This Old Telecom Stock Just Found A New AI Angle

Author

Noah Zelvis
December 20, 2025

For years, this was the kind of stock investors only talked about when complaining about shrinking revenues and too much debt.

Lately, the conversation has changed. Faster data movement, private networks, and AI workloads are turning an old telecom asset into something the market is willing to reprice.

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What Just Happened

Lumen Technologies (NYSE: LUMN) has quietly put together a strong year, with the stock up roughly 35% year to date after spending most of the last decade on the wrong side of the chart.

The catalyst is not a sudden love for legacy telecom. It is a growing belief that Lumen’s network can play a useful role in the AI build-out.

The company says it has now signed more than $10B in Private Connectivity Fabric deals, up about $1B since the second quarter.

That matters because PCF is not a vague concept.

It is a product designed to move massive amounts of data securely between data centers, clouds, and enterprise locations without the congestion and latency of shared public networks.

On top of that, Lumen has leaned into Network-as-a-Service, pushing connectivity toward an on-demand, software-like model.

Management also reiterated plans to take $1B of costs out of the business on a run-rate basis by 2027, with a meaningful chunk already visible.

The market reaction has been noisy.

The stock has ripped, pulled back, and ripped again, with big daily moves driven by AI headlines, analyst notes, and the occasional TV personality pouring cold water on the trade.

Underneath the volatility, though, the core question is simple. Is this a real transformation, or just a better-marketed version of the same old telecom story.

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The Strategy In Plain English

Lumen owns a massive global fiber network that was built for a different era.

For years, that network served shrinking legacy services and price-competitive enterprise contracts. The new strategy is to reframe that asset for AI.

Instead of selling basic connectivity, Lumen is pitching private, high-capacity, low-latency links that help enterprises and cloud providers move data between AI workloads, clouds, and data centers.

Think less internet pipe and more private express lane.

Private Connectivity Fabric is the centerpiece. It is designed for customers that care about speed, security, and reliability more than price per megabit.

On top of that, Network-as-a-Service aims to make those connections easier to buy, scale, and manage, reducing friction and improving visibility.

The goal is to turn a lumpy, declining revenue base into something stickier, more recurring, and more defensible, while cutting enough costs to keep the lights on during the transition.

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Why The Stock Has Been So Jumpier Than The Business

If the story sounds reasonable, the chart still looks wild for a reason.

First, expectations moved quickly.

AI exposure is one of the most crowded trades in the market, and Lumen went from forgotten to interesting in a short span. That alone invites volatility.

Second, the balance sheet never stops mattering.

Lumen carries heavy debt relative to its market cap, which means investors constantly recalibrate how much optimism they are willing to price in.

Third, sentiment is fragile. A bullish analyst note or deal headline can push the stock up fast.

A cautionary comment or macro wobble can knock it down just as quickly. This is not a sleepy utility stock anymore.

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The Good Stuff You Can Actually Point To

Real contracts, not just buzzwords
More than $10B in signed PCF deals suggests customers are committing capital, not just kicking tires. That is the single most important proof point in the story.

Clear cost discipline
The plan to remove $1B in costs by 2027 gives the transformation a fighting chance. Without that, even good growth would struggle to show up in cash flow.

Positioned where AI creates friction
As AI workloads sprawl across clouds and regions, secure, high-capacity connectivity becomes more valuable. Lumen is not competing with Nvidia. It is serving a different layer of the stack.

Optionality if execution improves
At roughly 0.6x sales, the stock does not need perfection to work. Even modest revenue stabilization combined with cost cuts can move the valuation needle.

The Rub You Should Respect

  • Debt is still the elephant in the room
    Lumen’s leverage limits flexibility and magnifies mistakes. Any stumble in execution or macro shock puts pressure on the equity fast.

  • Revenue is still declining overall
    New AI-driven services are growing, but legacy lines continue to shrink. The race is about whether the new can outgrow the old before patience runs out.

  • Deal timing risk is real
    Large enterprise and infrastructure deals are unpredictable quarter to quarter. That can make results look messy even when the longer-term picture is improving.

  • Sentiment can flip quickly
    This stock has seen dozens of 5%+ moves in the past year. That is not an accident. It reflects a market still deciding what this company is worth.

What This Sets Up Over The Next 3–4 Quarters

The next year is about conversion and credibility.

You want to see PCF deals turn into recognized revenue at a steady clip. You want NaaS adoption to keep expanding beyond early adopters.

You want cost savings to show up consistently in margins and cash flow. And you want the debt story to feel less like a ticking clock and more like a manageable constraint.

If those boxes get checked, the stock does not need to rerate aggressively to justify current levels. If they do not, the market will be unforgiving.

What I’m Watching

  1. PCF revenue conversion versus just deal signings

  2. Progress on cost reductions quarter by quarter

  3. Free cash flow relative to EBITDA

  4. Any balance-sheet moves that extend runway

  5. Volatility tied to AI sentiment rather than company-specific missteps

How I’d Frame A Position

This is not a widows-and-orphans stock. It is a speculative turnaround with real assets and real risks.

Small starter exposure makes sense only if you are comfortable with sharp swings.

Adds should come on proof of revenue conversion and cash improvement, not just another AI headline.

Trimming into spikes is reasonable if sentiment runs ahead of fundamentals again.

The Bottom Line

Lumen is trying to turn a legacy network into an AI-era asset, and for the first time in years, there are tangible signs the plan might work.

Signed deals, cost discipline, and a clearer strategy have pulled the stock out of the bargain bin.

The catch is that debt and declining legacy revenue leave little room for error. This is a story stock that still has to earn its happy ending.

If execution holds, the upside is real. If not, the volatility will remind investors why turnarounds are never as easy as the slide deck makes them look.

That's our coverage for today; thanks for reading! Reply to this email with feedback or any tech stocks you want me to check out.

Best Regards,
—Noah Zelvis
Tech Stock Insider