As soon as in defensive mode and preventing decline, Lumen Applied sciences has re-emerged with a radically simplified technique, a repaired stability sheet, and a daring declare to be important infrastructure for the AI financial system — as enterprise community spending shifts from connecting workplaces to connecting information centres and GPUs.
In sum – what to know:
Complete reset – Lumen has bought its shopper FTTH property to AT&T for $5.75 billion, secured $13 billion in non-public connectivity offers, restored its bonds to near-par ranges, and delivered a 400% fairness return.
Development engine – The agency is positioning itself because the AI spine, focusing on hyperscalers and enterprises that want high-capacity, low-latency fibre and programmable NaaS to connect with and between AI factories.
Structural shift – Enterprise budgets are transferring away from office-to-cloud connectivity (36% right now) to cloud-core and AI information centre interconnection (64% right now, rising to 84 % in three years).
Right here’s an try to take you thru a roller-coaster investor presentation (or two) from US fibre service supplier Lumen Applied sciences this week. It’s was a stacked deck, and RCR will invariably miss among the finer element, (and be pressured to interrupt the protection into two elements), however hopefully there is sufficient to get the gist, and get us began – concerning the excitable alternative for down-trodden telcos to serve the hyped-up AI infrastructure market, between information centres and enterprise venues. As a result of Lumen is on a tear-up, now – from having been on the brink.
“The darkish days are over,” remarked Kate Johnson, chief govt on the agency, talking in the course of the opening keynote at its investor day on February 25 in New York. “We’ve stabilized the corporate. We’ve pushed a turnaround (for) each credit score and fairness traders, and the longer term could be very vibrant.” She ran by the back-story: how the corporate has been “rebuilt” from its “people-up” over 30 months, since shrinking revenues, heavy leverage, and market scepticism pressured soul-searching in 2023, and a complete revamp by 2024/25.
Johnson mentioned: “We had been in survival mode. We had been enjoying to not lose, targeted on attempting to gradual the decline – harvesting money to pay a dividend. We’re now enjoying to win. We’re making intentional bets, which takes a totally totally different mindset – to continually be taught so you’re taking suggestions from the market to pivot. It takes agility, and braveness to talk fact to energy to level to issues, and have the mindset to repair them.” A while was given to the cultural reset – “eight behaviours… for profitable transformation”, and a “massive purpose why we’re right here right now”.
The corporate “imported business management from telecom in any respect ranges, throughout all capabilities”, she mentioned, and “retrained and upskilled” employees as required. Apart from, Lumen has reorganised its proposition. Johnson acknowledged: “We simplified the portfolio, and removed adjacencies that didn’t make sense – to give attention to the enterprise on the earth of Cloud 2.0 and AI. We’ve got pushed an enormous enlargement of our bodily community and proceed to take action. Importantly, we have now constructed a digital platform [as] a really thrilling and quick rising natural development [engine] for the corporate.”
Its capital construction has been “completely reboot(ed”. The agency bought its fibre-to-the-home (FTTH) enterprise, together with most of its residential fibre property, to AT&T for $5.75 billion in money; the deal closed this month (February). In the meantime, it has busily “inked” $13 billion of “Personal Connectivity Cloth offers with the most important tech firms on the earth” – which means hyperscalers, in the primary. Its debt bonds are actually buying and selling at 95 cents on the greenback – near face (‘par’) worth; a lot more healthy, “up from a really low quantity” in its darkest days.
Markets have responded, it appears: its fairness traders have seen a 400 % return in two years; its common inventory value has risen from a few greenback per share to greater than $7; its valuation a number of has expanded by 25 % relative to friends. So mentioned Johnson in New York. It may be introduced as a mannequin for telco transformation: a technique reset, a product revamp, and a cultural shift, resulting in a serious re-rating by traders, and a marked restoration. This week, the agency mentioned it had doubled its NaaS base to over 2,000 enterprises – since late (Q3) 2025.
Which is a testomony to each the market’s urge for food for on-demand programmable networking for AI and cloud workloads, and Lumen’s personal pivot to ship the identical. Which is the entire technique for telcos within the AI market, actually. Johnson remarked: “We are actually part of the AI commerce, and the speak concerning the AI financial system is optimistic in the future and unfavorable the subsequent. We’re now part of that story and we see volatility on account of it. [But] we have to make it possible for the world understands our story – which can are likely to reasonable the volatility over time, as soon as that story is thought.”
Lumen can have a job to make its story stand out, maybe. Its network-as-a-service (NaaS) pitch is broadly the identical as its rivals’, in fastened and cell provision – even whether it is engineered in another way. It’s about delivering “clever fibre options”, mentioned Johnson. With out fail, connectivity for AI, for infrastructure suppliers and enterprises customers, must be plentiful, fast, safe, and resilient; nevertheless it additionally must be versatile, programmable, and obtainable in all places – “whether or not it’s on-prem, on the edge, in any information heart, in any cloud; on-net or off-net”.
However the lure is inconceivable to disclaim, regardless of the volatility – as it’s for each AI-adjacent infrastructure sector. As a lot as $2 trillion can be spent on “AI factories” over the subsequent decade, advised Johnson, and graphics processing items (GPUs), the AI infrastructure market’s important stock-in-trade, are the “quickest depreciating asset on planet Earth”, she mentioned – and so the job to attach GPUs effectively, as they multiply in quantity in trillion-dollar actual property, is a TCO train for the entire AI business. “Essentially the most important [thing] is networking,” she mentioned.
“As a result of in any other case these information facilities are simply bricks. The largest proof level that Lumen is important infrastructure within the building of the supply-side of the AI financial system is the $13 billion of Personal Connectivity Cloth offers we’ve executed – as massive tech builds-out the infrastructure to supply AI companies to enterprises. They’ve tapped Lumen because the trusted community for AI, however there’s a requirement facet and a requirement facet (to attach enterprise utilization of AI) – and the demand facet is the place most of our development lies. It’s the place the thrilling a part of our valuation will come into play.”
Which is probably the most attention-grabbing half, actually, of the presentation. There’s a structural shift in community spending by enterprises, mentioned Johnson – away from easy web site connectivity, between workplaces and information centres by way of conventional long-haul and last-mile techniques (36 % of spending right now), in the direction of high-capacity interconnection between AI factories and cloud-core areas (64 % right now, rising to 84 % over three years). So fibre spend is transferring from connecting customers to connecting machines – and particularly information centres for AI-related workloads.
Which require huge bandwidth, ultra-low latency, and on-demand programmability by way of information centre interconnect (DCI) switching homes and alongside new fibre lanes between GPU clusters and hyperscale websites. It means a transfer from premise-to-cloud connectivity on enterprise WAN techniques to inter-cloud data-centre connectivity in new ‘AI corridors’. She mentioned: “Sure, enterprises have to connect with these information facilities, however, extra importantly, in addition they want companies to assist them transfer their information in an agile manner between them. And that’s the essence of our technique.”
We’ll decide up once more tomorrow – or after the weekend, or possibly after MWC. There may be tons extra to unpack.
