Why Lumen Technologies Stock Rocked the Market Last Month

Investors were eagerly calling on the stock of Lumen Technologies (NYSE: LUMN) in May. Shares of the telecom company rose by nearly 18% over the course of the month, comparing very favorably to the under 5% increase of the bellwether S&P 500 index. This, despite a quarterly earnings report that initially disappointed market players.

Worried about the whiff

On May 5, Lumen phoned in its first-quarter results. The company's revenue was just under $2.9 billion, down from almost $3.2 billion in the same period in 2025. Net loss not under generally accepted accounting principles (GAAP) deepened considerably, coming in at $467 million ($0.47 per share), compared with the first-quarter 2025 shortfall of $129 million.

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Although Lumen beat the consensus analyst estimate of $2.84 billion for revenue, it missed badly on the bottom line -- pundits tracking the stock were modeling only a $0.13 per share non-GAAP (adjusted) net loss.

It's usually not a good time for a company to announce a costly acquisition on the same day it reports a significant bottom-line miss. Obviously undaunted, Lumen revealed it agreed to acquire Alkira, a highly specialized tech business focused on cloud-to-cloud connectivity. The price is $475 million, which is to be paid entirely in cash. The deal is expected to close in the third quarter.

In the press release trumpeting the acquisition, Lumen wrote that it will allow clients to "have one control plane to orchestrate connectivity across major clouds, data centers, artificial intelligence (AI) compute regions, partner ecosystems, and carriers."

"This will help enable simplified operations, improved performance, and cloud-like consumption of networking, so customers can focus on their core business," the company added.

High-fiber diet

Investors didn't react positively to these twin news items, which was understandable given the shockingly deep loss and the nine-digit, all-cash spend on Alkira. Yet a deeper dive into that first quarter showed some key developments to be bullish about.

A highly encouraging one was Lumen's significant hike to its free cash flow (FCF) guidance. Management is now guiding for $1.9 billion to $2.1 billion, considerably higher than the preceding forecast of $1.2 billion to $1.4 billion. That'll pay for much more fiber, to be sure, and help cover that Alkira buy.

And in a balance-sheet improving move, Lumen drastically reduced its long-term debt by more than $4 billion. At the end of the first quarter, this stood at $12.9 billion; one year previous this figure was approaching $17.4 billion.

Tellingly, in the middle of the month, several analysts at major financial institutions raised their price targets on Lumen. While these lifts weren't dramatic, and those pundits kept their hold recommendations on the stock, they reflect a growing (if cautious) optimism that helped push the stock price up.

I wouldn't be so careful, personally. Lumen is an under-the-radar infrastructure player in the tech sector's great push to expand AI capabilities and access -- after all, it currently boasts nearly $13 billion in recently secured private connectivity fabric (PCF) contracts. The company remains an important part of the broader effort to bolster AI, even if it hasn't managed to shed its image as a telecom burdened by its history. I'd absolutely consider its stock for a buy.

Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.