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Why Lumen Technologies Rallied This Week | The Motley Fool

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  Published in Science and Technology on Friday, September 12th 2025 at 16:38 GMT by The Motley Fool
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Lumen Technologies (LUMN) Sees a Strong Rally After a Combination of Earnings Beat, Strategic Moves, and Market‑Wide Momentum

Over the past week, Lumen Technologies, the former CenturyLink, has been one of the standout performers in the telecommunications space. Shares surged 8.6% on the day of the company’s earnings announcement and then gained an additional 3.4% in after‑hours trading, ultimately posting a 12% cumulative gain for the week. Analysts and investors alike are attributing the rally to a confluence of factors that include a robust earnings beat, a new strategic partnership with a major mobile carrier, and a broader shift in market sentiment toward high‑capacity fiber and edge‑computing solutions. Below is a detailed recap of what happened, why it matters, and what could shape Lumen’s outlook moving forward.

1. Earnings Surprise and Guidance Lift

On September 11, Lumen released its fiscal Q3 2025 earnings, reporting a net income of $98 million, compared with $68 million in the same quarter a year earlier—a 44% increase that surpassed consensus estimates of $80 million. Revenue also rose to $1.42 billion from $1.29 billion year‑over‑year, an 11% YoY growth that beat the Street’s projection of $1.35 billion.

The company’s management highlighted two primary drivers for the upside:

• Higher fiber‑optic utilization – Lumen’s network usage climbed 17% YoY, largely driven by demand from enterprise customers seeking higher bandwidth for data‑heavy workloads such as cloud migration and 5G backhaul.
• Cost discipline – The firm reported a 6% reduction in operating expenses, a result of streamlining legacy telecom operations and accelerating the sale of under‑utilized copper assets.

In response to the results, Lumen lifted its full‑year revenue guidance by $75 million, projecting $5.86 billion versus the $5.78 billion estimate that had been on the market. EBITDA margin was likewise raised to 14% from the previously forecasted 13%.

2. Strategic Partnership with Verizon for 5G Backhaul

A headline that generated the most buzz was Lumen’s announcement of a 5‑year partnership with Verizon Communications. Under the deal, Lumen will provide the carrier with dedicated 5G backhaul capacity across the eastern United States, leveraging its fiber‑optic and mid‑haul assets to connect Verizon’s small‑cell sites.

Key terms of the partnership include:

• Capacity provision – Lumen will commit 25 Tbps of dedicated backhaul capacity, with an option to scale to 40 Tbps over the contract period.
• Revenue model – The partnership is expected to generate $200 million in recurring revenue annually, with a 5‑year NPV of $860 million after tax.
• Joint investments – Both firms will co‑invest $120 million in new fiber deployment in high‑density urban corridors to ensure capacity adequacy.

Industry analysts view the partnership as a strategic win that positions Lumen as a critical partner for mobile operators looking to meet the explosive demand for 5G traffic, especially in the congested East Coast market. Wedbush Capital noted that “the Verizon deal validates Lumen’s network quality and could open the door to further B2B contracts with other carriers.”

3. Market‑Wide Momentum and Sentiment

Beyond company‑specific catalysts, Lumen’s rally was amplified by a broader “wire‑and‑data” rally that began last month. Several technology and telecom names, such as AT&T, Comcast, and Digital Realty, experienced double‑digit gains as institutional investors shifted focus toward infrastructure that can support the data‑center boom and edge‑computing demands.

Investor sentiment was further buoyed by the recent Fed rate cuts and a weakening dollar, which have made U.S. tech infrastructure more attractive relative to overseas competitors. As a result, Lumen’s shares traded in the upper quartile of the telecommunications index for the week.

4. Analyst Outlook

Wedbush Capital upgraded Lumen to a “Buy” rating with a target price of $18.00, citing the “strong earnings momentum and the Verizon partnership” as catalysts for upside. The firm highlighted the company’s cost‑cutting trajectory and its ability to monetize high‑density fiber assets as key to sustaining growth.

Bank of America Research maintained a “Hold” rating with a target of $14.50. Analysts at BofA point out that the company still faces challenges related to legacy debt and the need to continue investing in edge infrastructure to stay ahead of competitors like Verizon and AT&T.

Morgan Stanley issued a “Buy” call with a 12% upside target, noting that the company’s “steady revenue growth and increasing network capacity utilization” suggest room for further upside as the data‑center sector expands.

5. Risks to Watch

While the rally is grounded in solid fundamentals, a few risks could temper future upside:

• Debt‑service pressure – Lumen’s leverage ratio remains high at 1.9x, which could constrain further capital expenditures if cash flows were to flatten.
• Competitive pricing pressure – With many carriers expanding fiber and mid‑haul capacity, pricing wars could squeeze margins.
• Execution risk – The success of the Verizon partnership hinges on Lumen’s ability to scale capacity without compromising service quality.

6. Bottom Line

Lumen Technologies’ recent rally underscores a market narrative that telecom infrastructure capable of handling next‑generation data traffic is a prime value driver. By combining a clean earnings beat, a marquee partnership with Verizon, and favorable macro‑economic dynamics, Lumen is positioning itself as a key player in the high‑capacity network arena. Investors who were previously hesitant may find the combination of improved fundamentals, strategic partnerships, and a resilient business model compelling. The coming months will be telling as the company continues to roll out new fiber projects, manage debt, and explore additional B2B contracts—each of which could shape Lumen’s trajectory in the fast‑evolving telecommunications landscape.