Lumen (LUMN) Up 5% Since Last Earnings Report: Can It Continue?

A month has gone by since the last earnings report for Lumen (LUMN). Shares have added about 5% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Lumen due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the latest earnings report in order to get a better handle on the important drivers.

Lumen Posts Better-Than-Expected Q4 Earnings

Lumen reported a fourth-quarter 2025 adjusted earnings (excluding special items) of 23 cents per share, which was significantly higher than the Zacks Consensus Estimate of a loss of 21 cents. The company reported adjusted loss per share of 9 cents in the prior-year quarter.

Quarterly total revenues were $3.041 billion, down 8.7% year over year and missed the Zacks Consensus Estimate by 1.4%. Full-year revenues were down 5% to $12.4 billion. 

Driven by significant AI-fueled connectivity demand, Lumen secured a total of $13 billion in PCF deals by the end of 2025. Lumen recognized revenues of $41 million and $116 million for the fourth quarter and full-year 2025, respectively, associated with the $13 billion in PCF deals. As AI demand surges, large companies across industries are urgently seeking fiber capacity, which is becoming highly valuable and potentially scarce. Increasing adoption of its NaaS solutions bodes well. 

Management used cash on hand and $4.8 billion in net proceeds to fully retire super-priority bonds, lowering annual cash interest expense by an additional $300 million. Total debt now reduced to less than $13 billion, down more than $5 billion since January 2025. Annual interest expense has been reduced by nearly $500 million in the last 12 months, unlocking massive cash flow gains.

Quarterly Details

By segment, Business revenues fell 8.8% year over year to $2.425 billion, caused by one-time dark fiber and higher public sector harvest revenue growth in the fourth quarter of 2024.

Revenues from Large Enterprises declined 1% to $758 million. Mid-Market Enterprise revenues declined 11% to $472 million. Public Sector revenues were down 18% to $457 million. Revenues of North America’s Enterprise Channels were down 9% to $1.687 billion. The metric for Wholesale decreased 8% to $661 million due to declines in voice, managed services and VPN.

Revenues from Mass Markets were down 7.9% year over year to $616 million.

Margin Performance

Total operating expenses increased 2% year over year to $3.241 billion.

Operating loss was $200 million against an operating income of $154 million in the year-ago quarter. Adjusted EBITDA (excluding special items) slipped to $767 million from $1.052 billion for respective margins of 25.2% and 31.6%.

Cash Flow & Liquidity

In the fourth quarter, Lumen generated $562 million of net cash from operations compared with $688 million in the prior-year quarter.

Free cash outflow (excluding cash special items) was $765 million compared with $174 million in the prior-year quarter. Free cash flow was affected by a delay in a $400 million tax refund, now expected in the first half of 2026. 

As of Dec. 31, 2025, the company had $1 billion in cash and cash equivalents with $17.353 billion of long-term debt compared with the respective figures of $2.4 billion and $17.578 billion as of Sept. 30, 2025.

2026 Outlook

Management reaffirmed that adjusted EBITDA will inflect to growth in 2026. For 2026, adjusted EBITDA is predicted to be between $3.1 billion and $3.3 billion.

Adjusted EBITDA includes the impact from the AT&T transaction and organic business revenue declines of 75 basis points. It excludes $400 million in transformation costs related to the multiyear target of lowering expenses by $1 billion by 2027.

Capital expenditures are estimated to be between $3.2 billion and $3.4 billion. The reduction from the 2025 capex of $4.367 billion is due to the sale of the fiber-to-the-home business. Capex associated with PCF deals is expected to be $1 billion, while the majority of the remaining Capex will be directed toward the core enterprise business. 

Free cash flow is now anticipated to be between $1.2 billion and $1.4 billion, compared with the free cash flow (excluding cash special items) of $1.041 billion reported in 2025. 

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a upward trend in estimates revision.

The consensus estimate has shifted 81.48% due to these changes.

VGM Scores

Currently, Lumen has a nice Growth Score of B, though it is lagging a bit on the Momentum Score front with a C. Charting a somewhat similar path, the stock has a grade of B on the value side, putting it in the second quintile for value investors.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of this revision looks promising. It comes with little surprise Lumen has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.

Performance of an Industry Player

Lumen belongs to the Zacks Diversified Communication Services industry. Another stock from the same industry, Rogers Communication (RCI), has gained 8.7% over the past month. More than a month has passed since the company reported results for the quarter ended December 2025.

Rogers Communication reported revenues of $4.43 billion in the last reported quarter, representing a year-over-year change of +13%. EPS of $1.08 for the same period compares with $1.04 a year ago.

Rogers Communication is expected to post earnings of $0.71 per share for the current quarter, representing a year-over-year change of +2.9%. Over the last 30 days, the Zacks Consensus Estimate has changed +0.4%.

Rogers Communication has a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of D.

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

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