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One of the biggest winners of the AI boom this year has been Lumen Technologies, the communications tech company recently securing five billion dollars in new business. It will provide fiber optic connectivity to some of the world's largest companies, including Microsoft. The shares up one sixty four percent this year, outpacing and video down fifteen percent. Twelve percent now today,
but very volatile. We're going to talk more about what's happening under the surface with Kate Johnson, Luman Technology CEO, with US now, and it's fascinating. You have investors really scraping the world here trying to figure out the scope here of the AI opportunity. From where you sit, what do you tell investors that are a little bit worried about how fast we're building into this fiber boom, this data center boom that is made to support that AI boom.
We're seeing a once in a generation rise and demand for terrestrial internet services. That's why we're expanding our internet or our network to build the backbone for the AI economy. We think it's ten twenty years build out for the critical infrastructure required to support this massive spike in data workloads.
Why do you think we see the volatility in your shares Kate, Because you've got a market cap of about five billion dollars, that's pretty much exactly you know, the business that you've got on your books. It doesn't make sense to me that you would see you know, ten, fifteen, twenty percent jumps and drops here because it's not a business that's unreliable. You lock in contracts for equipment that you then deliver.
Yeah, it's a good question.
So, first of all, super complex market right now, lots of volatility in the markets. But to your question, we're not at all so price that there are skeptics. What we're doing at Lumen is really fundamentally different than anyone else in the sector. We've got a world class network, fiber network that covers the nation, unique routes, diversity, you know, up to date fiber, which is differentiating. But what's more
is we're not taking cash and paying a dividend. We're taking our cash and building a digital platform to drive the best customer experience in networking right to make it secure, effortless and quick.
I think what a lot of people don't understand is how to build a digital platform. There are significant infrastructure needs to do, so you, for example, just a couple of weeks ago, announced in agreement with Corning to increase that fiber optic cable capability here. How much when you think about capex, how much do you have to invest for that physical footprint?
How do you gave people.
A sense of just how much needs to be on the ground.
We've been taking care of this network for decades. That's why we're so well positioned to capitalize on this moment, and we're continuing to do that with these partnerships. I think when we got the five billion dollars of deals coming in, we were anointed as the trusted network for AI and the reason is because we've cared for that network for a long time, and that's the physical component.
I think what's really differentiating is this digital platform that we're building on top of it, which enables enterprises to consume these services in a fundamentally different way. And I think what we all learn in the digital era is that the customer experience is the product. And when you think about telcos and sort of the legacy customer experience, it hasn't been great. That's why we're so well positioned to win in the space.
What about your future revenue prospects here? It was really interesting. Not only has your stock been volatile, so haves your bonds and that can be pretty rare for many companies, but certainly not that rare for companies that are kind of on the cutting edge of this new technology. Credit Sites has recently said that this new business is five billion dollars that we've been talking about, could solve a lot of liquidity needs for allumen, but that investor's debt.
Investors should be skeptical until revenue grows at a faster pace. With revenue not expected to grow until twenty twenty seven, how do you outline your revenue trajectory from here?
Can it grow faster? Look, there's three steps. The first is free cash flow stability.
We're in the middle of a very significant turnaround and these deals have given us the cash that we need to self fund our transformation, which is amazing. It's a breakthrough, and by the way, we're at the very tip of this. This is the first step. We've got a whole lot more business on the hill that we're going after, which will continue to improve the story. But when it comes to free cash flow stability, we're there.
We are there. The next step is using that cash to do a couple of things. Number one, continuing to.
Care for and build out the world's best fiber network. And the second thing, obviously, is to continue to invest in this digital platform and pull out cost of the legacy business to drive more and more efficiency. We announced on earnings last week that we were going to drive out more than a billion dollars in cost by the end of twenty twenty seven.
So the story just keeps getting better.
Free cash flow first, EVA dostability second, then revenue growth.
You talk about the legacy telcos and I, you know, lived through the dot com bubble and saw how much we were paying to put fiber in the ground then compared to how much it was worth after the pop. Do you take any lessons from the experience of those early kind of Internet pioneers as you attempt to, you know, build something on this new revolutionary technology.
Yeah, it's all about penetration of the existing assets to deliver the return that was originally intended. And that's what we're seeing from a growth in these data workloads, is that we can actually drive the penetration to get great returns on the network, and we're super excited about that.
You know, it's interesting you have worked at major companies Microsoft, Ge Oracle, and you kind of joined Lumen right before a time where there was kind of an economic slowdown, if you will, in the fiber industry. What have you learned from all of that? I mean, when you think about the concerns that are out there about maybe a soft or even a hard landing, how does this AI boom sustain itself through any potential slowdown?
So we're talking about building critical infrastructure for decades to come. And I came to Lumen to help drive a turnaround to take advantage of this once in a generation opportunity. I didn't come to tidy up the legacy telco business.
Those customers they deserve more. And that's what we're doing, is we're building the.
Future, the trusted network for AI so we can enable all of these customers that frankly the Internet doesn't serve today and move them to this new platform to allow them to thrive in the AI economy. That's why I'm here, That's what's happening. We're super excited by this momentum. That we're seeing already, and we think it really rides out any momentary volatility or any questions about the health of the economy today or six months from now or twelve months from now.
This is a multi decade story that we're writing.
Ok, there are a subset of people out there who believe AI is the technology of the future. There's a smaller subset that also believe that crypto is maybe even equally as transformative of the Internet. They believe that AI as it booms, that crypto could be more of a native, native let's say, currency of the Internet. Do you believe in the potential of crypto as well? And how does dovetail with the needs of AI.
So, look, when I'm looking at things from the growth of our business perspective, and AI drives massive spikes in data workloads required, which drives massive spike in data center.
Growth, which drives a need for connectivity.
Crypto driving the same increase in demand for data falls right into that storyline, and that's what we're interested in. So building out these networks to connect data centers for the largest companies in the world, hyperscalers, social platforms, cloud companies, that's what we're in the process of doing, and it actually doesn't matter what kind.
Of data's running across them.
It's about data volume and connectivity across the globe.
Kate, we thank you so very much for joining us. That is Kate Johnson of Luman Technologies, of course, a company a lot of people have their eyes on right now.