ルーメン・テクノロジーズ（LUMN）2026年第3四半期決算説明会：戦略的売上高が10%増

要点

• 2026年第3四半期の売上高は27億2,000万ドルとなり、特別項目を除く調整後EBITDAは7億1,500万ドルに達しました。
• 戦略的売上高は前年同期比10%増の12億8,000万ドルとなり、ビジネス総売上高の55%を占め、前年同期の48%から上昇しました。
• デジタル売上高は前年同期比86.7%増の5,600万ドルに達し、NaaSおよびAlkiraが寄与しました。Alkiraを除外しても、経営陣によるとデジタル売上高は健全な2桁成長を達成しました。
• 戦略的受注高は前年同期比で30%増加し、Strategic Wavesの売上は前四半期比で22%増加しました。Lumenはプライベート・コネクティビティ・ファブリック（PCF）関連の契約を新たに7億ドル締結し、PCF関連の累計受注額は135億ドルを突破しました。
• Lumenは調整後EBITDA、設備投資額、フリーキャッシュフローの通期見通しを据え置きました。経営陣は引き続き、2028年におけるビジネス総売上高の増収転換を見込んでいます。
• 同社は銅線網の廃止により、営業費用や設備投資の削減効果を除いて、5年間で10億〜15億ドルの税引き前純収入が見込めると予想しています。

主要財務データ

年初来のフリーキャッシュフローには、マスマーケット向けFTTH事業売却に伴う納税額3億2,100万ドルが含まれています。これらの支払額は同社の業績予想からは除外されています。

事業および営業実績

AI関連のネットワーク需要は引き続き中核的な成長牽引役となっています。Lumenのグローバルなパブリック・インターネット・バックボーンのトラフィックは2026年初頭から20%増加しました。そのトラフィック全体に占めるAIの割合は依然としてわずかですが、AIトラフィックは4月以降で1,000%以上拡大しており、経営陣はこれを企業によるAI推論利用の拡大と結びつけています。

Lumenは2026年の目標であった500万ファイバーマイルの新設敷設を2カ月以上前倒しで達成しました。AI企業向けの新規波長敷設は過去12カ月間で5倍超に急増し、400G波長の新規敷設の3分の1以上を占めました。

NaaSの導入も拡大しました。LumenのNaaS顧客数は4,000件超となり、アクティブ顧客数は前四半期比24%増、アクティブポート数は38%増、アクティブサービス数は35%増を記録しました。現在、NaaS Internet on Demandポートの約20%が複数のサービスを運用しています。

同社は専有インターネットアクセスとNaaS Internet on Demandを統合し、Lumen Intelligent Internetを立ち上げました。この統合事業は、10億ドル超の売上高、10万件超の導入済みポート、および2万5,000件超の顧客を擁しています。Lumenは2027年からこの売上基盤をデジタルに分類し、その時点でプロフォルマ数値を公表する予定です。

経営陣はポートフォリオ転換による利益率改善のメリットを強調しました。年初来の直接利益率は、戦略的サービスで80%を超え、約65%のレガシーサービスを上回りました。同社によると、導入済みポートに追加されるデジタルサービスは、ほぼ100%の直接利益率で売上を生み出すことが可能です。

Lumenはマイクロソフトを通じた販売網の拡大も進めています。両社はAI、クラウド、ネットワークのモダナイゼーション分野の商機を共同で追求する計画であり、顧客がLumenプラットフォームを採用した際、マイクロソフトの営業担当者はAzureのノルマ達成クレジット（quota credit）を獲得できます。

経営陣による業績見通し

Lumenは2026年通期の見通しを据え置きました：

フリーキャッシュフローの予想には、特別項目およびマスマーケット向けFTTH事業売却に伴う納税額は含まれていません。

経営陣は第4四半期の調整後EBITDAの想定される増加要因として、第3四半期から第4四半期にかけての通常の季節性に加え、モダナイゼーションと業務簡素化によるコスト削減効果を挙げました。同社は引き続き、2027年に10億ドルのコスト削減を達成することに注力しています。

Lumenは、Alkiraが銅線ベースのサービスからの撤退加速を補うことで、ビジネス総売上高が2028年に増収へ転じるという見通しを維持しています。

リスクと注目点

• レガシー事業の減収：戦略分野の成長がレガシーサービスの縮小を補い続けているものの完全には相殺できず、ビジネス総売上高は前年同期比4.5%減となりました。
• 銅線網廃止の実行：設備の廃止作業は顧客の移行、規制当局の承認、回収費用、銅の市況に左右されます。経営陣は、関連する運営コストが削減される前に売上が減少する可能性があることを認めました。
• キャッシュフローの計上時期：四半期のフリーキャッシュフローは、PCFの入金、設備投資、ネットワーク区間の納入スケジュールによって変動する可能性があります。
• PCF売上の変動性：経営陣は、ネットワーク区間が納入された時点で売上が計上されるため、PCFの売上計上にはばらつきが生じると説明しました。
• 供給制約：経営陣は市場全体での機器供給問題を認めたものの、Lumenの波長展開の遅延にはつながっていないと述べました。

アナリスト質疑応答の要点

戦略的受注の売上化：経営陣は、好調な受注が第3四半期の売上高に反映され始めたと述べました。NaaSポートの初回設置には現在平均約1四半期の遅れが生じているものの、設置完了後の追加サービスははるかに迅速に開通できます。

PCF需要：Lumenはハイパースケーラーのプロジェクト時期に変更はないとし、顧客からは早期納入の要請が続いていると報告しました。PCFの受注は戦略的受注に含まれますが、経営陣は戦略的成長率を大きく左右するものではないとしています。

デジタル事業の成長：経営陣は、顧客が既存ポートにサービスを追加するにつれて、デジタル事業が成長カーブを描く初期の兆候を見せていると述べました。同社は社内の導入目標を想定より早く達成したものの、その成長ペースを正確に特定するのはまだ時期尚早だとしています。

銅の資産化：試算された10億〜15億ドルは回収された銅による税引き前純収入であり、営業費用の削減額は含まれていません。Lumenは現在、銅線ネットワークの維持に年間約2億〜3億ドルを支出しています。アイオワ州、フロリダ州、ネバダ州、ユタ州が銅線ネットワーク基盤の約4分の1を占めており、初期の財務的影響は主に2027年後半に現れる見通しです。

マージン拡大：経営陣は、戦略的サービスは主にサービス提供コストの低減とデジタルの拡張性の恩恵を受けていると述べました。オンネット拠点とオフネット拠点では最初のサービスの採算性が異なる可能性があるものの、その後にデジタルで提供されるサービスは同様の利益率を維持します。

決算説明会トランスクリプト全文

決算説明会の完全なトランスクリプト

経営陣による説明

Operator

Greetings, and welcome to Lumen Technologies Third Quarter 2026 Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded, Tuesday, November 4, 2026. Your speakers for today are Kate Johnson, CEO; and Chris Stansbury, CFO.

I would now like to turn the conference over to Michael Reinke, Senior Vice President, Investor Relations and Lumen Transformation. Please go ahead.

Michael Reinke

Good afternoon, everyone, and thank you for joining Lumen Technologies third quarter 2026 earnings call. Before we begin, I would like to remind everyone that today's presentation will include forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements reflect our current expectations, assumptions and projections about future events and financial performance. Actual results may differ materially from these expressed or implied in these forward-looking statements due to a number of risks and uncertainties. A detailed discussion of these factors can be found in our most recent filings with the Securities and Exchange Commission, including our most recent annual report on Form 10-K, our quarterly report on Form 10-Q for this quarter and any subsequent filings. We undertake no obligation to update or revise any forward-looking statements made today, whether as a result of new information, future events or otherwise. Today's presentation may also include non-GAAP financial measures. Reconciliations are provided in our posted materials.

With that, I'll turn the call over to Kate.

Kathleen Johnson

Thanks, Michael, and thank you all for joining us. I'm pleased to report that Lumen once again delivered a strong operating quarter. Our progress reflects growing demand from customers for a network that can change as fast as their business does. For decades, network planning was a forecasting exercise. And simply put, AI has broken that model. Now customers need to move data from anywhere to anywhere instantly, securely and without knowing in advance where it will need to go. As a result, demand for network capacity continues to accelerate. Now obviously, PCF or the hyperscalers private network interconnect for AI model training carries the majority of AI traffic on our network.

But what's really interesting is what we see on our global public internet backbone. Since the beginning of this year, overall traffic on this part of our network has grown 20%. While AI is still a small percentage of this overall traffic, it has grown more than 1,000% since April, an indication that enterprises are really beginning to dig into AI inferencing. And that demand is translating directly into sales growth at Lumen.

Total strategic sales in the third quarter surged 30% year-over-year. Strategic Waves sales grew 22% sequentially, and we've signed an incremental $700 million of PCF, pushing our total cumulative PCF business to over $13.5 billion. This strong performance helped us deliver 10% year-over-year growth in strategic revenue, which now comprises 55% of our total business revenue, up from 53% last quarter.

And the industry continues to take note in addition to winning 4 Mplify 2026 NaaS Excellence Awards, Frost & Sullivan named Lumen its 2026 Global NaaS Company of the Year and gave us a Frost Radar Visionary Leader Award. This commercial momentum and industry recognition is because of our 3 built-in advantages: a massive physical network with direct on-ramps into clouds and data centers, a digital platform that delivers programmable network control and a connected ecosystem of technology partners that really matter.

Our platform puts the customer in control and makes complex networking feel simple, starting with a NaaS port and adding services from there, more bandwidth, click. More security, click. The value is a single screen where you can see your entire network, choose what you need and turn it on right there.

Our acquisition of Alkira takes that experience to the next level. Need direct on-ramps to the cloud, want to move data between clouds, need a new firewall, click, click, click. Instead of managing each connection and security service separately, customers can tell the platform what they want to accomplish and let it execute on their behalf.

Our execution rigor and active investment in all 3 layers of the Lumen platform is generating measurable results. At the physical layer, we've outpaced our 2026 annual target to deploy 5 million new fiber miles funded by signed PCF deals, more than 2 months ahead of schedule. We're seeing momentum with Neocloud, including demand for our 400-gig rapid waves deploying with speed that traditional telcos simply can't match. In fact, new wavelength installs from AI companies in the last 12 months grew more than fivefold compared to the prior 12-month period and drove more than 1/3 of our new 400-gig wave installs.

At the programmable network layer, great brands like Nasdaq and Volvo continue to choose Lumen. And now with Alkira, they can expand connectivity and control across cloud and data center environments where AI and digital workloads are driving the fastest growth in network demand. An interesting customer that we landed since closing the Alkira acquisition is VUMI Group, a global private medical insurer that's leveraging the platform to deliver a global network upgrade.

VUMI turned to Lumen to replace its legacy VPN with 0 trust cloud networking while maintaining secure always-on access worldwide. The platform strengthened security without adding headcount and enabled the data center exit, simplifying a complex global network so VUMI's team could focus on growing the business, not managing the complexity.

Like VUMI, many more customers are choosing Lumen to simplify their networks, which is showing up in our NaaS adoption results. Today, the total number of NaaS customers exceeds 4,000. Active customers are up 24% quarter-over-quarter. Active ports are up 38% quarter-over-quarter, and active services are up 35% quarter-over-quarter.

One final adoption metric. 20% of NaaS Internet on Demand ports carry more than one service. These adoption results are exciting because they show that customers want to buy connectivity like they do with cloud in minutes through platforms with the flexibility to scale as their needs change. But the results also demonstrate a breakthrough that telecom has long thought, operating leverage. Each digital service added to an installed port grows revenue at a much lower incremental cost.

That's why earlier this fall, we converged Dedicated Internet Access, or DIA, and NaaS Internet on Demand, or IOD, into Lumen Intelligent Internet so that we could establish a digital connection with every single DIA customer and port and upsell more services. Customers now get connectivity that moves at the speed of business available at more than 10 million U.S. locations. Through Lumen Connect, they can add security, cloud connectivity and orchestration remotely in minutes without a truck roll, generating revenue at nearly 100% direct margin.

Lumen Intelligent Internet brings together a fast-growing IOD customer set with an established DIA base, which combined is more than $1 billion of revenue with over 100,000 installed ports and more than 25,000 customers. That scale puts this combined digital business well beyond the launch phase and makes our growth opportunity very clear, land as many new ports as possible and sell additional services to all ports existing and new. And going forward, we'll shift away from sharing NaaS adoption metrics to sharing financial performance, reporting this business within Lumen's digital revenue and growth metrics.

Before I continue to the next slide, I want to share some color on our copper decommissioning plan. Higher quality strategic revenue and portfolio simplification are funding our transformation. We made big moves in 2026, selling fiber-to-the-home, continuing to simplify our product portfolio from hundreds of products toward a core set of 25, announcing the exit of our voice business and converging our internet products into a single digital business. Winding down copper is the next meaningful step.

The old legacy playbook was to harvest revenue for cash and manage the decline. Now with a strong growing strategic revenue base, we can actively and systematically harvest cash from legacy by decommissioning it, redirecting that capital towards higher return digital growth and debt paydown.

In addition to the modernization work already underway across several states, we plan to accelerate copper decommissioning in Iowa, Florida, Nevada and Utah. Across our copper footprint, we'll continue to work with regulators and meet our obligations to serve customers while stepping back from actively marketing, promoting and incentivizing new sales of legacy copper services. Chris will share more on the economics of this important work, but here's a spoiler alert. Copper is worth more to us mined than operated.

Okay. Turning to our connected ecosystem. We're forging partnerships that accelerate innovation and expand our commercial reach. Together with our partners, we're building towards a clear vision. Intelligent networks have to do more than just move data. They should adapt in real time to energy availability, data residency requirements, physical disruptions and emerging security threats. That's what we're building at Lumen, a risk-aware network that anticipates change and give customers visibility and control. Our work with Emerald AI is just one example of that vision in action. We plan to help customers move AI workloads based on available power, network performance, latency, security and cost.

By combining their power aware technology with our programmable network, our goal is to automate those decisions and workload moves. And that vision extends beyond adapting to today's demand. Future quantum computers could break today's encryption and put important customer data at risk. As we prepare for a quantum future, we're deploying a quantum-resistant security through our Fortinet SASE solution while exploring long-distance quantum connectivity with Ohio State University.

Finally, we announced an expanded partnership with Microsoft that puts the Lumen platform into their enterprise selling motion. Microsoft and Lumen will jointly pursue opportunities where AI, cloud and network modernization come together. And importantly, the co-sell model aligns our field organizations, allowing Microsoft sellers to retire Azure sales quota when customers adopt the Lumen platform.

To wrap up, we're growing strategic services, deliberately reducing our legacy exposure and strengthening the economics of our business. At the same time, we're innovating to solve increasingly complex customer needs. The transformation is going very well, and we're building a stronger, more valuable Lumen.

Chris, over to you.

Christopher Stansbury

Thanks, Kate. I'll build on Kate's remarks by walking through how the third quarter results reflect the progress we're making against our financial goals. We're improving the mix and quality of revenue. We're delivering the adjusted EBITDA inflection we committed to, and we're maintaining discipline around cash and capital allocation while continuing to strengthen the balance sheet. This focus gives us the flexibility to continue investing in strategic and digital growth.

Before getting into some of the financial details from the quarter, I want to be crystal clear about our growth plan. Lumen's growth is built on a strategic portfolio already in the market, including digital network, AI-enabling connectivity and the programmable network and orchestration capabilities that bring it all together. Strategic growth is where we are laser-focused. That's how we run the business, and that's where we spend our time. We are not focused on preserving legacy economics and the market shouldn't be either. Put simply, we don't need to sign another large infrastructure build or hang on to legacy economics to execute our growth ambitions. That gives us tremendous confidence in our path forward and continuing to deliver what we promised.

The third quarter provided another proof point that the transformation is moving from strategy into financial results. Strategic revenue had another strong quarter, up 10% year-over-year to $1.28 billion and now represents 55% of total business revenue compared to 48% a year ago. Within strategic, digital revenue grew 86.7% year-over-year to $56 million, driven by strength in NaaS and Alkira.

To follow up on Kate's overview of Lumen Intelligent Internet, we will be shifting to the Lumen Intelligent Internet revenue base into digital starting in 2027. We'll provide a pro forma of the digital revenue at that time. The mix of our business continues to shift towards higher growth strategic and digital services. And as I'll discuss in a moment, that shift is also improving the economics of our business.

Total revenue was $2.72 billion, ahead of our expectations and in line with consensus, including a positive impact to revenue of $27 million related to support payments received under the Federal Communications Commission's Connect America Fund and the Phase II program. This $27 million does not impact adjusted EBITDA.

Total business revenue was $2.35 billion, down 4.5% year-over-year. North American enterprise revenue was $1.67 billion, down 3.1% year-over-year. And within North America enterprise, large enterprise continued to show strength, growing 3.6% year-over-year and 2% sequentially to $810 million.

Adjusted EBITDA, excluding special items, was $715 million, putting us on track for the full year inflection we previously outlined. Third quarter adjusted EBITDA was higher than originally anticipated, primarily due to lower-than-expected operating expenses.

Capital expenditures, excluding special items, were $796 million. PCF cash received was $117 million in the quarter, and free cash flow, excluding special items, was negative $76 million for the quarter and $1 billion year-to-date, including the impact of $75 million and $321 million in cash tax payments related to our mass markets fiber-to-the-home divestiture, which were excluded from our guidance. This was in line with our internal expectations, driven by timing of PCF, and we continue to expect that full year free cash flow will be within our existing guidance range.

Our return to business revenue growth is built on higher growth strategic and digital services. The current macro environment reinforces our value proposition. Customers increasingly need to reduce cost and complexity while improving resilience, speed and control. Our platform helps customers simplify their technology stack, provision and scale services more efficiently and reduce the cost and operational burden of managing fragmented networks that can only be accomplished on a truly digital programmable network.

The mix shift matters because of the economics of the future portfolio are compelling. As Kate shared earlier, so far, 20% of our IOD ports have more than one service on them, which means there's a significant scaling opportunity by adding services to installed ports with nearly 100% direct margin and creates operating leverage for Lumen.

Many incorrectly believe that legacy revenue carries higher margin than strategic. Year-to-date, the average direct margin across our strategic portfolio is over 80% compared to approximately 65% for legacy. Strategic portfolio margins are meaningfully higher than legacy. I'll say that again. Strategic portfolio margins are meaningfully higher than legacy.

Now let's touch on PCF quickly. As we said before, PCF is a disciplined way to monetize underutilized assets by leveraging conduit already in the ground, allowing us to deploy fiber efficiently and with attractive economics. We've now signed over $13.5 billion of PCF deals, including an additional $700 million. These contract structures also provide meaningful inflation protection.

The customer is billed upfront. We actively manage procurement and supply chain exposure and ongoing operations and maintenance payments include inflation escalators. The agreements already signed support our current plan and our approach to incremental deals remains disciplined. They need to create attractive returns by leveraging assets we already own and preserving capital for higher return strategic growth. For the third quarter, PCF revenue and CapEx were $66 million and $269 million, respectively.

Before turning to the outlook, I want to highlight the strength of our balance sheet and the actions we've taken to get there. More than 80% of our debt is fixed rate and only approximately $2.4 billion is tied to SOFR. A 25 basis point change in rates affects annual interest expense by approximately $6 million. Put simply, our exposure to changes in interest rates is limited and immaterial in our ability to deliver against our objectives.

We've also significantly extended our maturity profile with only approximately $1.2 billion of debt coming due over the next 5 years, providing meaningful financial flexibility. That profile reflects the proactive steps we've taken to refinance debt, simplify the capital structure and reduce annual interest expense by nearly $0.5 billion. Our balance sheet is more resilient. Our near-term maturities are manageable, and we intend to continue using proceeds and cash generation to reduce debt.

As Kate discussed, we're accelerating the decommissioning of our copper network. I'll say it again, copper is worth more mined than it is operated. For this business, revenue is the wrong metric. We estimate that the initial 4 states represent approximately 25% of our copper network. This is a methodical market-by-market transition focused on moving customers to modern services, working through regulatory requirements and removing the stranded cost of infrastructure that no longer fits the future portfolio.

The economics extend well beyond the value of the recovered copper. Decommissioning reduces the operating and capital costs required to maintain legacy infrastructure, simplify systems and facilities and allows us to redirect capital towards higher return strategic opportunities. At current copper prices, we expect to generate between $1 billion and $1.5 billion in pretax net copper proceeds across our footprint over the next 5 years. This will build over time and depending on customer migration, regulatory approvals, recovery costs and market conditions.

Put simply, legacy can generate cash in 2 ways: through the services that remain in operation and over time, through the decommissioning and monetization of the underlying assets. That cash can support debt reduction and investment in our strategic portfolio.

Now moving to guidance. We're reaffirming our full year outlook. For the full year, we expect adjusted EBITDA of $3.1 billion to $3.3 billion, capital expenditures of $3.2 billion to $3.4 billion and free cash flow, excluding special items and cash tax payments related to our mass markets fiber-to-the-home divestiture of $1.9 billion to $2.1 billion.

Each quarter, we continue to show significant progress against our strategic and financial objectives of driving operating leverage, delivering higher margins and lower capital intensity through digitally delivered services. The future of Lumen is being built on strategic growth, not on preserving the past. We have a stronger, more resilient balance sheet, limited exposure to changes in interest rates and a disciplined capital model.

PCF allows us to leverage assets we already own, while copper decommissioning provides another opportunity to remove legacy costs, generate cash and reduce debt. Together, that puts us in a stronger position to invest in the strategic opportunities ahead while continuing to strengthen the financial foundation of the company. The story of Lumen is building what comes next.

Kate, back to you.

Kathleen Johnson

Thanks, Chris. Look, before we open it up for questions, I want to thank our Lumen team. The progress we're talking about today is all because of their hard work and relentless focus on our customers. Let me leave you with 3 things. Number one, we are executing really well. We're delivering on what we said we would deliver. Adjusted EBITDA is inflecting, strategic revenue is growing, and our balance sheet gives us the flexibility to finish what we started.

Number two, we're starting to see the operating leverage. We're landing customers on the platform, and they're coming back and buying more services. That [ 1+N ] motion is really important because it strengthens the economics of every single connection.

And thirdly, and finally, we're innovating again. Intelligent Internet, Alkira and the work we're doing around riskware networking, we're solving increasingly complex problems for our customers and expanding what the Lumen platform can do. We're executing, the economics are getting better, and we're innovating for what comes next.

Operator, let's take some questions.

Operator

[Operator Instructions] Your first question comes from the line of Michael Rollins with Citi.

質疑応答

Michael Rollins

Two topics, if I could. So first, curious, as you look at the growth of strategic sales that you're achieving, how much of that is coming from new customers, new relationships and opportunities relative to the existing customers and just expanding the wallet for those that you have?

And then secondly, curious, as it relates to the PCF deals, are you seeing from those hyperscalers any change in timing for when those data centers are coming online? And if there is a delay in those data centers, does that attract an ability to get paid on the schedule that you anticipate?

Kathleen Johnson

I'll start with PCF. There's no change in timing other than continued pressure to go faster on everything we're doing. And we're pretty pleased with our performance of delivering all 5 million miles 2-plus months earlier. So that's going extremely well, and we're not seeing any slowdown.

Regarding strategic sales and the increase, so there is that sort of new entrant, the Neoclouds. I talked about the 5 times number with consumption of waves. But remember, we have business with the lion's share of companies in North America already. And so when we talk about what's new, it's really a conversion to digital. First, they try a little bit of ad, then they expand and they do more ports and now they're doing more services. So the expansion is really in this recognition that we're seeing that there's a requirement to modernize networks. And that's -- it's not just about a new connection or higher capacity, it's about new capability and wanting to buy like they do with cloud on the compute and the storage side. Next question?

Operator

Your next question comes from the line of Frank Louthan with Raymond James.

Frank Louthan

Just wanted to touch base on the long-term guide. And are you still on track to hit the positive top line growth inflection? And how is that cadence progressing? And then if you -- I apologize if I missed this, but maybe walk us through a little bit of your wavelength growth. Are you seeing any issues getting customers connected or getting hardware customers need? And how is that business progressing?

Christopher Stansbury

Frank, it's Chris. I'll take that. Look, I think even before we jump into the results, I want to highlight something that we're seeing clearly with each passing day, and that is the demand for our network is really growing in a significant way. And that's really what's underlying the results. As it relates to wave growth, it really is -- it goes back to enterprise preparing themselves for the inference phase. And the investments that we made in the network, rapid routes, a lot of our metro rings, net expansions, those are the things that allow us to light up 100 and 400 gig connectivity really rapidly. And no -- I mean, yes, there's obviously issues in the market in terms of equipment supply and whatnot, but we've been prepared for that, and that has not slowed us down.

As it relates to the total business revenue inflection, it is still 2028. That's what we're modeling even with kind of accelerating the exit from copper. The offset in there is largely driven by Alkira. But if there's one thing that I'd like to leave investors with, it's that while we're committed to that, and we'll still continue to talk to it, don't get too wrapped up in the total revenue growth. This is about a business internally that is 55% of our portfolio growing every quarter and growing double digits. There's a tremendous growth company inside of Lumen. And the decisions that we make on legacy have been and will continue to be focused on one thing, cash generation.

And so as I said in my prepared remarks, we are not focused on legacy revenue declines. Those are obviously in the total. We are not going to shift our focus to be focused on legacy revenue declines. All of our revenue focus is on driving strategic and legacy is about harvesting cash. And as soon as the market understands that and really starts to model our business that way, I think the inherent value that's inside of this company will get unlocked.

Operator

Your next question comes from the line of Greg Williams with TD Cowen.

Gregory Williams

First one is just on the digital revenue. You hit $56 million. That's up, I think, $17 million quarter-over-quarter. Chris, you mentioned eventually hitting a J-curve. Are we starting to ramp that up? Or is it too early? Were there some onetime benefits in there? And as we think about that long-term goal of $500 million plus in digital revenue.

Second question, just on the copper decommissioning. You mentioned $1 billion to $1.5 billion. Is that the sale of the copper plus the OpEx savings over the next 5 years? And can you help us with the cadence? You said you'd go market by market. Is it going to be sort of linear, front-end loaded, back-end loaded?

Christopher Stansbury

Yes. So I'll answer the copper first. The $1 billion to $1.5 billion is really the impact, the net impact pretax of the mined copper. And so that is -- that excludes kind of the OpEx savings. The CapEx that we spend today is probably in the neighborhood of $200 million to $300 million a year to keep those networks alive. And so over time, we'll see those CapEx efficiencies as well. And that's why we can generate the cash that we're generating. As it relates to the first 4 states, think of those first 4 states as being roughly 1/4 of our footprint and therefore, 1/4 of that cash generation opportunity.

On digital J-curve, I'd say it's a little early, but we're seeing signs of encouragement. When we look at individual customer data, we're starting to see, as Kate mentioned, the adoption of more services. And if you think about this in kind of a land and expand mindset, it's really 2 things. It's continuing to sign customers and drive port adoption. But then beyond that, it's about driving services. So the growth, I would say, is really more organic than that, but all the signs are super positive that we're seeing the adoption that we'd love to see. Kate, I don't know if you want to add any of that.

Kathleen Johnson

Yes. I mean we're having trouble modeling it. We beat our internal targets for the year much earlier than we expected. And so we'll keep putting that back into the model. And I think the fact that we combine DIA with IOD for that one Lumen Intelligent Internet business is going to basically allow us to show how digital is growing at scale, which I think is a nice step in the maturity curve for us.

Operator

Your next question comes from the line of Sebastiano Petti with JPMorgan.

Sebastiano Petti

Just, I guess, sticking with Greg's question there on digital. Up 86% in the quarter. What's the [ account's ] carrier growth? Just a little bit helpful. You're talking about beating your internal metrics just so we can have a baseline there. And then sticking with the copper theme as well. So the OpEx savings are not necessarily included within that $1 billion to $1.5 billion. You obviously have the cost transformation program that's going to be accelerating or run rate cost savings should be accelerating exiting 2027. Any way to contextualize or frame how much incremental OpEx savings could come out of the -- as you decommission the copper, you talked about 1/4 of your network, maybe 1/4 of the savings. Obviously, it's not going to hit in '27, but just maybe help us think about the glide path to those OpEx savings timing? Is it back-end loaded over the next 5 years?

Christopher Stansbury

Yes. So as it relates to digital, look, I want to answer your question, but I also want to be careful here about setting expectations. What we're really focused on is driving total digital sales and revenue growth. And that's what we're going to pivot to next quarter because that's, frankly, the only thing that really matters in driving our transformation. So I don't want to get in the habit of trying to break out every single piece of what's in there. What I will tell you is that if you exclude Alkira from the results for the quarter, which got included, is we saw a very healthy double-digit growth in our digital business excluding that acquisition. And so we're very pleased with that.

As it relates to copper, here's how I would think about it. Yes, there's OpEx that will come out. There's obviously revenue that will come out, too. And so you have EBITDA being a negative impact from that loss of revenue, that is offset by the EBITDA that is generated from the copper sales. So again, I would think about it as an EBITDA modeling exercise. And I don't think you need to change your models for EBITDA on legacy versus what we've already shared with you for that reason. So think about it in that regard. The revenue and OpEx impacts are offset by that copper mining.

In terms of timing, yes, the 4 states is not going to happen like overnight at the beginning of the year. There's a lot of work that has to be done. We have to work with regulators. We have to work with our customers on transferring service. We're committed to that and making this as good of an experience for everyone as possible. So we would expect that a lot of this will start to impact the back part of next year.

Sebastiano Petti

Just a quick follow-up, I mean...

Christopher Stansbury

Next question. Yes.

Sebastiano Petti

Sorry, yes, just a follow-up there. I mean just thinking about -- I mean, one of your larger peers said there's a mismatch between when the revenue comes out and when the OpEx comes out. Is that kind of -- should we think about it in that same fashion as well? Because you can take all the revenue out and shut off customers and no longer sell services in X, Y and Z market, but then before you get approval to shut down the wire center, there's a little bit of a timing mismatch. Is that still how we should think about it as well?

Christopher Stansbury

Yes. I think that's -- yes. No, I think that's a very fair characterization. I mean obviously, we don't guide those metrics every quarter, and we're not going to start to. When we give guidance for next year, we'll let you know what we think those impacts are for the year. But again, in total, in terms of where we deliver EBITDA and cash to the market, we really don't think there's any material change to what we showed at Investor Day.

Operator

Your next question comes from the line of Eric Luebchow with Wells Fargo.

Eric Luebchow

Two questions, if I could. First, I think in your EBITDA guide, Chris, it implies a pretty big step-up in the fourth quarter. So maybe you could kind of help bridge Q3 to Q4 for us would be helpful. And then secondly, kind of a higher-level question, given the results of the midterms yesterday and some questions around the potential for data center builds to potentially slow, particularly in markets like Texas. Maybe you could talk about whether that has any impact, if at all, to your PCF builds, any associated services like waves that you might sell into those data center markets, that would be helpful.

Kathleen Johnson

Okay. I'll take your second question first. It's exactly why we've pivoted away from being a legacy telco. We're no longer dependent on selling the next physical link in order to grow. right? We make money by moving data from anywhere to anywhere. We're agnostic to cloud. We're agnostic to carrier. We're monetizing network intelligence, and it's helping us grow at higher margins. So if anything, if there's a slowdown in data center builds, it forces enterprises to have to make more out of the assets that they already have, which means moving the workloads where there's available GPUs. And that's what we do. We're the platform that enables exactly that. So it's really -- there's not a dependency for growth on the number of data centers being built out this year or not. And in terms of our PCF deals, I've reiterated this several times, the only edict that we get from the hyperscalers is please go faster.

Christopher Stansbury

Yes. And as it relates to your first question on fourth quarter, if you look at our historical fourth quarter versus third quarter seasonality that will take your rate to where we need to be to deliver guidance for the year. So it's really seasonality. And I'd say the only overlay to that is, as I said in my prepared remarks, we're well on our way to delivering our modernization and simplification savings for the year and ultimately, the $1 billion for next year, and that obviously is impacting things as well as margins start to improve.

Kathleen Johnson

Next question?

Operator

Your next question comes from the line of Sam McHugh with BNP Paribas.

Samuel McHugh

Chris, I think you talked about the medium-term guidance maybe not changing as Alkira offsets that quicker exit from copper. Then you also said that copper sales might offset the copper declines happening faster. Just if you could clarify kind of what you were trying to explain on the medium-term guidance maybe? And then just on the PCF deals, I think revenue this quarter was down about 30% versus last quarter. I assume it's just lumpiness, but is there anything happening on like revenue recognition for the PCF deals? As I think you've guided to $200 million to $250 million of revenue this year, but you're already at $240 million-ish, I think. So any update there would be helpful.

Christopher Stansbury

Yes. On the PCF, that was really driven by the state of California that got recognized last quarter. So that was chunkiness. As it relates to just the underlying trend on PCF, as Kate said, we're actually ahead of schedule and revenue gets recognized, as we've discussed in the past, based off of when segments are delivered.

As it relates to the copper piece in terms of how the declining revenue associated with sales is offset by the timing of the copper sales. Again, for any given year, we view that as relatively a wash in EBITDA because, again, there's cost to mine the copper. So you have -- you're replacing a P&L that is revenue driven by sales and OpEx driven by sales to generate EBITDA with a P&L that is driven by copper-based mining sales, which has costs associated to mine and delivers a net EBITDA number. And again, in total, broadly, we don't think that has a material impact on your modeling based off what we showed at Investor Day to Sebastiano's question, yes, we obviously will incur some expense before we incur that revenue. But again, when we give guidance for next year, we'll give you all those details. But we don't expect a major impact.

Operator

[Operator Instructions] Your next question comes from the line of Batya Levi with UBS.

Batya Levi

Can you provide a bit more color on the pricing environment of these new services that you're ramping and customer willingness to pay for extra security, risk aware network, I think you mentioned. And as you sell these next-gen services, how does the pricing of the existing connectivity ramp? And then maybe a quick follow-up on the PCF. The CapEx required to build the PCF deal seems to be coming in a little bit lighter than expected. How do they compare to your expectations? Are you seeing some efficiencies as you leverage your strategic assets?

Kathleen Johnson

So I'll start and pass to Chris. On the pricing question, Batya, basically, the only way to provide value when you're just selling the physical link, like the legacy telco value proposition was discounts. And the way that, that's changing with our model is we're able to deliver more advanced services that you can't get anywhere else, and they're tied to business outcomes that really matter real-time inventory management for retail or real-time fraud detection services for financial services companies, et cetera. And that puts us in a fundamentally different spot with a different buyer and a different conversation around value.

The other thing that the cloud platform does is it drives massive simplicity and a centralization of how you operate your network. So instead of managing firewall policy locally across hundreds of different geographic points, you can do it centrally. And there's inherent value in that. There's cost savings. They need to buy less equipment. They need to have less people do it. So what we're finding is that we're able to sell these higher-margin services which is what we were describing earlier. Not only are we not rolling trucks and managing things separately, but we're able to get customers to buy more of these services because it's having a dramatic effect on their business. Long gone is the race to the bottom on commoditized fiber only. The intelligence layer that we put in there is giving us pricing power again. Chris?

Christopher Stansbury

Yes. And I think that's really the critical point, Batya. I can't tell you how many conversations I've had with CFO peers where the requirements to manage the network and the cost associated with managing the network in an AI world are becoming untenable. There's security risks, there's data sovereignty issues, and there's massive complexity. And what that means is we're not talking about the cost of the waves anymore. That is long over. We're talking about the total cost of ownership and running the network in an AI world. And what Lumen has can reduce the total cost of ownership for our enterprise customers in a way that no one else can deliver. That's the conversations that we're having today.

As it relates to PCF, look, there's ebbs and flows. I would say 2 things. Super, super pleased with the work that our teams are doing to deliver network ahead of schedule for our customers. And I would say that we are definitely within budget on the cost side. And there's puts and takes, obviously, along the way, but super pleased with where that's all netting out.

Operator

Your last question comes from the line of Nick Del Deo with MoffettNathanson.

Nicholas Del Deo

First question, maybe on the margins, right? So Chris, you highlighted the strategic versus legacy direct margins and it's 80% strategic versus 65% legacy. How much of that 15-point differential is a function of the underlying like on-net versus off-net mix difference? And how much is a function of like lower cost to serve more generally?

Christopher Stansbury

I would say that it's more driven by the lower cost to serve and the scalability. I mean I think you're touching on a very important point, and I want to be super transparent. Clearly, when we have an on-net customer taking that NaaS port and lighting up the first service, the margins are going to be better than they are if that endpoint is an off-net location. After that, every single service gets delivered at the same margin because it's delivered digitally. So as we've leveled the playing field in terms of our ability to provide customers solutions everywhere, whether it's on-net or off-net, as we drive that scalability, we really drive the operating leverage that Kate talks about. And over time, that difference in margin becomes relatively inconsequential. So it truly is about land and expand.

And what I mean by that more clearly is I think there would be CFOs who have historically sat in telecom saying, "Oh, don't do off-net, don't do off-net because it's going to hurt our margins." Given the opportunity that lies ahead, we are going as fast as we can to provide a unified networking environment for our customers across all of their locations, and we're going to drive the margin expansion through expansion of digital services.

Nicholas Del Deo

Okay. Great. That's helpful color, Chris. Can I ask one on the sales you noted as well, the strategic sales. What sort of book-to-bill cycle should we be thinking about so we can kind of get a sense as to when this hits the P&L? And just to be clear, did the strategic sales figures you cited include or exclude PCF?

Christopher Stansbury

So strategic does include PCF. And again, we've given you those numbers. And frankly, one of the reasons why I've given you those numbers is it actually doesn't have a dramatic impact on strategic growth. And because those sales as they get booked, are paid for upfront, over time, it will actually hurt growth because there's no kind of inflation adjustment on the pricing. They paid upfront, and therefore, there is no adjustments. So I think that's the big overall impact there. What was the beginning of your question? I'm sorry, I lost it.

Nicholas Del Deo

Sorry, the book-to-bill. So book-to-bill...

Christopher Stansbury

Yes.

Nicholas Del Deo

Looking this quarter, when should we start to see that flowing through the revenue line?

Christopher Stansbury

[indiscernible] well, I think we are actually starting to see it flow through the revenue line now. So sales really started to strengthen in the second quarter. And as we've moved through the year, have been at or above our expectations. So I think what you're really starting to see in the results of the third quarter is that coming to fruition. In the near term, I think we still are looking at that roughly 1 quarter on that initial NaaS port install because it's a mix of things. It's -- in some cases, as we're reporting these NaaS adoption metrics, we're able to go provide that connectivity right away. In other cases, customers aren't ready yet. They've committed to the sale. They signed a contract, but they need to do work internally before we can deliver those circuits. So I'd say on average, that quarter-ish delay is about right. Over time, once those ports are installed, again, we expect that to dramatically shorten because those services are delivered digitally. And so too early to call yet, but that's where things sit today.

Operator

There are no further questions at this time. I will now turn the call back to [ Kathleen ] for closing remarks.

Kathleen Johnson

Thank you all for your questions and the time that you took to spend with us today. Lumen is building the trusted network for AI, and we look forward to sharing more with you next quarter. See you soon.

Operator

That concludes the conference call for today. We thank you for your participation and ask that you please disconnect your line. Have a great day, everyone.