Lumen Earnings Boost Balance Sheet After AT&T Sale

Lumen Technologies said in its Feb. 3, 2026 earnings report that closing the sale of its consumer fiber-to-the-home business to AT&T on Feb. 2 reduced leverage and interest costs, supporting its 2026 outlook.

AT&T Sale Strengthens Balance Sheet and Supports 2026 Outlook

Lumen sold its consumer fiber-to-the-home business, Quantum Fiber, for $5.8 billion, serving about 1 million customers across more than 4 million locations in 11 states. The company received $4.8 billion in net proceeds, which it used to repay super-priority bonds and prior second-lien debt. "The divestiture of our consumer fiber-to-the-home business marks a pivotal moment for Lumen," the company said in a press release.

Following the transaction, total debt fell below $13 billion, and net leverage stood at about 3.8 times on a trailing 12-month adjusted EBITDA basis. Management said the deal will reduce annual cash interest by roughly 45%, or about $500 million compared with 2025. Net cash interest in 2026 is expected to range from $650 million to $750 million, while annual capital spending will be more than $1 billion lower. Lumen plans to file a pro-forma Form 8-K on Feb. 4 with additional transaction details.

Management framed the divestiture as a strategic pivot toward enterprise and AI-era services, focusing on powering digital infrastructure for enterprises and public sector organizations.

Fourth-Quarter Results and 2026 Guidance

Lumen reported fourth-quarter adjusted EBITDA of $767 million, a 25.2% margin, down from $1.052 billion a year earlier. The decline reflected revenue trends, one-time items in the prior year, and higher healthcare and cloud costs. The company recorded $280 million in special charges related to severance and transaction and modernization activities. It exceeded its 2025 cost-savings target, delivering a run-rate of more than $400 million.

For 2026, Lumen issued guidance for adjusted EBITDA of $3.1 billion to $3.3 billion, free cash flow of $1.2 billion to $1.4 billion, and capital expenditures of $3.2 billion to $3.4 billion, about $1 billion of which will fund pre-funded capacity (PCF) activity. Management expects cost-savings run-rate to reach $700 million exiting 2026 and targets $1 billion exiting 2027. It also projected a cash-tax inflow of $350 million to $450 million, including a delayed $400 million refund expected in the first half of 2026.

PCF contributed $116 million in revenue for full-year 2025 and $41 million in the fourth quarter. Lumen signed $2.5 billion of new PCF deals in Q4, with a pipeline of about $13 billion and $4.5 billion of new commitments over the past 12 months. The PCF model requires about 90% of payments upfront and roughly 10% on lighting, with revenue recognized on the latter.

At year-end 2025, Lumen’s network reached 17 million intercity fiber miles, with plans to expand to 58 million miles by 2031 through PCF arrangements. The company reported growth in its network-as-a-service (NaaS) business, with active customers up 29% quarter-over-quarter, fiber ports up 31%, services sold up 26%, and more than 900 Off-Net ports sold. It will retain backbone and metro fiber, copper consumer services, and its enterprise and wholesale customer base as it shifts reporting into "strategic" and "legacy" categories.