Can Lumen Technologies ($LUMN) Surprise Us in Q3 2024

With Lumen Technologies ($LUMN) set to release Q3 2024 earnings on November 5, it’s worth examining the company’s recent moves and overall position in the telecom sector. Analysts have tempered expectations, predicting a slight loss and lower revenue year-over-year, but Lumen’s working on some interesting changes. Here’s everything you need to know.

Analysts expect Lumen to post a small loss for Q3 2024—$0.05 per share on revenue around $3.2 billion, a 12% year-over-year decrease. These cautious expectations reflect Lumen’s transition phase, with lower demand for older services. Investors will be watching for any early progress in high-growth areas like AI infrastructure and fiber expansion.

Lumen’s competitors in telecom—AT&T, T-Mobile, and Verizon—recently reported earnings with mostly positive results:

• AT&T: Beat earnings estimates but missed slightly on revenue.
• T-Mobile: Strong quarter, up 43% in net income and gained 1.6 million customers.
• Verizon: Met earnings expectations but had a small revenue miss.

Overall, steady demand is visible in telecom, though companies face some challenges in hitting revenue targets.

Yes, the telecom sector has been resilient in 2024. The S&P Telecom Index is up about 54% over the last 12 months, outpacing the broader market (+37%). This shows strong demand for connectivity and digital infrastructure, which benefits companies like Lumen that provide core telecom services.

Lumen has secured some high-profile partnerships recently, particularly in AI, which could drive growth long-term. They’ve signed $5 billion in AI-related contracts with potential for another $7 billion. These contracts involve giants like Microsoft, Meta, and AWS, all using Lumen’s high-capacity fiber for AI data demands. While promising, these partnerships may take time to show up in earnings.

Lumen’s focus on AI partnerships and fiber expansion could play a significant role in their future growth. With rising demand for high-speed internet and digital infrastructure, their fiber investments could meet increasing needs. And the AI contracts with companies like Meta, Microsoft, and AWS position Lumen in a high-growth sector. These initiatives may take time to reflect in earnings but could be a major growth driver in the next few years.

Key areas to watch in the Q3 earnings report:

• Revenue from AI Contracts: Are new AI deals bringing in revenue yet?
• Fiber Network Updates: Updates on fiber expansion could show how Lumen’s adapting to increased demand.
• Cost Management and Cash Flow: After restructuring debt, any improvement in cash flow or lower operating costs would be a positive indicator.

It’s possible but may be close. Given sector strength and the progress in high-growth areas, Lumen might meet or slightly beat revenue expectations. However, a significant earnings beat feels less likely. This quarter may be more about tracking the progress of their strategic shifts than seeing a full turnaround.

Lumen is positioning itself with a focus on AI and fiber, signaling a strong commitment to adapting to new market demands. Q3 might not be the quarter that shows big gains, but the groundwork is there for potential future growth. Investors should look for signs of progress in these areas and keep an eye on how these changes may play out over the next few quarters.

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