Lumen Technologies (LUMN) stock plummeted 5.16% on Wednesday in pre-market trading after the company reported mixed results for the fourth quarter of 2024 and provided a cautious outlook for 2025.

The telecommunications and technology services provider recorded positive developments in reducing its debt load and securing new sales contracts. However, these gains were overshadowed by concerns over declining revenues and profitability.

In the earnings report, Lumen highlighted the following key achievements:

• Lowered debt by $1.6 billion in 2024, with redemption notices for an additional $200 million
• Secured $8.5 billion in closed sales with major tech companies like Microsoft, AWS, Google, and Meta

Despite these efforts to strengthen its financial position and expand its customer base, Lumen faced challenges in its core business operations. Total reported revenue declined by 5.3% to $3.32 billion, impacted by divestitures, commercial agreements, and the sale of its CDN business. Adjusted EBITDA for the fourth quarter was $1.052 billion, with a 31.6% margin, representing a 40 basis point year-over-year decline. Free cash flow was negative $174 million, primarily due to the timing of cash from PCF deals.

Looking ahead, Lumen provided guidance for 2025, projecting adjusted EBITDA between $3.2 billion and $3.4 billion and free cash flow between $700 million and $900 million. However, the company acknowledged the need for further investments and cost-cutting measures, including an estimated $200 million in incremental costs related to team expansion, data center shifts, and legacy service disconnects.

While Lumen's CEO, Kathleen Johnson, expressed confidence in the company's ability to drive operational excellence, build the backbone for AI, and "cloudify" telecom, investors appeared concerned about the near-term impact on profitability and cash flow. The stock's decline reflects the market's cautious stance as Lumen navigates the transition to a more modern and efficient business model.