Digital networking company Lumen Technologies exceeded Wall Street’s revenue projections for the first quarter while simultaneously announcing a $475 million cash acquisition of networking platform Alkira on Tuesday.
The purchase is designed to strengthen Lumen’s expansion into cloud-to-cloud connectivity and data center interconnection services, with the company expecting to grow its total addressable market to approximately $70 billion through Alkira’s worldwide presence and cloud-native technology.
Company officials indicated the transaction won’t significantly affect profit margins in the immediate term, though they anticipate enhanced earnings as the digital platform expands, along with improved long-term free cash flow and reduced construction expenses and risks.
“The acquisition of Alkira substantially completes the digital platform that we had to build. It accelerates it, it is capex that we do not have to invest now,” CFO Chris Stansbury told Reuters in an interview.
For the quarter ending March 31, Lumen posted revenue of $2.9 billion, surpassing the analyst consensus estimate of $2.83 billion compiled by LSEG.
“We had a very strong quarter on private connectivity fabric (PCF), because we lit up some State of California business,” Stansbury said, adding that PCF growth was in the mid-single digit and Lumen’s digital offerings were a “big piece” of it.
The company reported a quarterly adjusted loss of 47 cents per share, which was higher than the anticipated 13-cent per share loss.
Lumen increased its yearly free cash flow projection to between $1.9 billion and $2.1 billion, up from the previous estimate of $1.2 billion to $1.4 billion. This revision came after auditors determined that $729 million in cash receipts from selling its consumer fiber operations to AT&T should be categorized as operating cash flows.
Earlier this year in February, Lumen secured a contract to expand Anthropic’s fiber network throughout North America, adding to its nearly $13 billion in total PCF agreements.
