Why Lumen Technologies Sank Today
Lumen delivered a bottom-line beat, but a big selloff across the sector took virtually all technology stocks down.
Shares of Lumen Technologies plummeted 12.9% on Thursday, as the entire AI sector, encompassing semiconductors, networking, and the infrastructure supporting AI, experienced a sharp decline. The company's mixed earnings report was but a small factor in the market's reaction. Lumen announced that revenue for the third quarter slipped by 12% to $2.72 billion, falling short of analysts' expectations, while adjusted earnings per share turned into a loss of ($0.14), up from ($0.20) a year prior.
Despite this, the adjusted figure exceeded analyst estimates. However, the disappointing outlook was exacerbated by recently elected Democratic politicians' anti-data-center and anti-AI remarks, which fueled concerns about a potential slowdown in data center development. Lumen had been grappling with a decline in its legacy business, but its strategic revenue, such as networking-as-a-service and its private connectivity fabric, rose by 10% year-over-year and now constitutes 55% of the company's revenue base.
Despite these positive trends, the company's substantial debt burden, with roughly $13.2 billion in gross debt and $11.3 billion in net debt, amounts to approximately 3.5 times its adjusted EBITDA guidance for the year, which is a significant concern. In light of the current favorable conditions across the technology sector, it might be prudent to seek a less indebted tech company to invest in during this market dip.
Written by urgent.news from Motley Fool's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
