Lumen Technologies Shares Fall 18.5% After Q2 Revenue Misses Estimates

Lumen Technologies' (LUMN) shares fell 18.5% after reporting Q2 revenue of $3.09bn, missing estimates and declining 5.4% YoY. The shortfall affected both business segments, but a smaller-than-expected adjusted loss and increased full-year free cash flow guidance were overshadowed. The stock is extremely volatile, with 54 moves greater than 5% in the last year.

Lumen Technologies (LUMN) reported its second-quarter 2025 results, revealing a 5.4% year-over-year (YoY) decline in revenue to $3.09 billion, missing analysts' estimates. The company's adjusted loss per share narrowed to 3 cents, significantly better than the anticipated 26-cent loss [1]. Despite the revenue shortfall, Lumen's full-year free cash flow (FCF) forecast was revised upward by over 60%, projecting a range of $1.2 billion to $1.4 billion for 2025 [1].

The improved outlook is primarily attributed to cost savings from recent tax cut legislation, allowing Lumen to deduct more interest expenses and accelerate the write-off of large investments. This has enhanced near-term cash flow, with the company expecting $350 million of run-rate cost benefit compared to an earlier target of $250 million [2]. Additionally, the divestment of its consumer fiber business to AT&T for $5.75 billion is expected to reduce annual capital expenditures by approximately $1 billion [1].

Lumen's revenue deficit was partly due to a $46 million giveback related to the FCC's Rural Digital Opportunity Fund (RDOF). The company added 34,000 Quantum fiber subscribers, taking the count to 1.2 million in the reported quarter. Despite the revenue shortfall, Lumen remains optimistic about its financial trajectory, maintaining its full-year adjusted EBITDA guidance of $3.2 billion to $3.4 billion [1].

The company's stock, however, reacted negatively to the results, falling 18.5% in the pre-market session. The stock has shown extreme volatility, with 54 moves greater than 5% in the last year. Lumen's shares have gained 44.9% in the past year compared to a 2.2% gain for the Diversified Communications Services industry [2].

Lumen's Q2 margin performance saw total operating expenses increase 18% year over year to $3.695 billion, leading to an operating loss of $603 million. Adjusted EBITDA slipped to $877 million from $1.011 billion, with margins of 28.4% and 30.9% respectively [2]. The company generated $570 million of net cash from operations in the second quarter, compared to $511 million in the prior-year quarter [2].

Lumen's 2025 outlook projects adjusted EBITDA between $3.2 billion and $3.4 billion, with capital expenditures expected to be between $4.1 billion and $4.3 billion. Free cash flow is anticipated to be between $1.2 billion and $1.4 billion, primarily due to a $400 million tax refund, lower capex, improved adjusted EBITDA performance, and reduced interest expense [2].

Lumen currently carries a Zacks Rank #3 (Hold) [2]. The company remains focused on enterprise operations, cloudifying telecom, and driving network-as-a-service solutions, with notable deals secured with tech giants like Microsoft, Amazon, Google Cloud, and Meta Platforms.

References:
[1] https://www.indexbox.io/blog/lumen-technologies-narrows-loss-and-boosts-free-cash-flow-forecast/
[2] https://www.nasdaq.com/articles/lumens-q2-loss-narrower-expected-revenues-fall-y-y