Lumen’s CEO says we’re seeing strong adoption of NaaS services

NaaS roadmap progresses

Lumen continues to advance its NaaS program. During its Investor Day program in February, the service provider laid out a multiyear roadmap focused on innovation, adoption and revenue growth.

Among the 2,500 NaaS customers it has today, over 30% of them are repeat customers, and 20% of first-time NaaS adopters in the first quarter were new Lumen customers. The remaining NaaS first-time adopters in the first quarter were existing Lumen customers.

Johnson noted, “that more than 60% of them were expanding their footprint with Lumen NaaS, not migrating from the old services.”

Among customers where Lumen upsold services, about 25% of NaaS customers are attaching more than one service per port, mainly DDoS and Lumen Defender.

And in the third buying scenario, Multi-Cloud Gateway, which Johnson said: “it's already in-market, enabling innovation with AWS and Google.”

Alkira boosts Lumen’s NaaS vision

Lumen is complementing its growing NaaS vision through its pending $475 million acquisition of software company Alkira.

Within the NaaS arena, Lumen sees Alkira extending and enhancing our programmable network into what it deems the fastest-growing segment of the enterprise networking market, the East-West segment, establishing the control plane for cloud connectivity.

The deal merges Alkira's software control plane with Lumen's global fiber network, allowing enterprises to program and orchestrate multi-cloud, on-premises, and data center connectivity without complex hardware.

With Alkira's global footprint and cloud-native platform, Lumen said it expects to deepen its presence in cloud-to-cloud and data center interconnect services and grow its total addressable market to roughly $70 billion.

“Alkira is expected to extend and enhance our programmable network into the fastest-growing segment of the enterprise networking market, the East-West part, establishing the control plane for cloud connectivity,” Johnson said. “After close, our combined capabilities will enable us to provide comprehensive coverage of North-South and East-West connectivity, whether on-net or off-net, with game-changing innovation, including direct cloud on-ramps and Multi-Cloud Gateway, and all of this in a single programmable system.”

She added that “we'll also be able to provide digital marketplace access to a myriad of ecosystem partners, simplifying network purchase and deployment experiences.”

In addition to its agreement to acquire Alkira, Lumen has partnered with AWS to launch AWS Interconnect - the last mile. This service allows enterprises to establish fast, secure, private direct connections from on-prem to the AWS cloud. Meanwhile, Google just announced the availability of private connectivity discovery through Google Cloud Marketplace, with an upcoming preview of an API-provisioned premise-to-cloud connectivity offering.

“These two new offerings are another example of how we're innovating to help enterprise customers deliver on their AI ambitions while simultaneously allowing Lumen to capture some of the over $2 billion in annual revenue currently served by carrier-neutral facility cross-connects,” Johnson said. “And it's Lumen Multi-Cloud Gateway that makes these direct on-ramp offerings possible, enabling customers to connect any cloud and any data center in any combination over our private network rather than the public Internet.”

Following the Alkira acquisition, Lumen notes it will use the Multi-Cloud Gateway and Alkira together to turn direct cloud on-ramps into more than just access points into clouds and data centers.

“After we close the Alkira transaction, it will be the bridge between East-West and North-South traffic, giving our customers the feeling of one network, any cloud, total control globally,” Johnson said. “And the fourth and fifth buying scenarios, direct connections into SaaS providers and dynamic East-West cloud interconnects, that will be our focus post-Alkira transaction close, as we believe there's material growth potential there.”

NaaS, PCF show revenue promise

While Lumen reported business revenue declined 3.2% year-over-year to $2.44 billion, which it attributed to the continued improvement in its revenue mix in North America, it sees revenue potential in NaaS and its Private Connectivity Fabric (PCF) offerings.

North American enterprise revenue, which includes wholesale, was down only 0.8% year over year.

It saw revenue fluctuations across its three main business segments. Large Enterprise and Mid-Market declined 1 and 2% sequentially to $778 and $439 million, while Public Sector rose 10% sequentially.

Another bright spot was strategic revenue, which accounted for 51% of total business revenue in the first quarter, up from 49% in the fourth quarter, even as legacy results were slightly ahead of internal expectations.

Likewise, first-quarter digital revenue was $37 million, in line with its expectations, with signs of growth from NaaS and Private Connectivity Fabric (PCF).

NaaS security products and cloud voice services were included in its total digital revenue mix.

Chris Stansbury, CFO of Lumen, noted, “We're still early in the adoption curve of NaaS services, and the shift to consumption-based revenue will take time.”

PCF revenue was $78 million, associated with nearly $13 billion in PCF deals announced to date. Roughly $32 million of the PCF number was a delivery milestone payment anticipated in its 2026 PCF revenue projections at Investor Day. Still, the company said it won't recur in the second quarter.

“Our long-term PCF revenue projections shared at Investor Day do not include any incremental PCF deals beyond those already announced,” Stansbury said. “We remain opportunistic on additional accretive opportunities. And while PCF is a key pillar, we believe that our differentiation comes from monetizing the network through a programmable digital layer and partner ecosystem to drive durable, higher-quality digital revenue.”

From an overall financial perspective, Lumen reported total first-quarter revenue of $2.9 billion.

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