Lumen Technologies’ ‘Year Of Investment’ Is Set Around Building Network For ‘Multi-Cloud, AI-First World’
'The growth lever of building the backbone for AI represents a huge accretive opportunity for this company. We're not only driving the strongest utilization of our network assets in the history of the company, we have unmatched capacity for growth at exactly the right time,' says Lumen President and CEO Kate Johnson during the company's Q4 2024 earnings call.
Lumen Technologies, formerly CenturyLink, is building the backbone for AI, according to
Lumen President and CEO Kate Johnson.
The telecom-turned-technology provider said that 2025 will be the “year of investment” for Lumen as it continues to cement its place as the trusted network for AI. To that end, the service provider in 2024 inked $8.5 billion in private connectivity fabric deals with the likes of Microsoft, Amazon Web Services, Google Cloud and Meta, Johnson told investors during the company’s fourth-quarter and full-year 2024 earnings call Tuesday evening.
With apps and data “sprinkled all over the place — on prem, at the edge, and in multiple clouds,” IT architectures have never been more complex, and enterprises are upgrading their infrastructures dramatically, Johnson said.
"High speed, low latency connectivity is table stakes, but it's not the end game. CIOs need visually controlled, higher bandwidth, higher performing, higher reliability and higher security networks to navigate this complexity and that's exactly what we're building at lumen. A digital platform on top of a rapidly expanding fiber network to help CIOs design, control, configure and consume network services in a multi-cloud, AI-first world," she said.
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To step up the company's plan to help meet growing demand for AI, Lumen is planning to increase the overall utilization of its network from 57 percent in 2022 to 70 percent by 2028, Johnson said.
Thirty percent of Lumen's network utilization in 2022 was generated by hyperscalers. The plan for that percentage is to grow it to 45 percent. Meanwhile, the Enterprise Channels utilization rate was 27 percent in 2022 and that will decrease to 19 percent in 2025, the company said.
Hyperscalers are using Lumen's network to train AI models right now. The second phase will be when enterprises start to use it to run AI workloads because Lumen is providing a cheaper and more flexible way for businesses to reach their data, according to Lumen's CFO Chris Stansbury, who said the company is still at the very beginning of that progression.
"The growth lever of building the backbone for AI represents a huge accretive opportunity for this company. We're not only driving the strongest utilization of our network assets in the history of the company, we have unmatched capacity for growth at exactly the right time," Johnson said.
Q4 and Full-Year 2024 Financial Results
Lumen in 2022 split its portfolio of business services into three segments. The Grow segment, which includes the carrier's higher-margin offerings, such as SASE, security, cloud, and UC collaboration services, saw maintained growth of 15.3 percent during the quarter. The Grow segment accounted for 47 percent of the company's total business revenue during the quarter.
Lumen's Nurture segment includes VPN Data Networks and Ethernet services and accounted for 26 percent of its business during the quarter but declined 16.2 percent. The Harvest segment, which house the carrier’s legacy services, including voice, represented 16 percent of Lumen's Q3 2024 business revenues and declined 7.3 percent.
Lumen’s Large Enterprise segment dipped 5 percent to $845 million during Q4 compared with revenues of $894 million a year ago. The midmarket enterprise segment declined 10 percent to $452 million in the fourth quarter compared to $501 million in Q4 2023. North American Enterprise Channels fell 2 percent to $1.85 billion from $1.89 billion a year prior. For the full year, the Large Enterprise segment declined 7 percent, midmarket enterprise fell 8 percent, and North American Enterprise Channels slipped down 5 percent.
Overall, Lumen’s total Business segment revenue dipped 5 percent, totaling $2.67 billion in the fourth quarter compared to $2.80 billion a year ago. For the full year, it declined 11 percent. The Mass Markets segment fell 6 percent to $670 million from $715 million in Q4 2023 and 8 percent for the full year. Wholesale revenue slumped 5 percent during the quarter to $716 million from $750 million in the year-ago quarter and 9 percent in total during 2024.
Public Sector revenue, on the other hand, increased 11 percent year over year to $554 million compared to $497 million in Q4 2023. Public Sector increased 3 percent for the full year 2024.
CFO Stansbury said about 25 percent of Lumen’s Business revenue decline came as a result of its recent divestures and CDN contracts sold.
The company in 2022 November closed the sale of its EMEA business to Colt Technology Services for $1.8 billion. Lumen in October 2023 finalized the $7.5 billion sale of its incumbent local exchange carrier (ILEC) business, which included its consumer, small business, wholesale and mostly copper-served enterprise customers and assets in 20 states to Brightspeed, a two-year old company that was launched by former Verizon executives.
Stansbury last quarter hinted at the potential future sale of Lumen's consumer business as the company continues to focus on enterprise customers. The Monroe, LA.-based service provider has indeed shifted its operations in recent years towards business services, which now account for about 75 percent of its revenue.
For the fourth quarter of 2024 that ended December 31, Lumen beat Wall Street's expectations with reported total revenue of $3.29 billion, which represented a decline of 5 percent compared to $3.52 billion in the year-ago period. For the full year of 2024 , revenue declined 10 percent from $14.56 billion to $13.11 billion.