Lumen Says AI Networking Push Lifted Strategic Revenue Above 50% in Q2

Lumen Technologies said its shift toward AI-focused networking services accelerated during the second quarter, with strategic revenue accounting for more than half of its business revenue for the first time as enterprises increased adoption of cloud connectivity and Network-as-a-Service (NaaS) offerings.

The company reported revenue of $2.805 billion for the quarter ended June 30, down from $3.092 billion a year earlier, while net loss narrowed to $201 million from $915 million. Strategic revenue rose to 53% of total business revenue, up from 51% in the previous quarter and 45% a year earlier, as legacy services continued to decline. Lumen also generated $327 million in free cash flow excluding special items and reaffirmed its full-year financial outlook.

According to the earnings release, the company now serves more than 3,000 NaaS customers, with new customer adoption increasing 22% quarter over quarter, active ports rising 34%, and active services growing 29%. 

AI Networking Strategy Takes Center Stage

While the financial results met expectations, management devoted much of the earnings call to explaining how Lumen is repositioning itself around enterprise AI networking rather than traditional telecom services.

Chief Executive Officer Kate Johnson said the company is combining its fiber infrastructure, programmable network, and cloud-based software capabilities to simplify connectivity for enterprises running AI and multi-cloud environments. She said the recent acquisition of Alkira strengthens that strategy by giving customers a unified platform to connect clouds, data centers, enterprise sites, and AI workloads. 

Johnson also said Lumen plans to integrate most of Alkira's capabilities into its platform over the next 18 months, beginning with digital management of its Direct Internet Access (DIA) services. During the call, she described the initiative as a way to add higher-margin digital services without requiring additional on-site infrastructure changes.

The strategy reflects a broader shift across enterprise AI infrastructure, where networking and orchestration are becoming increasingly important alongside compute as organizations move AI applications into production. 

Enterprise AI Demand Drives Network Upgrades

Executives also pointed to growing demand for high-capacity networking tied to enterprise AI deployments. Johnson said Lumen's 100G and 400G optical wave services continued to gain traction, while NaaS adoption exceeded the company's internal expectations during the first half of the year.

Chief Financial Officer Chris Stansbury said digital revenue reached $39 million during the quarter and that the company expects Alkira to contribute to future growth, although its immediate financial impact remains limited. He added that strategic revenue grew 14% year over year while digital services continue to expand from a relatively small base.

During the analyst question-and-answer session, management said Lumen is seeing enterprises purchase additional high-speed connectivity rather than simply replacing legacy services, suggesting AI deployments are creating new network demand. Executives also said the company believes it is gaining market share in 100G and 400G networking, supported by increasing adoption among cloud providers and enterprise customers.

Those comments align with a broader trend in enterprise AI spending, where infrastructure investment is increasingly shifting beyond GPUs toward the networking required to support inference and production AI workloads. 

Lumen reiterated its 2026 guidance, including adjusted EBITDA excluding special items of $3.1 billion to $3.3 billion and free cash flow excluding special items of $1.9 billion to $2.1 billion.