0000018926-26-000046
SEC filingRevenue declined 9% to $2.9B, operating income improved on $596M divestiture gain, but net loss remained at $200M.
For Q1 2026, Lumen reported total operating revenue of $2,899 million, down 9% from $3,182 million in Q1 2025. The decline was driven by a 31% drop in Mass Markets revenue ($455M vs $658M) following the divestiture of the Fiber-to-the-Home business, and a 3% decrease in Business revenue ($2,444M vs $2,524M) as legacy declines (-14%) outweighed strategic growth (+9%). Operating income surged to $602 million from $107 million, largely due to a $596 million net gain on sale of the Mass Markets business. Excluding this gain, operating income would have been approximately $6 million, reflecting margin pressure from higher SG&A (up 18%) partially offset by lower cost of services (down 15%). Net loss remained flat at $200 million, as the operating income improvement was offset by a $377 million income tax expense (effective rate 213%) from nondeductible goodwill on the divestiture, compared to a $44 million tax benefit in the prior year. Diluted EPS was -$0.20 in both periods.
Business revenue showed a clear mix shift: Strategic revenue grew 9% to $1,246 million, led by dark fiber and conduit sales (+$71M) and IP services (+$19M). Legacy revenue fell 14% to $1,198 million from declines in VPN (-$80M), voice, and private line services (-$71M). Mass Markets revenue collapsed 31%, with Fiber Broadband alone down 56% to $92M due to the divestiture. Other Broadband (-20%) and Voice and Other (-18%) continued their secular decline as customers migrated away from copper-based services. The divestiture reduced Mass Markets fiber capex by approximately $1 billion annually, sharpening focus on enterprise customers.
Management guided for capital expenditures of $3.2–$3.4 billion over the next 12 months, primarily for network modernization and fiber expansion. Liquidity remains adequate with $1.6 billion cash and $769 million credit facility availability. The company expects to refinance maturing debt and continues to pursue PCF agreements to monetize network assets. The recent Alkira acquisition for $475 million (expected Q3 2026) signals further strategic investments. Key risks include continued legacy revenue erosion, potential supply chain disruptions, and geopolitical instability in the Middle East. No explicit revenue or margin guidance was provided.
As of March 31, 2026, Lumen held $1.625B in cash and cash equivalents, down from $1.003B at year-end 2025, reflecting cash inflows from the Mass Markets divestiture and debt transactions. Total debt decreased sharply to $12.960B from $17.441B, primarily due to the use of $4.8B of divestiture proceeds to repurchase debt. Shareholders' deficit widened to $1.317B from $1.117B, driven by net loss and dividends (if any) but partially offset by comprehensive income. The company had $8.008B in non-current deferred revenue and $1.055B current deferred revenue; unsatisfied performance obligations stood at $5.9B.
The filing does not disclose standard purchase commitments (e.g., supply or capacity obligations). However, in connection with the divestiture, Lumen recorded $765M of liabilities for contractual credits and commercial agreements, including an IRU arrangement at no incremental charge. Additionally, a pending acquisition of Alkira for $475M in cash was announced on May 4, 2026, which is expected to close in Q3 2026. The company also has $83M in reasonably possible losses from Latin American tax indemnifications.
No share buybacks or dividends were reported. Capital allocation focused on debt reduction: Lumen issued $656M of new debt (additional 8.500% notes due 2036) and repaid $5.375B, including $4.765B from divestiture proceeds and $5M in open-market repurchases. Capital expenditures totaled $943M, or 32.5% of revenue, down from 24.9% in the prior-year period. The net loss on early retirement of debt was $226M.
Lumen now operates as a single reportable segment following the divestiture. The CODM uses consolidated net income and adjusted EBITDA for resource allocation. Revenue disaggregation shows Business revenue of $2.444B (Strategic $1.246B, Legacy $1.198B) and Mass Markets revenue of $455B (Fiber Broadband $92M, Other Broadband $205M, Voice and Other $158M). Geographic mix is not disclosed at the segment level.