LUMN Surges 26% in the Past Year: Can It Sustain the Momentum in 2026?

Lumen Technologies, Inc.’s LUMN shares have surged 25.9% in the past year, outpacing the S&P 500 composite and Diversified Communications Services sector’s growth of 18% and 13.7%, respectively. The stock has been gaining from the company’s AI pivot, balance sheet repair and improved operating execution.

Lumen also outperformed some of its peers, such as Verizon Communications VZ, AT&T T and T-Mobile US, Inc. TMUS. Verizon and AT&T have registered gains of 2.1% and 7.9%, respectively, while T-Mobile has lost 8.5% over the same time frame.  

As markets look ahead to 2026, the key question is whether this momentum is sustainable.

Closing at $7.63 as of yesterday’s trading session, LUMN stock is currently trading way below its 52-week high of $11.95. Is there further upside?

Let us analyze the company's fundamentals, opportunities and risks in detail to determine if it is worth considering for investment.

LUMN: Strategic Reset to Buoy Long-Term Growth

Increasing demand for Lumen's Private Connectivity Fabric (“PCF”) and network-as-a-service (“NaaS”) solution, amid rapid AI proliferation, is an encouraging development. Driven by significant AI-fueled connectivity demand, Lumen secured a total of $10 billion in PCF deals at the end of the third quarter.

As AI needs surge, large companies across various industries are urgently seeking fiber capacity, which is becoming highly valuable and potentially scarce. Lumen has inked deals with several tech giants like Microsoft, Amazon, Google Cloud and Meta Platforms to provide the network capabilities for AI innovation. In November 2025, LUMN introduced Lumen Defender Advanced Managed Detection and Response integrated with Microsoft Sentinel, aiming to strengthen enterprise cybersecurity as AI and cloud adoption expand. 

It has completed more than 3,200 miles of overpulls on 27 different routes, which is nearly 130% of the 2025 target by the end of the third quarter.

Lumen Technologies, Inc. Price, Consensus and EPS Surprise

Lumen Technologies, Inc. price-consensus-eps-surprise-chart | Lumen Technologies, Inc. Quote

Investments in PCF are expected to create future revenue streams and strengthen Lumen’s position as a relevant infrastructure player going ahead. Management added that given the $10 billion in hand, the existing O&M run-rate PCF business will yield $400-$500 million of recurring revenues exiting 2028.

On the NaaS front, Lumen highlighted that it has surpassed 1,500 customers for the NaaS platform, while active customers were up 32% sequentially on the last earnings call. Fabric ports deployed were up 30% and the number of services sold surged 36% sequentially. It recently unveiled Internet on Demand, or IoD Offnet, and expects this solution to boost market reach by 100x.

Lumen also noted that its connected ecosystem strategy was “off to a great start” with recent deals with Palantir, Commvault and QTS. Management expects digital capabilities, including NaaS, Edge Solutions, Security and the Connected Ecosystem, to deliver between $500 million and $600 million of incremental revenues exiting 2028. Lumen is upbeat about its new business model, PxQ model, which has the fabric port at its core. It is planning to extend this model with the launch of Project Berkeley. Berkely is a pre-provisioned cross-carrier fabric port that can power first and third-party services on and off-net, AI-ready.

Lumen continues to progress with its turnaround and is striving to boost operational efficiency. The company is anticipating $1 billion in cost savings by the end of 2027 through planned infrastructure simplification across the network, product portfolio and IT. It is also leveraging AI tech to drive intelligence and automation. It recently completed phase one of its ERP implementation and expects to complete phase two by next year. In the current year, Lumen expects $350 million of run-rate cost benefit compared with $250 million already achieved in the third quarter.

Balance Sheet Repair

Lumen is focused on deleveraging and it is highly optimistic about selling Mass Markets' fiber-to-the-home business (including Quantum Fiber, across 11 states) to AT&T for $5.75 billion in cash. The transaction is now expected to close in early 2026, pending regulatory approvals and customary closing conditions.

It is aimed at accelerating investment and focusing on core enterprise capabilities while improving the balance sheet. The company is planning to pay down $4.8 billion in super priority debt at close, boosting annual interest expense savings up to $535 million. In the third quarter, Lumen completed an additional $2.4 billion debt refinancing and subsequent term loan repricing, reducing annual interest expense by $135 million, and has reduced overall annual interest expense by approximately $235 million.

LUMN’s Compelling Valuation, Estimate Revision

From a valuation perspective, LUMN is trading at a massive discount. Going by its trailing 12-month price-to-sales ratio, LUMN is trading at a multiple of 0.66, much below the industry’s ratio of 1.45.

In comparison, Verizon, AT&T and T-Mobile are trading at multiples of 1.23, 1.36 and 2.39 compared with the Wireless National Industry’s multiple of 1.79.

Analysts have also revised estimates upwards for 2025 in the past 60 days.

However, no investment is without risks. As Lumen shifts toward newer growth products like fiber and cloud-based offerings, the secular headwinds in the legacy business will continue to prove a strain on the top-line expansion, at least in the near term. EBITDA in 2025 is expected to be below the levels of 2024, owing to the investments in transformation, along with higher startup costs for PCF sales and legacy revenue declines. Moreover, stiff competition in AI, high costs and massive debt are concerns.

LUMN: It’s a Buy for Now

Lumen is navigating a transformative period, aligning itself with the massive growth of AI, cloud computing and digital-telecom services. Increasing PCF demand and deals with tech giants are creating a strong foundation for growth. Expansion into NaaS markets is an additional tailwind. Extensive cost cuts and discounted valuation make LUMN a compelling investment opportunity.

At present, LUMN carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

 

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

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

Zacks Investment Research