Fresh off a record daily stock gain, Lumen Technologies reported earnings and refreshed its outlook for the full year Tuesday.
The telecommunications and fiber company now expects $1.0 billion to $1.2 billion in free cash flow for the full year, up from a prior outlook of $100 million to $300 million. The huge difference reflects recent partnership announcements that will help the company generate cash.
Lumen shares were up another 51% in Wednesday's premarket session after rallying more than 90% in regular trading.
When Lumen announced $5 billion in new business related to artificial intelligence a day earlier, the company noted in a video that the deals are structured as indefeasible rights-of-use agreements, or IRUs, which mean "meaningful upfront cash collection," according to a Lumen video put out at the time.
While Lumen boosted its free-cash-flow forecast, it cut its full-year outlook on earnings before interest, taxes, depreciation and amortization. The company now expects $3.9 billion to $4.0 billion on the metric, whereas it previously anticipated $4.1 billion to $4.3 billion. There are various construction expenses required to support Lumen's new deals.
Those deals include arrangements with Corning and Microsoft and show how Lumen and other fiber companies can deliver value in an AI era when data is even more crucial. Companies are, in essence, leasing Lumen's conduit, and Lumen helps them with network offerings that can connect data centers.
"As AI grows, demand for Lumen's network grows," Chief Financial Officer Chris Stansbury told MarketWatch. "The AI vision cannot be realized without a next-gen AI fiber network."
With Lumen shares up more than 350% over the past month, partly reflecting deal enthusiasm and also potentially factoring in some short covering, the AI partnerships and their financial ramifications overshadow results from the most recent quarter. Lumen sees AI arrangements as a way to position it for the future, as the company has seen pressure in its legacy units.
Overall revenue in the second quarter fell to $3.27 billion from $3.66 billion, while analysts tracked by FactSet were modeling $3.25 billion.
The company categorizes its business in three sections: There are "grow" products like managed security, "nurture" products like ethernet and "harvest" products like legacy voice offerings. All three saw revenue decline from a year earlier, with Lumen posting a 7% decline in "grow," a 14% drop in "nurture" and an 18% decline in "harvest."
Lumen reported a net loss of $49 million, or 5 cents a share. Its net loss a year before amounted to $8.8 billion as the company took a massive goodwill charge then.
On an adjusted basis, Lumen lost 13 cents a share in the second quarter, while analysts had been expecting a 6-cent loss per share.
The company also posted earnings before interest, taxes, depreciation and amortization of $1.01 billion, whereas the FactSet consensus was for $1.02 billion.
Lumen logged $156 million in negative free cash flow during the period.
