How LUMN (Lumen Technologies) Makes Money in 2026: A Deep-Dive With Income Statement

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Understanding how a telecommunications company like LUMN makes money is essential for investors and anyone interested in the business of telecom services. In this post, we break down LUMN's quarterly income statement (Q4 2025) using a Sankey chart to visualize the financial flows — what comes in, where it goes, and what's left as profit.

Quick LUMN Overview

LUMN operates as a telecommunications and fiber network services provider, offering broadband, voice, and enterprise connectivity solutions primarily in the U.S. Revenue comes from consumer broadband services, business fiber solutions, and related network services. The company focuses on high-speed fiber infrastructure to support mass-market and enterprise customers amid industry shifts toward digital connectivity.

Revenue Breakdown

• Total Revenue (Q4 2025): $3.041B (-8.7% YoY)
  • Core telecom services (broadband and enterprise): Primary driver, comprising the bulk of reported revenue.
  • No detailed segment breakdowns available in the statement.
  • Growth is powered by stable demand for fiber services, though offset by competitive pressures and legacy declines leading to overall YoY contraction.

Gross Profit and Margins

• Gross Profit: $1.335B (43.9% gross margin)
  • Cost of Revenue: $4.376B (+0.0% YoY)
  • LUMN maintains robust margins due to efficient fiber network operations and scalable infrastructure, despite high cost of revenue exceeding revenue in the quarter.
• Most costs come from network maintenance, depreciation on fiber assets, and service delivery.

Operating Income and Expenses

• Operating Income: $0.428B (+177.9% YoY, 14.1% margin)
• Operating Expenses: $1.763B (+0.0% YoY)
  • R&D: Not reported — LUMN focuses less on traditional R&D, prioritizing network deployment.
  • SG&A: $0.940B (+25.5% YoY, 30.9% of revenue) — Driven by administrative overhead, sales efforts, and restructuring costs in a competitive telecom landscape.
  • LUMN continues to prioritize innovation while maintaining efficiency through cost controls in operations amid revenue challenges.

Net Income

• Pre-Tax Income: $0.509B (+0.0% YoY, 16.7% margin)
• Income Tax: Not specified (tax rate not available)
• Net Income: $2.000B (+0.0% YoY, 0.1% net margin)
• LUMN converts a moderate portion of sales into profit due to operational leverage from fiber assets and one-time adjustments, though thin net margins reflect high interest and other expenses.

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What Drives LUMN's Money Machine?

• Broadband and fiber services: 100%+ of revenue / Core driver from consumer and business connectivity.
• Network efficiency: Gross margins at 43.9% highlight scalable infrastructure despite revenue dip.
• Strategic investments: Focus on fiber expansion to counter cord-cutting trends.
• Quantum and enterprise growth areas: Emerging services like advanced networking, though not yet profitable.

Visualizing LUMN's Financial Flows

The Sankey chart below visualizes how each dollar flows from gross revenue, through costs and expenses, down to net income. This helps investors spot where value is created, what areas weigh on profits, and how efficiently the company operates.

• Most revenue flows into gross profit, with operating expenses (especially SG&A) taking the largest chunk.
• Even after significant costs, 0.1% of revenue drops to the bottom line.

Key Takeaways

• LUMN's money comes overwhelmingly from broadband and fiber services
• High gross and net margins illustrate the power of LUMN's scalable network model
• Heavy investment in SG&A for growth, balanced by efficiency in operating costs
• Ongoing growth is driven by fiber expansion and enterprise demand

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FAQ About LUMN's Income Statement

1. What is the main source of LUMN's revenue in 2025?

LUMN generates over 100% of its revenue from broadband, fiber, and enterprise telecom services.

2. How profitable is LUMN in Q4 2025?

LUMN reported net income of $2.000B in Q4 2025, with a net margin of approximately 0.1%, reflecting moderate profitability driven by strong gross margins and operating leverage.

3. What are the largest expense categories for LUMN?

The biggest expenses on LUMN's income statement are operating expenses, particularly Sales, General & Administrative (SG&A) costs. SG&A investment reached $0.940B in Q4 2025, as LUMN prioritizes sales expansion and administrative scaling.

4. Why does the cost of revenue exceed revenue?

Cost of revenue, despite generating $3.041B in revenue, resulted in a gross structure where costs hit $4.376B in Q4 2025. This is because LUMN aggressively invests in network depreciation and maintenance, believing these will drive long-term growth—even if challenging profitability today.

5. How does LUMN's effective tax rate compare to previous years?

LUMN's effective tax rate in Q4 2025 was not specified, consistent with previous years. This moderate rate is primarily due to telecom industry tax structures and deductions.