Lumen Stock Up 18% in the Past 3 Months: Stay Invested or Exit?

Lumen Technologies, Inc.’s LUMN shares have surged 18% in the past year, outpacing the S&P 500 composite’s rise of 4.3% and contrasting sharply with the Diversified Communications Services sector’s decline of 4.5%.

Price Performance

Gains are higher than some of its peers, such as Verizon Communications VZ, AT&T T and T-Mobile US, Inc. TMUS. Verizon, AT&T and T-Mobile have lost 4.6%, 10% and 19%, respectively over the same time frame.  

Once written off as a structurally declining telecom asset, LUMN has made a comeback through its AI pivot, balance sheet repair and improved operating execution.

Closing at $8.45 as of yesterday’s trading session, LUMN stock is currently trading below its 52-week high of $11.95. Is there meaningful upside in 2026?

Should investors remain invested?

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

LUMN: What’s Driving the Run

The explosive growth of AI workloads is driving demand for low-latency, high-bandwidth fiber connectivity between data centers, cloud regions and enterprise clients, resulting in increasing demand for Lumen's Private Connectivity Fabric (“PCF”) and network-as-a-service (NaaS) solutions. Driven by significant AI-fueled connectivity demand, Lumen has secured a total of $10 billion in PCF deals at the end of the third quarter.

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.

Lumen Technologies, Inc. Price, Consensus and EPS Surprise

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

On the NaaS front, Lumen highlighted that it has surpassed 1,500 customers for the 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, the 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.

Focus on Cost Discipline

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. Lumen 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.

LUMN’s Discounted Valuation

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 0.74, much below the industry’s ratio of 1.53.

In comparison, Verizon, AT&T and T-Mobile are trading at multiples of 1.17, 1.31 and 2.21, respectively, compared with the Wireless National Industry’s multiple of 1.71.

Risks to Monitor

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. As of Sept. 30, 2025, the company had $2.4 billion in cash and cash equivalents with $17.578 billion of long-term debt compared with the respective figures of $1.6 billion and $17.565 billion as of March 31, 2025. It expects to still have a massive $13 billion in debt following the closing of the AT&T transaction.

LUMN: Stay Invested

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.

However, legacy declines persist and leverage remains elevated.

At present, LUMN carries a Zacks Rank #3 (Hold). Investors already having a position in this stock can stay invested to capture potential AI upside, but need to closely monitor execution. New investors should wait for a better entry point.

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

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

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