Telecommunications infrastructure company Lumen Technologies (NYSE: LUMN) reported revenue ahead of Wall Street’s expectations in Q2 CY2026, but sales fell by 9.3% year on year to $2.81 billion. Its non-GAAP loss of $0.07 per share was 50.5% above analysts’ consensus estimates.

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StockStory’s Take

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.

Looking forward, Lumen’s strategy is centered on accelerating its transformation into a digital-first provider, with management expecting incremental gains from the Alkira acquisition and a disciplined focus on higher-margin, platform-based services. CFO Chris Stansbury outlined the company’s intent to redeploy capital from legacy operations into digital growth initiatives, stating, “These decisions create the flexibility to invest in capabilities like Alkira that can accelerate our digital revenue curve.” Management cautioned that while Alkira’s near-term revenue contribution is limited, its integration and the continued pruning of legacy products are expected to support margin expansion and position Lumen to capture emerging demand tied to artificial intelligence (AI) and cloud networking.

Key Insights from Management’s Remarks

Management highlighted that the ongoing shift from legacy to strategic services, rapid NaaS adoption, and integration of Alkira were the main drivers of the quarter’s results and future positioning.

• NaaS adoption surge: Lumen saw over 20% quarter-over-quarter growth in new NaaS customers, with more than 20% of these being entirely new to Lumen. Active ports and services both posted substantial sequential increases, reflecting rising demand for flexible, consumption-based network solutions.
• Alkira integration underway: The recently closed Alkira acquisition is now branded as Lumen Connect, offering customers a unified platform for connecting and securing multi-cloud and AI environments. Nearly 4,000 employees have been trained on the Alkira value proposition, and early customer feedback has been positive.
• Strategic revenue mix shift: Strategic revenue grew 14% year-over-year and now represents 53% of total business revenue, up from 45% a year ago. This mix shift is happening faster than anticipated, driven by increased adoption of digital and high-capacity services like 100 and 400 gigabit waves.
• Legacy product phase-out: Lumen continued to phase out low-growth, low-margin legacy offerings such as enterprise voice, redirecting capital and talent to higher-growth, digital business lines. Management emphasized this move is essential for margin expansion and future competitiveness.
• Digital platform expansion: The company is prioritizing technical integration to deliver a seamless digital experience for customers, including remote provisioning and management of Dedicated Internet Access (DIA) ports and new high-margin digital services like DDoS mitigation. These efforts are expected to simplify operations and improve profitability.

Drivers of Future Performance

Management expects that accelerated adoption of digital services, continued portfolio simplification, and integration of recent acquisitions will shape Lumen’s performance for the remainder of the year.

• Alkira-driven growth potential: Management believes the Alkira platform will enable Lumen to upsell high-margin digital services to both new and existing customers, particularly in AI and multi-cloud networking. While near-term revenue impact is modest, the company expects Alkira to drive incremental adoption and help position Lumen as a differentiated provider as enterprise networking needs evolve.
• Legacy business wind-down: The continued reduction of legacy services, such as enterprise voice and private line, is expected to unlock capital for reinvestment and support overall margin expansion. Management highlighted that most legacy customers have minimal overlap with strategic offerings, reducing the risk of unwanted churn as services are sunset.
• Cost discipline and modernization savings: Ongoing modernization and simplification initiatives are expected to yield over $1 billion in annualized cost savings by next year, offsetting revenue declines and supporting adjusted EBITDA margins. The company is on track with its cost savings targets and expects these efficiencies to support the transition to a digital-first business model.

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 $6.49, down from $6.81 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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