Lumen’s second quarter was marked by a sharper-than-expected decline in sales and a negative market reaction, despite delivering revenue and non-GAAP earnings above Wall Street expectations. Management attributed the results to continued progress in shifting the business mix toward strategic and digital services, highlighted by robust growth in Network-as-a-Service (NaaS) adoption and the initial integration of Alkira. CEO Kate Johnson noted, “Our NaaS growth rates exceeded even our own internal ambitions for the first half,” emphasizing that strategic revenue now comprises a majority of total business revenue. However, ongoing declines in legacy services and increased costs related to modernization initiatives tempered the quarter’s performance.
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Lumen (LUMN) Q2 CY2026 Highlights:
- Revenue: $2.81 billion vs analyst estimates of $2.74 billion (9.3% year-on-year decline, 2.4% beat)
- Adjusted EPS: -$0.07 vs analyst estimates of -$0.14 (50.5% beat)
- Adjusted EBITDA: $802 million vs analyst estimates of $769.3 million (28.6% margin, 4.3% beat)
- EBITDA guidance for the full year is $3.2 billion at the midpoint, below analyst estimates of $3.33 billion
- Operating Margin: -3.1%, up from -19.5% in the same quarter last year
- Market Capitalization: $6.85 billion
While we enjoy listening to the management’s commentary, our favorite part of earnings calls is the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.
Our Top 5 Analyst Questions From Lumen’s Q2 Earnings Call
- Michael Rollins (Citigroup) asked how quickly customers are transitioning from legacy to strategic services and about the potential impact Alkira could have on accelerating this shift. CEO Kate Johnson and CFO Chris Stansbury explained that strategic adoption is outpacing legacy declines, with significant share gains in high-capacity networking and an expanding customer base for NaaS and Alkira.
- Frank Louthan (Raymond James) questioned the incremental revenue potential from Alkira customers and whether Lumen is gaining market share in high-capacity waves. Johnson cited rapid customer adoption and upsizing of renewals, while Stansbury noted it was too early to quantify recurring revenue but highlighted the ability to upsell additional services with minimal incremental cost.
- Gregory Williams (TD Cowen) inquired about the ramp in digital revenue and the impact of the State of California deal pull-forward on public sector results. Stansbury responded that digital adoption is scaling from a small base, with Alkira expected to accelerate growth, and clarified that public sector results were boosted by the accelerated state contract delivery.
- Michael Funk (Bank of America) asked about the size and progression of the enterprise deal funnel and Lumen’s approach to pricing new conduit (PCF) deals. Stansbury emphasized a disciplined approach, focusing on monetizing underutilized assets and only pursuing new builds with attractive returns, rather than chasing headline growth.
- Batya Levi (UBS) sought details on CapEx for public sector fiber (PCF) projects and the incremental costs of integrating Alkira. Stansbury stated that PCF capital requirements are funded upfront by customers and that Alkira’s revenue and costs remain immaterial at this stage, but integration efforts are progressing as planned.
Catalysts in Upcoming Quarters
In the coming quarters, the StockStory team will monitor (1) the pace of Alkira platform adoption and its impact on digital revenue growth, (2) the ongoing shift in revenue mix from legacy to strategic services, and (3) the company’s ability to achieve targeted cost savings from modernization and simplification initiatives. We will also track additional portfolio pruning and new product releases as key indicators of execution.
Lumen currently trades at $6.65, in line with $6.71 just before the earnings. Is the company at an inflection point that warrants a buy or sell? See for yourself in our full research report (it’s free).
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