Lumen Technologies Bets on Digital Networks as AI Inference Strains Connectivity

Lumen Technologies NYSE: LUMN is focusing its strategy on digitizing enterprise networking, expanding Network-as-a-Service offerings and managing its legacy operations for cash generation, President and CFO Chris Stansbury said at the Goldman Sachs Communacopia + Technology Conference. Stansbury said more than half of Lumen’s revenue now comes from what the company classifies as strategic revenue, which includes connectivity products such as fiber waves, IP and security services. That portion of the business grew 14% in the most recent quarter, he said, while the company’s legacy revenue stream is intended to generate cash as Lumen shifts toward newer digital services. Get Lumen Technologies alerts: Sign Up Alkira acquisition supports cloud connectivity strategy AT&T's Earnings Glow-Up Can't Hide These Red Flags Stansbury said Lumen’s acquisition of Alkira, combined with its existing network footprint and direct cloud access capabilities, is intended to enable customers to move data “from anywhere to anywhere on demand” across networks and cloud platforms. He described the offering as an “east-west capability” that can support data movement between cloud environments. As enterprises increase use of AI inference, Stansbury said network connectivity is becoming a constraint. It's Not Too Late to Buy These 2 Red-Hot AI Infrastructure Stocks “As enterprise moves to inference, the network is the bottleneck,” Stansbury said. “It is not energy, it is not GPUs, it is the network.” The company sees its digitally provisioned wavelength offerings as particularly relevant for neocloud providers and enterprises that need connectivity more quickly than traditional network deployments can provide. Lumen reported that revenue from on-demand wavelengths grew 11% in the prior quarter, while sales grew 35%. Stansbury said customers can self-provision a Network-as-a-Service circuit rather than waiting for traditional field deployment processes. He added that large language model training has driven demand for Private Connectivity Fabric, or PCF, among hyperscale cloud companies, while inference activity is broadening demand toward neoclouds and enterprise customers. PCF investments use existing conduit On PCF, Stansbury emphasized that Lumen is not pursuing new routes requiring new conduit, which he said offer low single-digit returns on investment. Instead, the company is using existing conduit and routes, including infrastructure installed decades ago. Lumen estimates it will have 58 million miles of fiber in the ground by 2030, according to Stansbury. He said the company can now pull more than 1,700 fiber strands through 2-inch PVC conduit that was originally designed to carry roughly a dozen strands. PCF provides three benefits, Stansbury said: It monetizes previously dormant...