Goldman Sachs looks ahead to Lumen (LUMN.US) Q4 earnings report and Investor Day: EBITDA is expected to reach US$806 million Investor Day or announce five-year growth blueprint

The Zhitong Finance App learned that Goldman Sachs recently released a forward-looking report on the financial report of the US optical fiber company Lumen Technologies Inc. (LUMN.US) for the fourth quarter of 2025 and the upcoming Investor Day event. Currently, the bank maintains Lumen's “neutral” rating and raised its 12-month target share price from $5 to $5.5.

Core financial forecasts and near-term prospects

Goldman Sachs predicts that Lumen's adjusted profit before interest, tax, depreciation and amortization (EBITDA) for the fourth quarter will reach US$806 million, slightly higher than the market's general expectation of US$792 million; quarterly revenue is expected to be US$3.02 billion, slightly lower than the market consensus of US$3.04 billion. According to this estimate, the company's EBITDA for the full year of 2025 will reach 3.4 billion US dollars, which is at the upper limit of the $32-3.4 billion guidance range previously given by management. This is mainly due to the cost control measures implemented by the company and improvements in the traditional business downturn.

In terms of cash flow, Goldman Sachs expects Lumen's fourth quarter free cash flow (FCF) of -435 million US dollars, and annual free cash flow of 1.37 billion US dollars, in line with the company's guidelines of $12-1.4 billion. However, the bank indicated that due to the shutdown of the US federal government, which may delay tax refunds, there is a downside risk — the company originally expected a $400 million tax refund in the fourth quarter. Additionally, considering that Lumen will refinance its debt at a higher interest rate between the fourth quarter of 2025 and the first quarter of 2026, Goldman Sachs slightly lowered the company's free cash flow forecast for 2026-2027.

Regarding the 2026 results guidance, Goldman Sachs stated that Lumen management expects the full year's eBITDA to exceed US$3.5 billion, including US$2-250 million in mass market business contributions. Excluding the impact of the proposed sale of consumer-grade fiber assets to AT&T (T.US) for US$5.75 billion (net income of approximately US$4.8 billion), the company's EBITDA in 2026 will still exceed US$3.2 billion on the premise that the transaction is expected to be completed in early 2026. Goldman Sachs predicts that Lumen's free cash flow in 2026 will be 1 billion US dollars. Although PCF business advance payments will provide some support, tax expenses of up to 1 billion US dollars will offset capital expenditure savings of about 1 billion US dollars.

Investor Day 2026 is in the spotlight

Lumen plans to hold an Investor Day on February 25, 2026, which is seen as a key catalyst. Goldman Sachs expects Lumen management to release eBITDA profit margins, interest expenses and capital expenditure targets for the next five years, and further disclose PCF's business and Lumen Digital division operating data, which will enhance the transparency of the company's contribution to growth initiatives and the downward trend in traditional business. If the asset sale transaction with AT&T is successfully completed, the company's management may also announce a subsequent capital allocation framework, including increasing investment in network infrastructure to support AI workload growth, further reducing debt to achieve target leverage ratios, and carrying out strategic mergers and acquisitions in high-growth fields such as AI security and edge computing.