Lumen Technologies, Inc.

Results of Operations

In this section, we discuss our overall results of operations and highlight special items that are not included in our segment results. In "Segment Results" we review the performance of our two reporting segments in more detail.

The following table summarizes the results of our consolidated operations for the three and six months ended June 30, 2025 and June 30, 2024:

Our over-arching strategic goal is to digitally connect people, data, and applications quickly, securely, and effortlessly. As the trusted network for AI, Lumen uses the scale of our network to help companies realize AI's full potential. To attain these goals, we strive to, among other things:

•deliver best in class infrastructure to meet network, transport, data, and computing needs;

•optimize and innovate the way locations, data centers, and clouds connect;

•limit, detect, and mitigate network and data security vulnerabilities;

•expand our product offerings and strengthen our digital self-service ordering platforms;

•create a more adaptive and integrated network;

•continue to monetize our network-related assets;

•expand our network capacity through our AI backbone initiative;

•execute on our Quantum Fiber buildout plan;

•manage our non-core business for cash flow; and

•strengthen our financial position and performance through our modernization and simplification initiatives, resulting in lower costs and debt reduction.

Revenue

The following table summarizes our consolidated operating revenue recorded under each of our two segments and in our five revenue sales channels within the Business segment described above:

Consolidated operating revenue decreased by $176 million and $284 million for the three and six months ended June 30, 2025, as compared to the three and six months ended June 30, 2024. See our segment results below for information on the drivers of our revenue.

Operating Expenses

The following table summarizes our operating expenses for the three and six months ended June 30, 2025 and 2024:

nm Percentages greater than 200% and comparisons between positive and negative values or to/from zero values are considered not meaningful.

Cost of Services and Products (exclusive of depreciation and amortization)

Cost of services and products (exclusive of depreciation and amortization) decreased by $29 million and increased by $6 million for the three and six months ended June 30, 2025, as compared to the three and six months ended June 30, 2024. For the three months ended June 30, 2025 compared to the three months ended June 30, 2024, the decrease was primarily due to a decrease of $48 million related to equipment and maintenance expense, partially offset by an increase of $26 million in employee-related expense. For the six months ended June 30, 2025 compared to the six months ended June 30, 2024, the increase was primarily due to an increase of $68 million in network expenses, partially offset by a decrease of $54 million related to equipment and maintenance expense and a decrease of $13 million in employee-related expense from lower headcount.

Selling, General and Administrative

Selling, general and administrative expenses increased by $13 million and decreased by $135 million for the three and six months ended June 30, 2025, as compared to the three and six months ended June 30, 2024. For the three months ended June 30, 2025 compared to the three months ended June 30, 2024, the increase was primarily due to (i) an increase of $49 million due to fees related to the relinquishment of our funding received under the FCC's Rural Digital Opportunity Fund (“RDOF”), (ii) an increase of $16 million related to a loss on the sale of operating assets in the second quarter of 2025, and (iii) an increase of $9 million related to property and other taxes. These increases were partially offset by a decrease of $51 million in employee-related expenses from lower headcount. For the six months ended June 30, 2025 compared to the six months ended June 30, 2024, the decrease was primarily due to a decline of (i) $140 million in legal and other professional fees, mainly driven by our debt transaction in the first quarter of 2024 with no comparably-sized transaction in the first quarter of 2025, and (ii) $83 million in employee-related expenses from lower headcount. These decreases were partially offset by (i) an increase of $65 million related to a loss on the sale of operating assets in the first half of 2025 and recognition in the first quarter of 2024 of a deferred gain on the sale of select CDN contracts and (ii) an increase of $49 million due to fees related to the relinquishment of our funding received under the FCC's RDOF.

Net (Gain) Loss on Sale of Business

For a discussion of the net (gain) loss on sale of business that we recognized for the three and six months ended June 30, 2024, see Note 2—Divestitures of the Latin American, ILEC and EMEA Businesses to our consolidated financial statements in Item 8 of Part II of our Annual Report Form 10-K for the year ended December 31, 2024.

Depreciation and Amortization

The following table details our depreciation and amortization expense:

Depreciation expense decreased by $26 million and $41 million for the three and six months ended June 30, 2025, respectively, as compared to the three and six months ended June 30, 2024. These decreases were primarily due to (i) a decrease of $7 million and $19 million, respectively, from accelerated depreciation of CDN assets in 2024, (ii) a decrease of $22 million for the three and six months ended June 30, 2025, respectively, as compared to the three and six months ended June 30, 2024, due to the discontinuation during the second quarter of 2025 of the depreciation of the tangible assets of our Mass Markets fiber-to-the-home business held for sale, and (iii) a decrease of $8 million for the six months ended June 30, 2025, as compared to the six months ended June 30, 2024, due to decommissioned assets. These decreases were partially offset by an increase of $6 million and $9 million, respectively, associated with the net increase in depreciable assets.

Amortization expense decreased by $29 million and $49 million for the three and six months ended June 30, 2025, as compared to the three and six months ended June 30, 2024. This was due to a $9 million and $22 million decrease, respectively, associated with net reduction in amortizable assets and a $19 million and $26 million decrease, respectively, associated with the accelerated amortization of software assets.

Further analysis of our segment operating expenses by segment is provided below in "Segment Results."

Goodwill Impairment

We are required to perform impairment tests related to our goodwill annually, which we perform as of October 31, or sooner if an indicator of impairment occurs. The classification of our disposal group as held for sale related to the divestiture of our Mass Markets fiber-to-the-home business as described in Note 2—Planned Divestiture of the Mass Markets Fiber-to-the-Home Business was considered an event or change in circumstance which required an assessment of our goodwill for impairment as of April 30, 2025.

We report under two segments: Business and Mass Markets. As of April 30, 2025, we had three reporting units for goodwill impairment testing, which are (i) Mass Markets, (ii) North America Business ("NA Business") and (iii) Asia Pacific ("APAC") region.

When we performed our impairment tests during the second quarter of 2025, we concluded that the estimated fair value of our Mass Markets reporting unit was less than our carrying value of equity as of our testing date. As a result, we recorded non-cash, non-tax-deductible goodwill impairment charges aggregating to $628 million in the second quarter of 2025.

See Note 3—Goodwill, Customer Relationships and Other Intangible Assets to our consolidated financial statements in Item 1 of Part I of this report for further details.

Other Consolidated Results

The following table summarizes our total other (expense) income, net and income tax (benefit) expense:

nm Percentages greater than 200% and comparisons between positive and negative values or to/from zero values are considered not meaningful.

Interest Expense

Interest expense decreased by $35 million and increased by $21 million for the three and six months ended June 30, 2025, as compared to the three and six months ended June 30, 2024. The decrease for the three months ended June 30, 2025, as compared to the three months ended June 30, 2024, was due to the decrease in the average interest rate from 7.74% to 7.31% and a decrease of approximately $1 billion in average outstanding long-term debt for the period. The increase for the six months ended June 30, 2025, as compared to the six months ended June 30, 2024, was due to the increase in the average interest rate from 6.99% to 7.49% for the period. This increase was partially offset by a decrease of approximately $1 billion in average outstanding long-term debt for the period.

Net (Loss) Gain on Early Retirement of Debt

For a discussion of certain transactions that resulted in the net loss on debt we recognized for the three and six months ended June 30, 2025, see Note 5—Long-Term Debt and Credit Facilities. See Note 7—Long-Term Debt and Credit Facilities to our consolidated financial statements in Item 8 of Part II of our Annual Report Form 10-K for the year ended December 31, 2024 for discussion of the 2024 transactions that resulted in the net gain on debt recognized for the three and six months ended June 30, 2024.

Other Income, Net

Other income, net reflects certain items not directly related to our core operations, including (i) components of net periodic pension and post-retirement benefit costs, (ii) foreign currency gains and losses, (iii) our share of income from partnerships we do not control, (iv) interest income from cash and cash equivalents, (v) gains and losses from non-operating asset dispositions, (vi) income from transition and separation services provided by us to the purchasers of our divested businesses, and (vii) other non-core items.

Income Tax Expense

For the three and six months ended June 30, 2025, our effective income tax rate was 20.4% and 19.9%, respectively, both of which include a $42 million unfavorable impact from our goodwill impairment. For the three and six months ended June 30, 2024, our effective income tax rate was (19.5)% and 86.9%, respectively, including an unfavorable impact of interest on our uncertain tax position reserves.