN also targets mid-30% EBITDA margins by 2030, up from 27.1% in 2025.

Taking a Look at LUMN Competitors’ Strategies

AT&T T remains focused on business transformation to enhance efficiency and optimize resource utilization. By leveraging Ericsson technology, it plans to deploy a nationwide Open RAN network, fostering vendor competition, reducing reliance on single suppliers and lowering costs while enabling innovative monetization opportunities. The company targets strong adjusted EBITDA growth, double-digit EPS expansion and robust free cash flow. AT&T aims to return more than $45 billion to shareholders via dividends and buybacks. With $1 billion in savings achieved in 2025 and $4 billion more expected by 2028, improving capital efficiency should support sustained long-term shareholder value.

Cogent Communications CCOI benefits from cost-effective operations and a streamlined product offering that eliminates redundant costs and offers greater pricing flexibility. The company excels in selling larger 100-gigabit and 400-gigabit connections in select locations, resulting in a shift in its connection mix and significantly lowering its average price per megabit. By using Internet routers without additional legacy equipment, Cogent incurs relatively lower costs compared to its competitors. The company's efficient network expansion and integration execution ensure high-quality Internet service, leveraging its highly economical metro and intercity network infrastructure.

LUMN Price Performance, Valuation and Estimates

Shares of LUMN have lost 12.9% in the past month compared with the Diversified Communications Services industry’s decline of 5.5%.

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Regarding the forward 12-month price/sales ratio, LUMN is trading at 0.62, lower than the sector’s multiple of 1.65.

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The Zacks Consensus Estimate for LUMN’s earnings for 2026 has been revised upward significantly over the past 60 days.

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LUMN currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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