Changing the economics of Lumen: three proof points from Q3

Lumen’s third-quarter results made one thing clear: we are changing the economics of this business, not just the top line, writes CFO Chris Stansbury. We are building Lumen on Strategic growth, not on preserving Legacy economics, with additional infrastructure agreements providing further upside. Here is what the quarter shows.

The portfolio is changing, and the mix is moving fast

Strategic revenue now represents 55% of business revenue, up from 48% a year ago. That matters because of what sits underneath it. Year to date, average direct margins exceeded 80% across Strategic, compared with approximately 65% for Legacy. Every point of mix we shift toward Strategic improves the quality of our revenue. Total revenue declined year over year this quarter, but that doesn’t tell the whole story. Strategic revenue grew 10% year over year, and it is replacing Legacy revenue with a higher-margin business. That is the shift that changes our economics.

The digital platform is where the operating leverage comes from

We have more than 4,000 NaaS customers, and 20% of Internet on Demand ports now carry multiple services. Each digital service we add to a port that is already in place generates revenue at nearly 100% direct margin, creating significant operating leverage. That is the model working, and it is built on the portfolio we have in market today.

The financial foundation is stable, and it gives us room to execute

More than 80% of our debt is fixed rate, and a 25-basis-point change in rates would affect annual interest expense by only approximately $6 million. With approximately $1.2 billion coming due over the next five years, we are not managing from a position of urgency. We are executing from a position of stability.

What it adds up to

We remain on track for adjusted EBITDA inflection exiting 2026, we have reaffirmed our full-year outlook, and we anticipate a return to business revenue growth in 2028. We are building Lumen around a higher-growth, higher-margin portfolio and a more resilient financial foundation. That is the business we are building, and the Q3 results show it is taking hold.

Read more in our third-quarter results.