Lumen Revenue a Mixed Bag as 'Proactive Disconnects' LoomLumen Revenue a Mixed Bag as 'Proactive Disconnects' Loom

Lumen Technologies in its latest quarter saw 11% growth in its public sector business, but its enterprise and midmarket revenues declined.

The Louisiana-headquartered company announced its fourth quarter earnings results Tuesday, showing a 5% year-over-year decline in overall revenue, to $3.3 billion. 2024 Lumen revenue totaled $13.1 billion, down from $14.6 billion in 2023. CEO Kate Johnson said the sale of Lumen's EMEA business and select CDN contracts as well as commercial agreements accounted for about 25% Lumen's revenue decline in the latest quarter.

"North American enterprise channels," a category that includes business revenue but excludes wholesale, declined 2% to $1.85 billion for the quarter.

Public sector revenue grew 11% year-over-year to $554 million. Lumen cited the State of California's use of Lumen's Private Connectivity Fabric for its Broadband for All initiative.

Large enterprise revenue declined by 5%. Midmarket enterprise declined by 10%.

Lumen Revenue by Technology

The company notes that its "Grow" product division, which includes UCaaS, IP and enterprise broadband, increased 15.3% year-over-year for North American enterprise channels.

Johnson noted that more than 500 clients added the Lumen Digital NaaS platform.

Its "Nurture" segment, which contains contains Ethernet/VPN, declined 16.2% year-over-year for North American enterprise channels. Lower VPN revenue played a role in that segment, according to Johnson. The "Harvest" category, containing legacy solutions, dropped 7.3% year-over-year, with TDM-based voice a key culprit.

Related:Lumen Reportedly Looking To Sell Consumer Fiber Business

Johnson said the legacy harvest segment represents about 16% of overall Lumen revenue.

Wholesale revenue decreased by 4.5% year-over-year. Johnson said Lumen will be driving TDM disconnects from "smaller off-net providers" in 2025 and encouraging customers "to either migrate or disconnect some services."

Lumen's Kate Johnson

"While these actions will be a drag on public sector revenue in the first half of the year, we believe they are healthy for the overall business as we're making decisions that are margin accretive," Johnson told investors and analysts.

Cost Takeout

Johnson said Lumen has identified more than $1 billion in operational expenditures that it intends to take out of the business by the end of 2027. She said the company has also identified "a big chunk of network expense."

"We believe the value creation path for Lumen is clear through additional sales, balance sheet improvements and cost structure optimization, all as we continue to execute on our core strategic goals to drive operational excellence, build the backbone for AI and cloudify telecom," Johnson said.

Related:Lumen Layoffs Impact Almost 7% of Workforce

Lumen earlier in January eliminated roles that it said accounted for less than 1% of the company. At the same time, Lumen said it was "investing in new roles within the commercial organization."

Johnson on DeepSeek

Lumen in the last year has framed its value proposition as providing the infrastructure necessary to support AI deployments.

China-based DeepSeek hit the ground running in January with an AI model that appears to operate with much lower cost, prices and data than its American rival, OpenAI. Although the rise of DeepSeek caused concern among American venture capital firms, Johnson said the company will "accelerate the democratization of AI."

"DeepSeek is putting pressure on everybody to go faster to innovate and to take cost down and to make the technology more accessible. And when you've got more companies that have to navigate in the multicloud AI-first world ... that's more total available market for us to sell our connectivity fabric into," she told analysts. "So, we see this as an increase in the total available market and a huge opportunity for us. We have a pretty good head start in this space, and we're investing heavily in a platform to differentiate, and we think it's going to allow us to capture share."

Related:Lumen CTO, Partner Leader Pitch 'AI Fabric' to Partners