Financial Analysis

"Note 17 Commitments, Contingencies and Other Items We are subject to various claims, legal proceedings and other contingent liabilities, including the matters described below, which individually or in the aggregate could materially affect our financial condition, future results of operations or cash flows. We review our litigation accrual liabilities on a quarterly basis, but in accordance with applicable accounting guidelines only establish accrual liabilities when losses are deemed probable and reasonably estimable and only revise previously established accrual liabilities when warranted by changes in circumstances, in each case based on then-available information. As such, as of any given date we could have exposure to losses under proceedings as to which no liability has been accrued or as to which the accrued liability is inadequate. Subject to these limitations, as of December 31, 2025 and December 31, 2024, we had accrued $71 million and $78 million, respectively, in the aggregate for our litigation and non-income tax contingencies, which is included in Other current liabilities or Other liabilities on our consolidated balance sheets as of such dates. Although we quantify our exposure for certain matters below, we cannot at this time estimate the reasonably possible loss or range of loss, if any, in excess of our $71 million accrual as of December 31, 2025 due to the inherent uncertainties and speculative nature of contested proceedings. The establishment of an accrua …

CommitmentsAndContingenciesDisclosureTextBlock · excerpt; the full note is in the filing

"Note 7 Long-Term Debt and Credit Facilities As of December 31, 2025, substantially all of our outstanding consolidated debt had been incurred by us or one of the following three subsidiaries, each of which has borrowed funds either on a standalone basis or as part of a separate restricted group with certain of its subsidiaries: Level 3 Financing, Inc. (""Level 3 Financing""), including its parent guarantor Level 3 Parent, LLC (""Level 3 Parent""), and certain subsidiary guarantors; Qwest Corporation (""Qwest""); and Qwest Capital Funding, Inc., including its parent guarantor, Qwest Communications International Inc. Each of these borrowers or borrowing groups has entered into a credit agreement with certain financial institutions or other institutional lenders or issued senior notes. Certain of these debt instruments are described further below. The following table reflects the consolidated long-term debt of Lumen Technologies, Inc. and its subsidiaries as of the dates indicated below, including unamortized premiums (discounts) and unamortized debt issuance costs: December 31, Interest Rates (1) Maturities (1) 2025 2024 (Dollars in millions) Senior Secured Debt: (2) Lumen Technologies, Inc. Series A Revolving Credit Facility SOFR + 4.00% 2028 $ Series B Revolving Credit Facility SOFR + 6.00% 2028 Term Loan A (3) SOFR + 6.00% 2028 $ 338 357 Term Loan B-1 (4) SOFR + 2.35% 2029 1,590 1,606 Term Loan B-2 (4) SOFR + 2.35% 2030 1,590 1,606 Term Loan B (5) N/A N/A 56 Superpriority n …

DebtDisclosureTextBlock · excerpt; the full note is in the filing

Note 12 Stock-Based Compensation We maintain an equity incentive program that allows our Board of Directors (through its Human Resources and Compensation Committee or a senior officer acting under delegated authority) to grant incentives to certain employees and outside directors in one or more forms, including: incentive and non-qualified stock options, stock appreciation rights, restricted stock awards, restricted stock units and market and other equity-based awards. Restricted Stock Awards and Restricted Stock Unit Awards We grant equity based restricted stock and restricted stock units that contain service only conditions for vesting (Service Awards), awards that contain both service and market conditions for vesting (Market Awards) and awards that contain both service and performance conditions for vesting (Performance Awards). The fair value of Service Awards is based upon the closing stock price on the accounting grant date and the awards generally vest over periods ranging from one to four years. The fair value of Market Awards is determined using Monte-Carlo simulations and the awards vest over periods up to three years. The number of shares ultimately earned for Market Awards is typically based upon our total shareholder return as compared to the return of selected peer companies and can range between 0% and 200% of the target number of shares for the award. The fair value of Performance Awards is based upon the closing stock price on the accounting grant date; howe …

DisclosureOfCompensationRelatedCostsShareBasedPaymentsTextBlock · excerpt; the full note is in the filing

Note 14 Fair Value of Financial Instruments Our financial instruments consist of cash, cash equivalents, restricted cash, accounts receivable, accounts payable, long-term debt (excluding finance lease and other obligations), certain equity investments and certain indemnification obligations. Due primarily to their short-term nature, the carrying amounts of our cash, cash equivalents, restricted cash, accounts receivable and accounts payable approximate their fair values. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between independent and knowledgeable parties who are willing and able to transact for an asset or liability at the measurement date. We use valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs when determining fair value and then we rank the estimated values based on the reliability of the inputs using the below-described fair value hierarchy. We determined the fair values of our long-term debt, including the current portion, based on quoted market prices where available or, if not available, based on inputs other than quoted market prices in active markets that are either directly or indirectly observable such as discounted future cash flows using current market interest rates. The three input levels in the hierarchy of fair value measurements are defined by the FASB generally as follows: Input Level Description of Input L …

FairValueDisclosuresTextBlock · excerpt; the full note is in the filing

"Note 3 Goodwill and Intangible Assets Goodwill and Intangible assets, net on our consolidated balance sheets consisted of the following: December 31, 2025 2024 (Dollars in millions) Goodwill (1)(2) $ 1,964 Indefinite-lived intangible assets $ 9 Other intangible assets subject to amortization: Customer relationships, less accumulated amortization of $4,945 and $4,504 2,602 3,196 Capitalized software, less accumulated amortization of $3,940 and $4,067 (3) 1,803 1,529 Patents and other, less accumulated amortization of $100 and $86 (3) 58 72 Total other intangible assets, net $ 4,463 4,806 ______________________________________________________________________ (1) We recorded cumulative non-cash, non-tax-deductible goodwill impairment charges of $628 million during the year ended December 31, 2025. (2) As of December 31, 2025, this amount excluded goodwill classified as held for sale of approximately $1.3 billion. See Note 2 Divestitures . (3) Certain capitalized software with a gross carrying value of $161 million and $352 million and trade names with a gross carrying value of $211 million and $153 million became fully amortized during 2024 and 2023, respectively, and were retired during the first quarter of 2025 and 2024, respectively. As of December 31, 2025 and December 31, 2024, the gross carrying amount of goodwill and intangible assets was $13.4 billion and $15.4 billion, respectively, excluding the amounts classified as held for sale. We are required to assess our goodwi …

GoodwillAndIntangibleAssetsDisclosureTextBlock · excerpt; the full note is in the filing

"Note 15 Income Taxes The components of the income tax (benefit) expense are as follows: Year Ended December 31, 2025 (Dollars in millions) Loss before income taxes Domestic $ (2,698) Foreign (18) Total pre-tax book loss $ (2,716) Income tax (benefit) expense Current tax (benefit) expense Federal $ (309) State and Local 32 Foreign 5 Total current tax benefit (272) Deferred tax (benefit) expenses Federal (546) State and Local (160) Foreign 1 Total deferred tax benefit (705) Income tax (benefit) expense Federal (855) State and Local (128) Foreign 6 Total income tax benefit $ (977) Years Ended December 31, 2024 2023 (Dollars in millions) Income tax (benefit) expense Federal Current $ 87 7 Deferred (251) (2) State Current (29) (6) Deferred 15 55 Foreign Current 2 Deferred 1 7 Total income tax benefit $ (175) 61 Income tax (benefit) expense was allocated as follows: Years Ended December 31, 2025 2024 2023 (Dollars in millions) Income tax (benefit) expense in the consolidated statements of operations: Attributable to income $ (977) (175) 61 Stockholders' (deficit) equity: Tax effect of the change in accumulated other comprehensive loss 36 26 (21) The following is a reconciliation from the statutory federal income tax rate to our effective income tax rate: Year Ended December 31, 2025 (Dollars in millions) (Percentage of pre-tax loss) Statutory federal income tax rate $ (573) 21.0 % Federal Effect of cross-border tax laws Other (2) 0.1 % Tax Credits Research and development credits …

IncomeTaxDisclosureTextBlock · excerpt; the full note is in the filing

"Note 5 Leases We primarily lease various office facilities, colocation facilities, equipment and transmission capacity to or from third parties. Leases with an initial term of 12 months or less are not recorded on our consolidated balance sheets; we recognize lease expense for these leases on a straight-line basis over the lease term. We determine if an arrangement is a lease at inception and whether that lease meets the classification criteria of a finance or operating lease at the commencement date. Lease-related assets, or right-of-use assets, are recognized at the lease commencement date at amounts equal to the respective lease liabilities. Lease-related liabilities are recognized at the present value of the remaining contractual fixed lease payments, discounted using our incremental borrowing rates. As part of the present value calculation for the lease liabilities, we use an incremental borrowing rate as the rates implicit in the leases are not readily determinable. The incremental borrowing rates used for lease accounting are based on our unsecured rates, adjusted to approximate the rates at which we could borrow on a collateralized basis over a term similar to the recognized lease term. We apply the incremental borrowing rates to lease components using a portfolio approach based upon the length of the lease term and the reporting entity in which the lease resides. Operating lease expense is recognized on a straight-line basis over the lease term, while variable lease …

LesseeOperatingLeasesTextBlock · excerpt; the full note is in the filing

"Recently Adopted Accounting Pronouncements Segments On January 1, 2024, we adopted Accounting Standards Update (""ASU"") 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. This ASU is intended to improve reportable segment disclosure requirements primarily through enhanced disclosures about significant segment expenses. The ASU does not change how a public entity identifies its operating segments, aggregates them or applies quantitative thresholds to determine reportable segments. Refer to Note 16 Segment Information for more information. Investments On January 1, 2024, we adopted ASU 2023-02, Investments-Equity Method and Joint Ventures (Topic 323): Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method."" This ASU allows reporting entities to elect to account for qualifying tax equity investments using the proportional amortization method, regardless of the program giving rise to the related income tax credits. The adoption of this ASU did not have any impact on our consolidated financial statements. On January 1, 2024, we adopted ASU 2022-03, Fair Value Measurement (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions."" This ASU clarifies that a contractual restriction on the sales of an investment in an equity security is not considered part of the unit of account of the equity security and, therefore, is not considered in measuring its fair value. Th …

NewAccountingPronouncementsPolicyPolicyTextBlock · excerpt; the full note is in the filing

"Note 11 Employee Benefits Pension, Post-Retirement, and Other Post-Employment Benefits We sponsor various defined benefit pension plans (qualified and non-qualified) which, in the aggregate, cover a substantial portion of our employees. Pension benefits for participants of the Lumen Combined Pension Plan (""Combined Pension Plan"") who are represented by a collective bargaining agreement are based on negotiated schedules. All other participants' pension benefits are based on each individual participant's years of service and compensation. We also maintain non-qualified pension plans for certain current and former highly compensated employees. We maintain post-retirement benefit plans that provide health care and life insurance benefits for certain eligible retirees. We also provide other post-employment benefits for certain eligible former employees. We use a December 31 measurement date for all our plans. Pension Benefits United States funding laws require a company with a pension shortfall to fund the annual cost of benefits earned in addition to a seven-year amortization of the shortfall. Our funding policy for our Combined Pension Plan is to make contributions with the objective of accumulating ample assets to pay all qualified pension benefits when due under the terms of the plan. The accounting unfunded status of the Combined Pension Plan was $559 million and $615 million as of December 31, 2025 and 2024, respectively. We made no voluntary cash contributions to the tru …

PensionAndOtherPostretirementBenefitsDisclosureTextBlock · excerpt; the full note is in the filing

Note 10 Severance Periodically, we reduce our workforce and accrue liabilities for the related severance costs. These workforce reductions result primarily from the progression or completion of our post-acquisition integration plans, increased competitive pressures, cost reduction initiatives, process improvements through automation and reduced workloads due to reduced demand for certain services. During April 2024, we further reduced our workforce by approximately 6% as a part of our efforts to change our workforce composition to reflect our ongoing transformation and cost reduction opportunities that align with our shapeshifting and focus on our strategic priorities. As a result of this plan, we incurred severance and related costs of approximately $103 million during the second quarter of 2024. We have not incurred, and do not expect to incur, any material impairment or exit costs related to either of these plans. We report severance liabilities within accrued expenses and other liabilities - salaries and benefits in our consolidated balance sheets and report severance expenses in selling, general and administrative expenses in our consolidated statements of operations. As described in Note 16 Segment Information, we do not allocate these severance expenses to our segments. Changes in our accrued liabilities for severance expenses were as follows: Years Ended December 31, 2025 2024 (Dollars in millions) Balance at beginning of period $ 12 18 Accrued to expense 64 130 Payme …

RestructuringAndRelatedActivitiesDisclosureTextBlock · excerpt; the full note is in the filing

"Note 4 Revenue Recognition Product and Service Categories Business As of December 31, 2025, we categorize our products and services revenue among the following categories for the Business segment: Grow : Includes existing and emerging products and services in which we are significantly investing, including our dark fiber and conduit, Edge Cloud, IP, managed security, software-defined wide area networks, Unified Communications and Collaboration, and wavelengths services; Nurture : Includes our more mature offerings, including ethernet, and VPN data networks services; Harvest : Includes our legacy services managed for cash flow, including Time Division Multiplexing voice, and private line services; and Other : Includes equipment sales, managed and professional service solutions and other services. Mass Markets As of December 31, 2025, we categorize our products and services revenue among the following categories for the Mass Markets segment: Fiber Broadband : Under which we provide high speed broadband services to residential and small business customers utilizing our fiber-based network infrastructure; Other Broadband : Under which we provide primarily lower speed broadband services to residential and small business customers utilizing our copper-based network infrastructure; and Voice and Other : Under which we derive revenues from (i) providing local and long-distance voice services, professional services, and other ancillary services, and (ii) federal broadband and state s …

RevenueFromContractWithCustomerTextBlock · excerpt; the full note is in the filing

"Note 16 Segment Information Our business is managed based on customer-facing sales channels to align with how we support our customers. Our chief operating decision maker (""CODM""), who is our CEO, makes decisions and assesses the performance of the Company reviewing two segments: Business and Mass Markets. Our reportable segments have not been aggregated. Under our Business segment, we provide products and services to meet the needs of our enterprise and wholesale customers under five distinct sales channels Large Enterprise, Mid-Market Enterprise, Public Sector, Wholesale and International and Other. For Business segment revenue, we report the following product categories: Grow, Nurture, Harvest and Other, in each case through the sales channels outlined above. The Business segment included the results of our EMEA business prior to the sale on November 1, 2023. Under our Mass Markets segment, we provide products and services to residential and small business customers. We report the following product categories: Fiber Broadband, Other Broadband, and Voice and Other. See detailed descriptions of these product and service categories in Note 4 Revenue Recognition. As described in more detail below, our segments are managed based on the direct costs of providing services to their customers and directly associated headcount and non-headcount operating expenses. Shared costs are managed separately and included in ""other unallocated expense"" in the table included below under t …

SegmentReportingDisclosureTextBlock · excerpt; the full note is in the filing

"Note 11Commitments, Contingencies and Other Items We are subject to various claims, legal proceedings, and other contingent liabilities, including the matters described below, which individually or in the aggregate could materially affect our financial condition, future results of operations or cash flows. We review our litigation accrual liabilities on a quarterly basis, but in accordance with applicable accounting guidelines only establish accrual liabilities when losses are deemed probable and reasonably estimable and only revise previously established accrual liabilities when warranted by changes in circumstances, in each case based on then-available information. As such, as of any given date we could have exposure to losses under proceedings as to which no liability has been accrued or as to which the accrued liability is inadequate. Subject to these limitations, as of June 30, 2026 and December 31, 2025, we had accrued $52 million and $71 million, respectively, in the aggregate for our litigation and non-income tax contingencies, which is included in Other current liabilities or Other liabilities on our consolidated balance sheets as of such dates. Although we quantify our exposure for certain matters below, we cannot at this time estimate the reasonably possible loss or range of loss, if any, in excess of our $52 million accrual as of June 30, 2026 due to the inherent uncertainties and speculative nature of contested proceedings. The establishment of an accrual does n …

CommitmentsAndContingenciesDisclosureTextBlock · excerpt; the full note is in the filing

"Note 5Long-Term Debt and Credit Facilities As of June 30, 2026, substantially all of our outstanding consolidated debt had been incurred by us or one of the following three subsidiaries, each of which has borrowed funds either on a standalone basis or as part of a separate restricted group with certain of its subsidiaries: Level 3 Financing, Inc. (""Level 3 Financing""), including its parent guarantor Level 3 Parent, LLC (""Level 3 Parent"") and certain subsidiary guarantors; Qwest Corporation (""Qwest""); and Qwest Capital Funding, Inc., including its parent guarantor, Qwest Communications International Inc. Each of these borrowers or borrowing groups has entered into a credit agreement with certain financial institutions or other institutional lenders or issued senior notes. Certain of these debt instruments are described further below or in Note 7Long-Term Debt and Credit Facilities to the consolidated financial statements included in Item 8 of Part II of our Annual Report on Form 10-K for the year ended December 31, 2025. The following table reflects the consolidated long-term debt of Lumen Technologies, Inc. and its subsidiaries as of the dates indicated below, including unamortized premiums (discounts) and unamortized debt issuance costs: Interest Rates (1) Maturities (1) June 30, 2026 December 31, 2025 (Dollars in millions) Senior Secured Debt: (2) Lumen Technologies, Inc. Revolving Credit Facility SOFR + 2.75% 2029 Term Loan A (3) N/A N/A 338 Term Loan B-1 (4) N/A N/ …

DebtDisclosureTextBlock · excerpt; the full note is in the filing

Note 9Fair Value of Financial Instruments Our financial instruments consist of cash, cash equivalents, restricted cash, accounts receivable, accounts payable, long-term debt (excluding finance lease and other obligations), certain equity investments, and certain indemnification obligations. Due primarily to their short-term nature, the carrying amounts of our cash, cash equivalents, restricted cash, accounts receivable, and accounts payable approximate their fair values. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between independent and knowledgeable parties who are willing and able to transact for an asset or liability at the measurement date. We use valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs when determining fair value and then we rank the estimated values based on the reliability of the inputs using the below-described fair value hierarchy. We determined the fair values of our long-term debt, including the current portion, based on quoted market prices where available or, if not available, based on inputs other than quoted market prices in active markets that are either directly or indirectly observable such as discounted future cash flows using current market interest rates. The three input levels in the hierarchy of fair value measurements are defined by the FASB generally as follows: Input Level Description of Input L …

FairValueDisclosuresTextBlock · excerpt; the full note is in the filing

"Recent Accounting Pronouncements In December 2025, the Financial Accounting Standards Board (""FASB"") issued Accounting Standards Update (""ASU"") 2025-12 Codification Improvements. The ASU represents changes to the Codification that clarify, correct errors, or make minor improvements. The amendments make the Codification easier to understand and apply. The amendments in ASU 2025-12 are effective for fiscal years beginning after December 15, 2026, including interim periods within those fiscal years, with early adoption permitted. Except for the amendments to Topic 260, ""Earnings Per Share"" this ASU can be applied either prospectively or retrospectively with transition method elected on an issue-by-issue basis. The Company is currently evaluating ASU 2025-12 to determine the impact it may have on our consolidated financial statements. In December 2025, the FASB issued ASU 2025-11, ""Interim Reporting (Topic 270): Narrow-Scope Improvements."" This ASU clarifies that the interim reporting requirements in Topic 270 apply to all entities that issue interim financial statements prepared in accordance with U.S. GAAP and consolidates such requirements within Topic 270. The amendments provide a comprehensive list within Topic 270 of required interim disclosures, establish a principle requiring disclosure of events or changes occurring after the end of the most recent annual reporting period that have a material impact on interim results and clarifies the form and content requireme …

NewAccountingPronouncementsPolicyPolicyTextBlock · excerpt; the full note is in the filing

"Note 7Employee Benefits For detailed descriptions of the various defined benefit pension plans (qualified and non-qualified), post-retirement benefits plan, and defined contribution plan we sponsor, see Note 11Employee Benefits to the consolidated financial statements in Part II, Item 8 of our Annual Report on Form 10-K for the year ended December 31, 2025. Net periodic benefit expense for the Lumen Combined Pension Plan (the ""Combined Pension Plan"" or the ""Plan"") includes the following components: Combined Pension Plan Three Months Ended June 30, Six Months Ended June 30, 2026 2025 2026 2025 (Dollars in millions) Service cost $ 5 6 9 11 Interest cost 51 60 102 120 Expected return on plan assets (64) (64) (128) (127) Settlement charges 9 Curtailment loss 5 Recognition of prior service credit (1) (1) Recognition of actuarial loss 28 37 56 72 Net periodic pension expense $ 20 38 53 75 Net periodic benefit expense for our post-retirement benefit plan includes the following components: Post-Retirement Benefit Plan Three Months Ended June 30, Six Months Ended June 30, 2026 2025 2026 2025 (Dollars in millions) Service cost $ 1 1 2 Interest cost 18 22 37 44 Recognition of prior service credit (1) (1) (2) (3) Recognition of actuarial gain (8) (7) (15) (13) Curtailment gain (10) Net periodic post-retirement benefit expense $ 9 15 11 30 Service costs for our pension and post-retirement benefit plan are included in the Cost of services and products (exclusive of depreciation and am …

PensionAndOtherPostretirementBenefitsDisclosureTextBlock · excerpt; the full note is in the filing

Note 6Severance Periodically, we reduce our workforce and accrue liabilities for the related severance costs. These workforce reductions result primarily from the progression or completion of our post-acquisition integration plans, increased competitive pressures, cost reduction initiatives, process improvements through automation, and reduced workloads due to reduced demand for certain services. Changes in our accrued liabilities for severance expenses were as follows: Severance (Dollars in millions) Balance as of December 31, 2025 $ 34 Accrued to expense 51 Payments, net (45) Balance as of June 30, 2026 $ 40 …

RestructuringAndRelatedActivitiesDisclosureTextBlock · excerpt; the full note is in the filing

"Note 4Revenue Recognition We categorize revenue from our operations within the products and services listed below based on the customers we serve, as follows: (i) revenue from Business customers is primarily reflected in the 'Strategic' and 'Legacy' categories, and (ii) revenue from Mass Markets customers is primarily reflected in 'Fiber Broadband', 'Other Broadband', and 'Voice and Other' categories. Product and Service Categories Strategic: Includes existing and emerging products and services in which we are significantly investing, including offerings that leverage modernized infrastructure, higher-capacity technologies, and scalable or on-demand delivery models, such as dark fiber and conduit, IP, higher speed wavelength services, colocation facilities, certain Ethernet and VPN data network services, and digital services, such as Edge Fabric and Network-as-a-Service (""NaaS""); Legacy: Includes our services that are generally provided over legacy platforms or lower-capacity configurations, such as traditional Ethernet, IP, and VPN data network services, delivered in locations or with technologies not currently suited for scalable or on-demand models, lower-speed wavelength services, voice and private line services, as well as managed and professional services and equipment sales; Fiber Broadband: Under which we provide high speed broadband services to residential and small business customers utilizing our fiber-based network infrastructure, representing the fiber-based b …

RevenueFromContractWithCustomerTextBlock · excerpt; the full note is in the filing

"Note 10Segment Information Historically, we disclosed two reportable segments, Business and Mass Markets, based on customer-facing sales channels, reflecting how the business was managed and how we supported our customers. In connection with the sale of the Mass Markets Fiber-to-the-Home business in 11 states to AT&T, which closed on February 2, 2026, our Chief Executive Officer, who serves as the Chief Operating Decision Maker (""CODM""), changed how the business is managed beginning in January 2026. The CODM now makes operating decisions and assesses performance and profitability on a consolidated basis and does not regularly review discrete financial information for individual business components. As a result, we manage our business, make operating decisions, and evaluate financial performance based on one operating segment, which also represents our single reportable segment. The CODM primarily uses net income (loss), as well as a secondary non-GAAP financial measure of adjusted earnings before interest, taxes, depreciation and amortization (""EBITDA""), to assess financial performance and allocate resources. These financial measures are used by the CODM to make key operating decisions. Although our revenue is disaggregated by product and sales channel, which aligns with the customer markets in which the revenues are generated, we do not allocate significant operating expenses, assets, or debt to those sales channels. See Note 4Revenue Recognition for additional info …

SegmentReportingDisclosureTextBlock · excerpt; the full note is in the filing