Lumen's NaaS Customer Doubling Highlights Growth but Exposes Execution Gap

What happened

Lumen Technologies announced it doubled its network-as-a-service customer base to over 2,000 businesses since Q3 2025, citing enterprise demand for AI and cloud connectivity. This growth aligns with prior disclosures of NaaS acceleration, including a 29% quarter-over-quarter increase in active customers in Q4 2025. However, SEC filings reveal persistent revenue declines across Business segments, with total operating revenue dropping from $13.1B in 2024 to $12.4B in 2025, indicating new wins aren't yet offsetting legacy erosion. The company still faces high execution risks from capex-heavy PCF builds and ongoing refinancing needs, as highlighted in its 10-K. Thus, while the NaaS milestone supports the strategic narrative, tangible financial stabilization remains unproven, reinforcing the cautious investment stance.

Implication

Lumen's doubling of NaaS customers reinforces its positioning in the enterprise AI connectivity market, which is critical for the growth thesis. However, this metric must translate into sustainable revenue increases to counter declining Business segment sales, as shown in recent financials. Investors should monitor whether this adoption accelerates the conversion of the $13B PCF backlog into billable services and helps achieve 2026 free cash flow targets of $1.2-$1.4B. High net leverage at 12.68x net debt/EBITDA and ongoing refinancing requirements keep equity value vulnerable to credit market conditions. Until quarterly results demonstrate clear progress on both top-line trends and capital structure simplification, the WAIT rating remains justified.

Thesis delta

The news does not materially shift the thesis, as NaaS growth was already anticipated and embedded in the narrative, with financial execution and refinancing risks still dominant. It could increase confidence in the bull scenario if future quarters show NaaS adoption leading to revenue acceleration, but current declines persist. Key changes would require PCF installs rising and 2026 FCF staying within $1.2-$1.4B, as specified in the DeepValue report.