Lumen counts nearly 1,000 NaaS customers as that business surges

  • Lumen is tapping into a hot network-as-a-service market with “close to 1,000” customers
  • The company has now inked nearly $9 billion in private connectivity fabric (PCF) deals
  • But it’s still mindful of finances following the sale of its consumer fiber biz

Lumen is seeing network-as-a-service (Naas) interest take off, as the company continues to double down on enterprise connectivity that can handle AI and cloud applications.

Since Lumen launched its Internet-on-Demand offering in 2023, it’s accumulated “close to 1,000” NaaS customers, said Lumen CEO Kate Johnson on Thursday’s Q2 earnings call. Big-name companies that are using Lumen’s NaaS service include Best Buy, Columbia, DXC Technology and insurance company Pacific Life.

The number of customers that purchased one or more NaaS ports increased by 35% from the first quarter, she stated. The company also saw a 31% rise in the number of ports deployed to support multi-cloud networking.

“As we continue to build and deliver quick, secure and effortless customer experiences, NaaS adoption will continue to accelerate, ultimately becoming a significant part of our revenue growth story,” Johnson said.

Lumen is tapping into a market poised to run hot over the next four to five years. Analysys Mason predicts global NaaS connectivity revenue (including both retail and wholesale connections) will reach $14.7 billion by 2029. The need for NaaS will become more critical as AI workloads ramp.

“Flexible NaaS connectivity solutions are well-suited to handle the bursty, intermittent traffic flows associated with transferring data between data stores and AI infrastructure for training AI models and fine-tuning workloads,” the firm wrote.

Lumen’s road to AI profit

Lumen beefed up its AI-related revenue by adding about $500 million in new contracts in Q2. To date, it’s inked nearly $9 billion in private connectivity fabric (PCF) deals.

Not only is Lumen building long-haul fiber routes between data centers, it’s also supplying private fiber connectivity to the likes of Amazon Web Services (AWS), Google Cloud, Meta and Microsoft. To that end, the company struck a deal with Corning last year to reserve 10% of the vendor’s global fiber capacity for two years.

Johnson noted Lumen has already deployed 1,200 miles of fiber on 16 routes and that it’s currently constructing 119 in-line amplifier (ILA) sites, which amplify optical signals for long-distance fiber networks. Construction is expected to wrap up in the next couple of years.

At the same time, Lumen remains mindful of its financial situation. The company reported a net loss of $915 million in Q2, most of which resulted from accounting charges tied to the sale of Lumen’s consumer fiber business to AT&T.

“For any new route construction, we’re working with our customers on creative deal structures to mitigate risks and manage costs,” said Johnson, while stressing the remaining PCF deals in Lumen’s pipeline “are purely upside.”

She added Lumen will continue to work on improving its balance sheet before the AT&T deal closes, which is expected to happen in the first half of 2026.

Despite beating analyst expectations on earnings per share and raising its free cash flow forecast, the company disappointed investors with revenue of $3.09 billion versus the consensus estimate of $3.11 billion, driving the stock down sharply after the earnings report.