📄 What This Document Is

This is Lumen Technologies' combined 2025 Annual Report and 2026 Proxy Statement. Think of it as a "year-in-review" plus a "voter guide" for shareholders. The annual report part shares the company's story and performance, while the proxy section details the issues shareholders will vote on at the upcoming annual meeting on May 20, 2026.

👉 Why it matters: It's the company's main communication to investors, covering strategy, results, and governance all in one place.

🏢 What The Company Does

In simple terms, Lumen is a telecommunications company racing to become the backbone for artificial intelligence (AI). They operate a massive fiber optic network across North America and are transforming from a traditional phone/internet provider (a "legacy telecom") into a high-tech digital platform.

• Business Model: They sell network, cloud, and security services primarily to businesses (80% of revenue), helping them connect their data, apps, and people securely and quickly. A smaller part (20%) serves mass-market consumers.
• Core Strategy: They're building a "programmable" network that can adapt in real-time to AI workloads, which they call the "Trusted Network for AI."

💰 Financial Snapshot (2025 Results)

• Total Revenue: $12.4 billion
• Net Loss: $1.7 billion (The company is investing heavily in its transformation, impacting profitability.)
• Adjusted EBITDA: $3.4 billion (A key metric showing cash-generating ability from operations.)
• Revenue Mix: 80% Business ($9.9B), 20% Mass Markets ($2.5B).

🚀 The Big Transformation: Key Moves

2025 was a pivotal year focused on two major shifts:

1. Becoming the "AI Network"

Lumen is leveraging its vast physical fiber network as a competitive advantage. They've secured nearly $13 billion in deals (called Private Connectivity Fabric or PCF) with major tech giants (hyperscalers), AI companies, and cloud providers who need massive, fast data connections.

• Three Key Network Projects: RapidRoutes (fast long-haul connections), MetRON (modern metro networks), and data center expansions.
• Digital Platform: Their Network-as-a-Service (NaaS) platform now serves over 2,000 enterprise customers and can reach 10 million+ additional locations in the U.S.
• Connected Ecosystem: Creating a network of partners to drive joint solutions and sales.

2. Cleaning Up the Balance Sheet (Debt Reduction)

In early 2026, Lumen sold its consumer fiber business (Quantum Fiber) to AT&T for $5.75 billion.

• Impact: Used the cash (plus existing cash) to reduce debt by $4.8 billion. Total debt is now below $13 billion.
• Savings: This move, combined with earlier restructurings, is expected to cut annual interest expenses by about $500 million.
• Result: The market responded well—Lumen's total shareholder return was 324% over two years, vastly outperforming the S&P 500's 45%.

📦 Governance & Leadership Changes

The Board of Directors has significant updates:

• New Chairman: General Kevin P. Chilton (retired U.S. Air Force four-star general) is taking over as Chairman, succeeding T. Michael Glenn.
• Board Refreshment: The Board is actively changing to match the new strategy. There have been 5 new directors since 2022, with an average board tenure dropping from 7.5 to 4 years.
• New Nominee: Michael Collins (former COO of Bain & Company) is up for election.
• Retirements: Directors T. Michael Glenn and Hal Stanley Jones are retiring.

🗳️ Key Shareholder Votes (Items 1-7)

Shareholders will decide on these important items:

• ITEM 1: Elect 9 Directors: The board slate, including new nominee Michael Collins. The Board recommends FOR.
• ITEM 2: Ratify KPMG as Auditors: Standard annual vote. The Board recommends FOR.
• ITEMS 3A & 3B: Remove Supermajority Voting: This would make it easier for shareholders to pass measures, aligning with a 2025 shareholder proposal that passed. The Board recommends FOR.
• ITEM 4: Tweak "Related Person" Definition: A technical change to the company's rules. The Board recommends FOR.
• ITEM 5: Increase the Equity Incentive Plan: Add 45.6 million more shares for employee stock awards to attract and retain talent. The Board recommends FOR.
• ITEM 6: "Say-on-Pay" Advisory Vote: Approve executive compensation. Highlights that 93% of the CEO's target pay is "at risk" (based on performance). The Board recommends FOR.
• ITEM 7: Shareholder Proposal on "Poison Pills": A request to let shareholders vote on any future poison pill (a defense against hostile takeovers). The Board recommends AGAINST, preferring board discretion.

⚖️ Strengths & Risks (Big Picture)

👍 Strengths:

• Massive, strategically valuable physical fiber network with proximity to most businesses.
• $13B in big-tech AI deals proving the network's value.
• Successful debt reduction improving financial flexibility.
• New leadership and refreshed board aligned with digital transformation.

⚠️ Risks:

• Revenue is still under pressure as they move away from old, declining services. The path to revenue growth isn't immediate.
• Significant net losses continue as the company invests heavily.
• Execution risk on the ambitious strategic pivot to become an AI platform.
• Industry competition remains fierce.

🧠 The Analogy

Lumen is like a highway company transitioning from collecting tolls on old, congested roads to building a brand-new, automated superhighway exclusively for Formula 1 race cars (AI workloads). They're selling off the old local roads (consumer fiber) to fund the new project, and they've already signed major contracts with the racing teams (hyperscalers). The challenge is managing the construction while keeping traffic flowing on the old roads during the transition.

🧩 Final Takeaway

Lumen is mid-transformation, betting its future on becoming the essential network for AI. While financially stronger after a major debt reduction and landing huge strategic deals, the company is still navigating operational losses and a decline in legacy revenue. Shareholders are being asked to approve governance changes that simplify decision-making and to endorse a compensation plan tied to this risky, high-stakes pivot.