Telecommunications infrastructure company Lumen Technologies (NYSE: LUMN) met Wall Street’s revenue expectations in Q3 2026, but sales fell by 12.1% year on year to $2.72 billion. Its non-GAAP loss of $0.14 per share was 41% above analysts’ consensus estimates.

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StockStory’s take

Lumen met Wall Street’s revenue expectations in the third quarter of 2026, with management highlighting a pronounced shift toward higher-margin strategic and digital services. CEO Kate Johnson attributed this performance to growing enterprise demand for flexible, programmable networks able to support artificial intelligence (AI) workloads and rapid data movement. She noted that strategic sales, including AI-related network services and platform offerings, drove a 10% year-over-year increase in strategic revenue, now comprising most of Lumen’s business line.

Looking ahead, Lumen’s guidance continues to emphasize the transition away from legacy copper infrastructure toward digital and AI-enabled services. Management believes that accelerated copper decommissioning and the expansion of the Lumen Intelligent Internet platform will increase operating leverage and improve margins. CFO Chris Stansbury stated, “Our return to business revenue growth is built on higher-growth strategic and digital services,” while cautioning that the cadence of copper decommissioning and customer migration will impact the timing of cost savings and revenue recognition.

Key insights from management’s remarks

Management pointed to the combination of new AI-driven network demand, customer migration to digital platforms, and portfolio simplification as primary drivers of third-quarter performance and the company’s ongoing transformation.

• AI-related network demand: Lumen saw a surge in AI traffic, with public internet backbone traffic growing 20% year-to-date and AI-specific traffic up over 1,000% since April, signaling rapid enterprise adoption of AI inferencing workloads.
• Strategic sales growth: Strategic sales—including network-as-a-service (NaaS), private cloud fiber (PCF), and digital platform solutions—rose 30% year-over-year, while strategic revenue now makes up 55% of total business revenue.
• Alkira integration and digital platform expansion: The recent acquisition of Alkira, a cloud networking company, enhanced Lumen's digital platform capabilities, allowing customers to quickly provision network services, cloud connectivity, and advanced security features via a single interface. This contributed to a meaningful increase in digital revenue and customer adoption.
• Copper decommissioning and portfolio streamlining: Lumen advanced its plan to retire legacy copper infrastructure, focusing capital and operational resources on digital and strategic segments. Management highlighted that decommissioned copper is expected to generate $1–$1.5 billion in pre-tax proceeds over five years, supporting debt reduction and investment in growth areas.
• Shift in customer buying behavior: Customers are increasingly seeking network solutions that can be bought and scaled as easily as cloud services, driving up demand for Lumen’s digital and NaaS offerings. Management reported a 24% quarter-over-quarter increase in active NaaS customers and a 35% increase in services attached to those ports, demonstrating strong land-and-expand momentum.

Drivers of future performance

Lumen’s management expects continued growth in digital and strategic services, while legacy revenue declines are offset by cost savings and asset monetization.

• Digital platform scaling: The company anticipates increased adoption of the Lumen Intelligent Internet and Alkira-enabled solutions, with a focus on upselling additional services to existing ports, which management says generates near-100% direct margin and drives operating leverage.
• Copper decommissioning impact: Accelerated winding down of copper infrastructure is expected to reduce operating and capital costs, generate proceeds from asset sales, and redirect capital toward higher-return digital investments. However, management cautioned there may be timing mismatches between revenue loss and cost reduction as copper assets are retired.
• Macro and regulatory environment: Lumen believes its programmable network and risk-aware security solutions position it well amid rising enterprise complexity, AI adoption, and regulatory attention to network resiliency and data sovereignty. The company will need to manage customer migration, regulatory approvals, and fluctuating copper prices to realize expected benefits.

Catalysts in upcoming quarters

Going forward, the StockStory team will watch (1) progress on customer migration to the Lumen Intelligent Internet and digital platforms, (2) execution and timing of copper decommissioning and related cost reductions, and (3) continued growth in strategic AI-driven network services and NaaS adoption. The ability to maintain pricing power for advanced offerings and manage regulatory hurdles will also be critical indicators.

Lumen currently trades at $4.47, in line with $4.47 just before the earnings. At this price, is it a buy or sell? Find out in our full research report (it’s free).

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