Goldman Sachs Group, Inc. looks ahead to Lumen (LUMN. US) Q4 financial report and investor day: EBITDA expected to reach $806 million, Investor Day may announce a five-year growth plan.

Goldman Sachs Group, Inc. recently released a forward-looking report on Lumen Technologies Inc.'s 2025 fourth-quarter financial report and upcoming investor day event. The firm currently maintains a "neutral" rating on Lumen and has raised its 12-month target stock price from $5 to $5.5. Core financial forecasts and recent outlook Goldman Sachs Group, Inc. predicts that Lumen's fourth-quarter adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) will reach $806 million, slightly higher than the market's general expectation of $792 million; quarterly revenue is estimated to be $30.2 billion, slightly lower than the market consensus of $30.4 billion. Based on this, the company's full-year EBITDA for 2025 is expected to reach $3.4 billion, at the upper end of the management's previous guidance of $3.2-3.4 billion, mainly attributed to the company's cost control measures and improvement in the decline of traditional business. In terms of cash flow, Goldman Sachs Group, Inc. expects Lumen's fourth-quarter free cash flow (FCF) to be -$435 million, with full-year free cash flow of $1.37 billion, in line with the company's guidance of $1.2-1.4 billion. However, the firm notes that there is downside risk to this data due to potential delays in tax refunds caused by the U.S. federal government shutdown - the company originally expected to receive $400 million in tax refunds in the fourth quarter. Additionally, considering Lumen's higher rate debt refinancing from the fourth quarter of 2025 to the first quarter of 2026, Goldman Sachs Group, Inc. has slightly lowered the company's free cash flow expectations for 2026-2027. Regarding the 2026 performance guidance, Goldman Sachs Group, Inc. points out that Lumen management expects full-year EBITDA to surpass $3.5 billion, with a contribution of $200-250 million from mass market business. Excluding the impact of the planned $5.75 billion sale of consumer fiber assets to AT&T (T.US) (net income around $4.8 billion), assuming the transaction is expected to be completed early in 2026, the company's EBITDA for 2026 will still exceed $3.2 billion. Goldman Sachs Group, Inc. predicts Lumen's free cash flow for 2026 to be $1 billion, although prepayments from the PCF business will provide some support, the high tax expenditures of $1 billion will offset savings of around $1 billion in capital expenditures. Investor day in 2026 is highly anticipated Lumen is planning to hold an investor day on February 25, 2026, which is seen as a key catalyst. Goldman Sachs Group, Inc. expects that Lumen management will disclose future five-year EBITDA profit margin, interest expenses, and capital expenditure targets, and further disclose operational data of the PCF business and Lumen Digital division, which will improve transparency on the contribution of growth initiatives and the slowdown of traditional business. If the asset sale transaction with AT&T is completed smoothly, company management may also announce a subsequent capital allocation framework, including increasing network infrastructure investments to support AI workload growth, further debt reduction to achieve target leverage ratios, and strategic mergers and acquisitions in high-growth areas such as AI security and edge computing.