Should Investors Buy Lumen Technologies Stock?

Lumen Technologies' (NYSE: LUMN) stock has long struggled. Despite its extensive fiber holdings, declines in legacy telecom businesses were calling into question its future.

However, in 2024, it began to benefit from a dramatic reversal of fortune thanks to artificial intelligence (AI). Some of tech's top companies have contracted with the company for Private Connectivity Fabric (PCF), a type of custom network architecture that helps data centers handle high bandwidth and reduce latency.

Despite this green shoot, doubts about its finances remain, though the stock is up about 125% from its low in late April. Given the current circumstances, can investors still profit from buying Lumen stock?

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The Lumen revival

Until 2024, Lumen, formerly known as CenturyLink, was often associated with industry acquisitions and outdated technologies. The various shifts in both the company and its industry left it with massive debts and an uncertain future.

Despite winning government contracts, it struggled to turn a profit and sold assets such as its incumbent local exchange carrier (ILEC) operation and its Latin American business to stay afloat.

As mentioned previously, this changed in 2024 when Microsoft signed a PCF agreement with Lumen. The deal gave Lumen a path by which it can leverage its existing fiber network to provide data center connectivity and thus breathe new life into the company. Meta Platforms and Amazon have since signed similar agreements with Lumen.

Earlier this year, it also agreed to sell its mass market fiber business to AT&T for $5.75 billion. Assuming the deal closes in the first half of 2026 as planned, the company will receive much-needed capital to invest in its burgeoning PCF business.

Lumen's financial condition

Since that time, Lumen stock has often spiked higher on optimism. Nonetheless, it has also retreated at times as its quarterly reports highlight Lumen's continued financial struggles.

In the first half of the year, revenue fell 3% yearly to just under $6.3 billion. Additionally, a goodwill impairment, high interest expenses, and a loss on the early retirement of debt led to a net loss of over $1.1 billion in the first two quarters of 2025. Lumen earned an $8 million profit in the same year-ago period.

Investors should note that its nearly $18 billion in debt is a considerable weight on the company, given its $7 billion market cap. Furthermore, analyst forecasts point to continued revenue declines, with revenue falling by 6% this year and an additional 4% in 2026. Those factors could weigh on its stock price growth, particularly in the near term.

Still, the deals may have begun to improve Lumen's finances in one key area. In 2024, its free cash flow was $1.1 billion. It had previously expected to generate between $700 million and $900 million in free cash flow in 2025, which could have meant a significant decline. Fortunately, it now expects to generate between $1.2 billion and $1.4 billion in free cash flow, a level pointing to modest growth.

Admittedly, positive free cash flows do not guarantee a positive net income. However, they appear to eliminate Lumen's need to raise cash through debt or share dilution, which is likely a relief to shareholders.

Should investors buy Lumen Technologies stock?

Despite significant signs of improvement, Lumen still has a way to go to make the stock a likely market beater in the long run.

Indeed, the PCF business gives Lumen a better-defined role in today's tech and telecom industries, increasing its odds of survival. The recent rise in the stock price likely reflects those improved prospects.

Unfortunately for investors, a stock must thrive, not just survive, in order to earn outsize returns. As conditions stand now, revenue declines are on track to continue, and Lumen will have to contend with its massive debt, even as it seeks to offload poorly performing businesses and raise money to invest in the PCF business.

Ultimately, Lumen needs to demonstrate that AI will return it to a positive growth trajectory and reduce its debt load. Until that growth returns, investors are likely better off owning other AI stocks.

Will Healy has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon, Meta Platforms, and Microsoft. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.