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Item 7. Management’s Discussion and Analysis

2026-02-20 compared with 2025-02-20 · 608 added, 475 removed, 112 unchanged (91% of the section changed)

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

All references to "Notes" in this Item 7 of Part II refer to the Notes to Consolidated Financial Statements included in Item 8 of Part II of this report.

Certain statements in this report constitute forward-looking statements.

See "Special Note Regarding Forward-Looking Statements" immediately prior to Item 1 of Part I of this report for factors relating to these statements and "Risk Factors" in Item 1A of Part I of this report for a discussion of certain risk factors applicable to our business, financial condition, results of operations, liquidity or prospects.

We are a networking company with the goal of connecting people, data, and applications quickly, securely and effortlessly.

We are unleashing the world's digital potential by providing a broad array of integrated products and services to our domestic and global Business customers and our domestic Mass Markets customers.

We operate one of the world's most interconnected communications networks.

Our platform empowers our customers to swiftly adjust digital programs to meet immediate demands, create efficiencies, accelerate market access and reduce costs, which allows our customers to rapidly evolve their IT programs to address dynamic changes.

With approximately 163,000 fiber on-net buildings and 340,000 route miles of fiber optic cable globally, we are among the largest providers of communications services to domestic and global enterprise customers.

Our long-haul network throughout North America and Asia Pacific connects to metropolitan fiber networks that we operate.

Divestitures of the Latin American, ILEC and EMEA Businesses

On August 1, 2022, affiliates of Level 3 Parent, LLC, an indirect wholly-owned subsidiary of Lumen Technologies, Inc., sold Lumen’s Latin American business for pre-tax cash proceeds of approximately $2.7 billion.

On October 3, 2022, we and certain of our affiliates sold the portion of our incumbent local exchange carrier ("ILEC") business conducted primarily within 20 Midwestern and Southeastern states.

In exchange, we received $7.5 billion of consideration, which was reduced by approximately $0.4 billion of closing adjustments and partially paid through the purchaser's assumption of approximately $1.5 billion of our long-term consolidated indebtedness, resulting in pre-tax cash proceeds of approximately $5.6 billion.

We retained the remainder of this business, which is conducted in 17 states, primarily in the Western United States.

On November 1, 2023, we and certain of our affiliates sold Lumen's operations in Europe, the Middle East and Africa ("EMEA") to Colt Technology Services Group Limited, a portfolio company of Fidelity Investments, for pre-tax cash proceeds of $1.7 billion after certain closing adjustments and transaction costs.

This consideration is further subject to certain indemnities set forth in the Purchase Agreement, as amended and supplemented to date.

For more information, see (i) Note 2—Divestitures of the Latin American, ILEC and EMEA Businesses to our consolidated financial statements in Item 8 of Part II of this report and (ii) the risk factors included in Item 1A of Part I of this report.

Macroeconomic Changes

Over the past few years macroeconomic changes have impacted us and our customers in several ways.

We believe macroeconomic changes over the past few years have resulted in (i) increases in certain revenue streams and decreases in others, (ii) operational challenges resulting from inflation and shortages of certain components and other supplies that we use in our business, (iii) delays in our cost transformation initiatives and (iv) delayed decision-making by certain of our customers.

None of these effects, individually or in the aggregate, have to date materially impacted our financial performance or financial position.

Industry developments over the past few years have increased fiber construction demand from customers.

The resulting increase in construction labor rates increased the cost of enabling units to be capable of receiving our Quantum Fiber broadband services.

We believe these factors also occasionally contributed to a delay in attaining our Quantum Fiber buildout targets.

Continued business uncertainty, supply constraints or inflationary pressures could materially impact our financial results in a variety of ways, including by increasing our expenses, decreasing our revenues, further delaying our network expansion plans or otherwise interfering with our ability to deliver products and services.

These above-mentioned macroeconomic factors, coupled with dis-synergies resulting from our 2022 and 2023 divestitures, changes in customer preferences and negotiations with our creditors through the end of the first quarter of 2024, placed additional pressures on our financial performance and our market capitalization.

These developments contributed to us recognizing a total of nearly $14.0 billion in goodwill impairment charges in 2022 and 2023.

Some of these pressures continue to impact us.

To the extent these pressures continue, we could experience additional deterioration in our projected cash flows or market capitalization, or make significant changes to the assumed discount rates or market multiples that we use to determine the fair value of our reporting units.

Any of these could result in additional future impairments of our approximately $2.0 billion of remaining goodwill.

For further information relating to these matters, see (i) “—Trends Impacting Our Operations” and (ii) Item 1A of this report.

Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) provides an overview of our financial performance, liquidity, and the business environment in which we operate.

This discussion is intended to help readers understand our results and key factors influencing our operations.

The MD&A should be read together with our audited consolidated financial statements and accompanying notes included in Item 8.

All references to “Notes” in this section refer to the Notes to Consolidated Financial Statements in Item 8.

This section includes forward-looking statements that involve risks and uncertainties.

Actual results may differ materially from those expressed or implied.

For a discussion of these risks, see “Special Note Regarding Forward-Looking Statements” immediately prior to Item 1 and “Risk Factors” in Item 1A.

The MD&A generally discusses results for the years ended December 31, 2025 and 2024, including year-over-year comparisons between these periods.

For discussions of 2023 results and comparisons between 2024 and 2023 that are not in this document, refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Item 7 of Part II of our Annual Report on Form 10-K for the year ended December 31, 2024.

We reclassified certain prior period amounts to conform to the current period presentation, including the recategorization of our Business revenue by product category and sales channel in our segment reporting for 2024 and 2023.

We are a leading digital networking services company, empowering enterprise businesses to fuel growth in a multi-cloud, AI-first marketplace by connecting people, data, and applications quickly, securely, and effortlessly.

We operate in a rapidly evolving landscape with growing demand for secure, high-speed connectivity.

Our strategy focuses on growing and transforming our network and business to deliver next-generation solutions that meet these needs and build the backbone of the AI economy.

Reporting Segments

Our reporting segments are currently organized by customer focus, as follows:

Our reporting segments are currently organized by customer focus.

• Business segment :

Under our Business segment, we provide our products and services under the following five sales channels:

◦ Large Enterprise:

Under our large enterprise sales channel, we provide our products and services to large enterprise customers and carriers in North America.

◦ Mid-Market Enterprise:

Under our mid-market enterprise sales channel, we provide our products and services directly to medium-sized enterprises in North America, as well as through our indirect channel partners.

◦ Public Sector:

Under our public sector sales channel, we provide our products and services to the public sector, including the U.S.

Federal government, state and local governments and research and education institutions.

Under our wholesale sales channel, we provide our products and services to a wide range of other communication companies providing wireline, wireless, cable, voice and data center services.

◦ International and Other:

Under our international and other sales channel, we provide (i) various products and services to multinational and global enterprise customers and carriers and (ii) services under the limited number of our remaining content delivery network ("CDN") contracts.

Serves enterprise and wholesale customers through five distinct sales channels:

Large Enterprise, Mid-Market Enterprise, Public Sector, Wholesale, and International and Other.

Revenue is reported under four product categories:

Grow, Nurture, Harvest, and Other.

• Mass Markets segment :

Under our Mass Markets segment, we provide products and services to domestic residential and small business customers.

At December 31, 2024, we served 2.5 million broadband subscribers under our Mass Markets segment.

See Note 17—Segment Information to our consolidated financial statements in Item 8 of Part II of this report for additional information.

We categorize our Business segment revenue among the following products and services categories:

• Grow , which includes existing and emerging products and services in which we are significantly investing, including our dark fiber and conduit, Edge Cloud, IP, managed security, software-defined wide area networks ("SD WAN"), Unified Communications and Collaboration ("UC&C") and wavelengths services;

• Nurture , which includes our more mature offerings, including ethernet and VPN data networks services;

• Harvest , which includes our legacy services managed for cash flow, including Time Division Multiplexing voice, and private line services;

• Other , which includes equipment sales, managed and professional service solutions and certain other services.

We categorize our Mass Markets products and services revenue among the following categories:

• Fiber Broadband , under which we provide high speed broadband services to residential and small business customers utilizing our fiber-based network infrastructure;

• Other Broadband , under which we provide primarily lower speed broadband services to residential and small business customers utilizing our copper-based network infrastructure;

• Voice and Other, under which we derive revenues from (i) providing local and long-distance voice services, professional services, and other ancillary services, and (ii) federal broadband and state support programs.

Serves residential and small business customers.

Revenue is reported under three product categories:

Fiber Broadband, Other Broadband, and Voice and Other.

From time to time, we may change the categorization of our products and services.

For additional information see Note 16 — Segment Information and Note 4 — Revenue Recognition in Item 8.

As of December 31, 2025, we served 2.4 million broadband subscribers under our Mass Markets segment.

Our methodology for counting broadband subscribers may be different than the methodologies used by other companies.

2026 Divestiture

On May 21, 2025, we entered into a definitive agreement to sell our Mass Markets Fiber-to-the-Home business in the Territory to AT&T (the "Mass Markets Fiber-to-the-Home divestiture").

On February 2, 2026, we completed the Mass Markets Fiber-to-the-Home divestiture in exchange for pre-tax cash proceeds of $5.75 billion, subject to post-closing adjustments.

In connection with the sale, we have entered into a transition services agreement under which we will provide to AT&T various support services and certain long-term agreements under which we and AT&T will provide to each other various network and other commercial services.

Current Business Environment and Macroeconomic Factors

The macroeconomic environment in which we operate remains dynamic and continues to affect our business.

Key factors that have impacted us and our customers include:

• Revenue mix :

Shifts in technology and economic conditions have driven us to continuously review our strategy and as such, we expect to see continued reduction in legacy voice, broadband, and other legacy services, while fueling growth in our strategic products.

• Inflationary pressures and build costs :

Rising costs for labor, materials, and energy have increased operating expenses and capital expenditures, particularly to support our continued PCF buildout and other network transformations.

• Supply constraints :

Shortages of critical components and other materials have slowed certain network expansion efforts.

• Customer behavior :

Certain customers have delayed purchasing decisions, which has occasionally impacted sales cycles.

To date, we do not believe these factors have materially impacted our financial performance or position.

However, ongoing economic and geopolitical uncertainty, tariffs, inflation, and supply constraints could increase costs, reduce revenues, delay network expansion, or disrupt service delivery, which could materially impact our results.

If these conditions persist, our projected cash flows and market capitalization could decline.

For further information relating to these matters, see “— Trends Impacting Our Operations” below and "Risk Factors" in Item 1A.

We are actively managing these challenges through disciplined capital allocation, cost optimization, and strategic investments in network infrastructure.

We believe these actions position us to navigate current macroeconomic conditions while pursuing long-term growth opportunities.

We expect continued demand for high-capacity, low-latency connectivity solutions, supported by enterprise digital transformation and government broadband programs.

While macroeconomic uncertainty and competitive pressures present risks, we believe our transformation initiatives position us to deliver long-term value.

Trends Impacting Our Operations

In addition to the above-described impact of macroeconomic and industry pressures, our consolidated operations have been, and will continue to be, impacted by the following trends:

• Customers’ demand for automated products and services and competitive pressures will require that we continue to invest in new technologies and automated processes to improve our customers' experience and reduce our operating expenses.

• The increased use of multi-cloud storage, digital applications, video streaming, gaming, robotics, quantum computing, and artificial intelligence has substantially increased demand for robust, scalable network services.

We are continuing to enhance our product and service offerings and taking other steps to enable customers to have access to greater bandwidth and capacity.

• Businesses continue to adopt distributed, global operating models.

We are expanding and enhancing our fiber network, connecting more buildings to our network to generate revenue opportunities and reducing our reliance upon other carriers.

• Changes in customer preferences and in the regulatory, technological and competitive environment are (i) significantly reducing demand for our more mature service offerings, commoditizing certain offerings, or resulting in volume or rate reductions for other offerings and (ii) also creating certain opportunities for us arising out of increased demand for advanced networking services and high-speed, low-latency secure data transmissions.

• The operating margins of several of our newer, more technologically advanced services, some of which may connect to customers through other carriers, are lower than the operating margins on our traditional, on-net wireline services.

• Uncertainties regarding our financial performance and overall leverage have caused, and may continue to cause, certain customers and other third parties to avoid transacting business with us.

• Our expenses will be impacted by higher vendor costs, reduced economies of scale and other dis-synergies due to our 2022 and 2023 divestitures and any future divestitures.

• Declines in our traditional wireline services and other more mature offerings have necessitated right-sizing our cost structure to remain competitive.

• We have historically generated revenue by entering into transactions that utilize excess conduit, fiber or other assets on our network to create custom networks for our customers, including through our Private Connectivity Fabric SM solutions.

We plan to continue to actively pursue additional revenue-generating opportunities with respect to these assets through right-of-use agreements, leases or other agreements.

We may or may not consummate such transactions from time to time, and the revenue from and obligations associated with any such opportunities may be significant, either individually or in the aggregate.

The completion of any future transactions may be subject to customary conditions, and may not be executed in a timely manner, or at all.

These and other developments and trends impacting our operations are discussed elsewhere in Item 1A and this Item 7.

Our operations are shaped by evolving technology, customer expectations, and market dynamics.

Key trends that impact us, and will continue to impact us, include:

• Automation and digital innovation :

Growing demand for automated experiences and advanced technologies like AI and multi-cloud platforms requires ongoing investment in technology and infrastructure to enhance service quality and reduce costs.

• Legacy decline and margin pressure :

Legacy wireline services continue to shrink, while newer offerings often deliver lower margins — especially those involving third-party connectivity — necessitating cost optimization and pricing discipline.

• Globalization and network expansion amid cost pressures :

Distributed business models drive demand for high-capacity, low-latency networks.

We are expanding our network capacity to capture growth, while managing vendor cost increases and dis-synergies from recent divestitures.

• Monetizing network assets with execution risk :

We aim to generate revenue through custom connectivity solutions, including PCF, by leveraging excess conduit and fiber assets.

These opportunities can be significant but depend on market demand, regulatory conditions, and timely execution.

These and other developments and trends impacting our operations are discussed in "Risk Factors" in Item 1A and elsewhere throughout MD&A.

RESULTS OF OPERATIONS

In this section, we discuss our overall results of operations and highlight special items that are not included in our segment results.

In "Segment Results" we review the performance of our two reporting segments in more detail.

Results in this section include the results of our Latin American, ILEC and EMEA businesses prior to their sale on August 1, 2022, October 3, 2022 and November 1, 2023 respectively.

In this section, we discuss our overall results of operations and highlight special items that are not included in "SEGMENT RESULTS", which covers the performance of our two reporting segments in more detail.

Operating Revenue

The following table summarizes our consolidated operating revenue recorded under each of our two segments and in our five revenue sales channels within the Business segment described above:

The following table summarizes our consolidated operating revenue by segment and sales channels within the Business segment as described in Note 4 — Revenue Recognition in Item 8:

Years Ended December 31, 2025 vs 2024 % Change

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Total operating revenue $ 12,402 13,108 14,557 (5) % (10) %

Our consolidated operating revenue decreased by $1.4 billion for the year ended December 31, 2024 as compared to the year ended December 31, 2023, $547 million of which was due to the sale of the EMEA business and select CDN contracts in the fourth quarter of 2023.

Our consolidated revenue decreased by $2.9 billion for the year ended December 31, 2023 compared to the year ended December 31, 2022, $2.1 billion of which was attributable to the sale of both our Latin American and ILEC businesses in the second half of 2022, and the sale of our EMEA business in the fourth quarter of 2023.

See our segment results below for additional information.

Operating revenue decreased $706 million in 2025 compared to 2024.

See our segment results below for information on the drivers of revenue.

Operating revenue decreased $1.4 billion in 2024 compared to 2023, primarily due to $547 million from the sale of the EMEA business and the sale of select CDN contracts in the fourth quarter of 2023.

Operating Expenses

The following table summarizes our operating expenses for the years ended December 31, 2024 and 2023.

For information regarding expenses for the year ended December 31, 2022, see "Management's Discussion and Analysis of Financial Condition and Results of Operations" in Item 7 of Part II of our Annual Report Form 10-K for the year ended December 31, 2023.

The following table summarizes our operating expenses;

however, these expense categories may not be comparable to those of other companies:

Years Ended December 31, % Change

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Net loss on sale of businesses

17 121 (86) %

Depreciation and amortization 2,749 2,956 (7) %

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Cost of Services and Products (exclusive of depreciation and amortization)

Cost of services and products (exclusive of depreciation and amortization) decreased by $441 million for the year ended December 31, 2024 as compared to the year ended December 31, 2023.

This decrease was primarily due to a decrease of $440 million as a result of the sale of the EMEA business in the fourth quarter of 2023 and a reduction of $147 million in employee-related expense from lower headcount in the business we retained following that sale and the 2022 sales of our Latin American business and a portion of our ILEC business.

These decreases were partially offset by an increase in facilities costs of $120 million, as well as increases of $21 million related to real estate and power expenses.

Cost of services and products (exclusive of depreciation and amortization) decreased $65 million in 2025 compared to 2024.

This was primarily as a result of:

• a decrease of $114 million in equipment and maintenance expense;

• an offsetting increase of $26 million in professional fees;

• an offsetting increase of $17 million in employee-related expenses.

Selling, General and Administrative

Selling, general and administrative expenses decreased by $226 million for the year ended December 31, 2024 as compared to the year ended December 31, 2023.

The decrease was due to (i) a decrease of approximately $80 million due to the sale of the EMEA business, (ii) a decrease of approximately $67 million attributable to our recognition of a non-recurring loss in connection with our donation of our Monroe, Louisiana campus in 2023 (iii) a decrease of $115 million in employee-related expenses as a result of our 2024 workforce reductions, and (iv) a decrease of $150 million related to gains on various real estate and other asset sales during the year, including $22 million due to the recognition in the first quarter of 2024 of a deferred gain on the fourth quarter 2023 sale of select CDN contracts.

These decreases were offset by (i) an increase of $157 million in legal and other professional fees mainly driven by our first and third quarter 2024 debt transactions and (ii) an increase of $80 million attributable to an impairment loss related to the initiation of marketing our Broomfield, Colorado office buildings to locate a buyer and the classification of those buildings as held for sale.

Selling, general and administrative expenses increased $227 million in 2025 compared to 2024.

This was primarily as a result of:

• an increase of $72 million in hardware and software expenses;

• an increase of $56 million in employee-related expenses;

• an increase of $49 million in fees related to our voluntary relinquishment of FCC Rural Digital Opportunity Fund (“RDOF”) funding in the second quarter of 2025;

• an increase of $40 million related to a loss on the sale of operating assets in the first half of 2025 and recognition in the first quarter of 2024 of a deferred gain on the sale of select CDN contracts.

Net Loss on Sale of Businesses

For a discussion of the net loss on the sale of businesses that we recognized for the years ended December 31, 2024 and December 31, 2023, see Note 2—Divestitures of the Latin American, ILEC and EMEA Businesses.

For a discussion of the net loss on the sale of businesses that we recognized for 2025 and 2024, see Note 2 — Divestitures in Item 8.

Depreciation and Amortization

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Total depreciation and amortization $ 2,749 2,956 (7) %

Depreciation expense decreased by $42 million for the year ended December 31, 2024 as compared to the year ended December 31, 2023 primarily due to a decrease of $63 million relating to changes in the depreciation lives of fiber network assets and a decrease of $52 million relating to a net decline in depreciable assets.

These decreases were partially offset by (i) a $29 million increase relating to the removal of certain assets held for sale and decommissioned assets, (ii) a $19 million increase relating to changes made at the beginning of 2024 in the method of depreciation from the group method of depreciation to the straight line by individual asset method, and (iii) an increase of $18 million from accelerated depreciation of CDN assets.

Amortization expense increased by $13 million for the year ended December 31, 2024 as compared to the year ended December 31, 2023.

The increase was due to a $43 million increase associated with the accelerated amortization of software assets, mostly related to CDN contracts, and a $15 million increase associated with net increases in amortizable assets.

These increases were partially offset by (i) a $24 million decrease due to a changed method of amortization as discussed in Note 1—Background and Summary of Significant Accounting Policies "— Change in Accounting Estimates", (ii) a $12 million decrease related to changes in our CDN customer relationships, and (iii) an $11 million decrease due to certain customer relationship intangible assets becoming fully amortized in the second quarter of 2023.

Depreciation decreased $144 million in 2025 compared to 2024.

This was primarily as a result of:

• a decrease of $104 million due to the discontinuation of the depreciation of the tangible assets of our Mass Markets Fiber-to-the-Home business held for sale during the second quarter of 2025;

• a decrease of $18 million from accelerated depreciation of CDN assets in 2024;

• a decrease of $8 million due to decommissioned assets.

Amortization decreased $63 million in 2025 compared to 2024.

This was primarily as a result of:

• a decrease of $45 million from accelerated amortization of software assets in 2024;

• a decrease of $24 million associated with a net reduction in amortizable assets.

Further analysis of our segment operating expenses by segment is provided below in "Segment Results."

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We are required to perform impairment tests related to our goodwill annually, which we perform as of October 31, or sooner if an indicator of impairment occurs.

We report under two segments:

Business and Mass Markets.

As of December 31, 2024, we had three reporting units for goodwill impairment testing:

(i) Mass Markets, (ii) North America Business ("NA Business") and (iii) Asia Pacific ("APAC") region.

Prior to the divestiture of the EMEA business in November 2023, the EMEA region was also a reporting unit and was tested for impairment in the pre-classification test as of October 31, 2022 discussed elsewhere herein.

Similarly, prior to the August 2022 divestiture of our Latin American business, the Latin American ("LATAM") region was also a reporting unit.

When we performed a qualitative impairment test during the fourth quarter of 2024, we concluded it was more likely than not that the estimated fair value of each of our reporting units was greater than our carrying value of equity of each of our reporting units as of our testing date.

Therefore, we concluded no impairment existed as of our annual assessment date in the fourth quarter of 2024.

The sustained decline in our share price during the second quarter of 2023 was considered a triggering event requiring evaluation of goodwill impairment.

During the second and fourth quarters of 2023, we determined circumstances existed indicating it was more likely than not that the carrying value of one or more of our reporting units exceeded its fair value.

When we performed an impairment test, we concluded that the estimated fair value of certain of our reporting units was less than their carrying value of equity as of our testing date.

As a result, we recorded non-cash, non-tax-deductible goodwill impairment charges aggregating to $10.7 billion for the year ended December 31, 2023.

When we performed our impairment tests during the fourth quarter of 2022, we concluded that the estimated fair value of certain of our reporting units was less than our carrying value of equity as of our testing date.

As a result, we recorded non-cash, non-tax-deductible goodwill impairment charges aggregating to $3.3 billion in the fourth quarter of 2022.

For additional information about our impairment charges, see (i) “—Macroeconomic and Industry Changes” above and (ii) Note 3—Goodwill, Customer Relationships and Other Intangible Assets to our consolidated financial statements in Item 8 of Part II of this report.

The classification of our Mass Markets Fiber-to-the-Home business as held for sale, as described in Note 2 — Divestitures in Item 8, was considered an event or change in circumstance which required an assessment of our goodwill for impairment as of April 30, 2025.

As of April 30, 2025, we had three reporting units for goodwill impairment testing, which are (i) Mass Markets, (ii) North America Business ("NA Business") and (iii) Asia Pacific ("APAC") region.

When we performed our impairment tests during the second quarter of 2025, we concluded that the estimated fair value of our Mass Markets reporting unit was less than our carrying value of equity for this unit as of our testing date.

As a result, we recorded non-cash, non-tax-deductible goodwill impairment charges aggregating to $628 million in the second quarter of 2025.

For a discussion of the goodwill impairment we recognized in 2025, see Note 3 — Goodwill and Intangible Assets in Item 8.

Other Consolidated Results

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Interest expense $ (1,284) (1,372) (6) %

Net gain on early retirement of debt 348 618 (44) %

Other income (expense), net 334 (113) nm

Net (loss) gain on early retirement of debt (740) 348 nm

Other income, net 120 334 (64) %

Total other expense, net $ (1,904) (690) 176 %

Income tax (benefit) expense $ (175) 61 nm

Income tax benefit $ (977) (175) nm

_______________________________________________________________________________

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Interest Expense

Interest expense increased by $214 million for the year ended December 31, 2024 as compared to the year ended December 31, 2023.

The increase was primarily due to an increase in the average interest rate from 5.9% to 7.0%, which was partially offset by a decrease of $1.3 billion in our average outstanding long-term debt.

Net Gain on Early Retirement of Debt

For a discussion of the exchange offers that resulted in the net gain on debt that we recognized for the years ended December 31, 2024 and 2023, see Note 7—Long-Term Debt and Credit Facilities.

Other Income (Expense), Net

Other income (expense), net reflects certain items not directly related to our core operations, including (i) components of net periodic pension and post-retirement benefit costs, (ii) foreign currency gains and losses, (iii) our share of income from partnerships we do not control, (iv) interest income from cash and cash equivalents, (v) gains and losses from non-operating asset dispositions (see Note 19—Other Financial Information), (vi) income from transition and separation services provided by us to the purchasers of our divested businesses and (vii) other non-core items.

Interest expense decreased $88 million in 2025 compared to 2024.

This was primarily as a result of:

• a decrease in average outstanding long-term debt of $1.0 billion;

• a decrease in average interest rate from 7.50% to 7.12%.

Net (Loss) Gain on Early Retirement of Debt

For a discussion of the debt transactions that resulted in the net (loss) gain on debt that we recognized in 2025 and 2024, see Note 7 — Long-Term Debt and Credit Facilities in Item 8.

Other Income, Net

Other income, net reflects certain items not directly related to our core operations, including:

Years Ended December 31,

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Pension and post-retirement net periodic expense $ (184) (152)

Foreign currency loss (25) (10)

Foreign currency gain (loss) 14 (25)

Gain on sale of investment — 205

Loss on investment in limited partnership — (10)

Loss on investment in equity securities — (22)

Transition and separation services 156 157

Interest income 75 119

Other 40 (75)

Other income (expense), net $ 334 (113)

Other income, net $ 120 334

Income Tax Expense

For the years ended December 31, 2024 and 2023, our effective income tax rate was 76.1% and (0.6)%, respectively.

The effective tax rate for the year ended December 31, 2024 includes a $135 million favorable impact of the exclusion of cancellation of debt income under Section 108 of the Internal Revenue Code.

The effective tax rate for the year ended December 31, 2023 includes a $2.2 billion unfavorable aggregate impact of non-deductible goodwill impairments and a $137 million favorable impact as a result of utilizing available capital losses generated by the sale of our Latin American business in 2022.

For additional information, see Note 16—Income Taxes to our consolidated financial statements in Item 8 of Part II of this report and "Critical Accounting Policies and Estimates—Income Taxes."

For 2025 and 2024, our effective income tax rate was 36.0% and 76.1%, respectively.

The effective tax rate for 2025 includes a $333 million favorable impact driven by statute of limitations releases on uncertain tax positions previously disclosed and for 2024 includes a $135 million favorable impact of the exclusion of cancellation of debt income under Section 108 of the Internal Revenue Code in 2024.

For additional information, see Note 15 — Income Taxes in Item 8 and "CRITICAL ACCOUNTING ESTIMATES — Income Taxes" below.

SEGMENT RESULTS

Reconciliation of segment revenue to total operating revenue is below.

The results presented in this section include results of our Latin American, ILEC and EMEA businesses prior to their sale on August 1, 2022, October 3, 2022 and November 1, 2023, respectively:

In this section we provide a reconciliation of segment revenue to total operating revenue and discuss the performance of our two reporting segments.

Our segment performance measurement is segment adjusted earnings before interest, tax, depreciation and amortization ("EBITDA").

Results in this section include results of our EMEA business prior to its sale on November 1, 2023:

Years Ended December 31,

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Total operating revenue $ 12,402 13,108 14,557

Reconciliation of segment EBITDA to total adjusted EBITDA is below:

Years Ended December 31,

2024 2023 2022

(Dollars in millions)

Net loss $ (55) (10,298) (1,548)

Income tax (benefit) expense (175) 61 557

Total other expense, net 690 653 1,086

Depreciation and amortization expense 2,956 2,985 3,239

Goodwill impairment — 10,693 3,271

Stock-based compensation expense 29 52 98

Total adjusted EBITDA $ 3,445 4,146 6,703

Business segment adjusted EBITDA $ 5,411 6,055 7,200

Mass Markets segment adjusted EBITDA 1,453 1,517 2,610

Other unallocated expense (3,419) (3,426) (3,107)

For additional information on our reportable segments and product and services categories, see Note 4—Revenue Recognition and Note 17—Segment Information to our consolidated financial statements in Item 8 of Part II of this report.

For additional information on our product and services categories and our reportable segments, see Note 4 — Revenue Recognition and Note 16 — Segment Information in Item 8.

Business Segment

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Total adjusted EBITDA $ 4,523 4,617 5,257 (2) % (12) %

Year ended December 31, 2024 compared to the year ended December 31, 2023 and the year ended December 31, 2023 compared to the year ended December 31, 2022.

Business segment revenue decreased $1.2 billion for the year ended December 31, 2024 compared to December 31, 2023 and decreased $1.5 billion for the year ended December 31, 2023 compared to December 31, 2022.

Approximately $547 million of the decrease for the year ended December 31, 2024 compared to December 31, 2023 was due to the sale of the EMEA business and select CDN contracts in the fourth quarter of 2023.

Approximately $1.0 billion of the decrease for the year ended December 31, 2023 compared to December 31, 2022, was due to the sale of the Latin American, ILEC and EMEA businesses in late 2022 and 2023.

More specifically, within each product category for the year ended December 31, 2024 compared to December 31, 2023 and for the year ended December 31, 2023 compared to December 31, 2022:

• Grow decreased $121 million and $124 million, respectively, reflecting decreases of approximately $272 million and $370 million associated with the sale of the divested businesses.

For the year ended December 31, 2024 compared to December 31, 2023, we saw growth in IP services of $107 million and an increase in revenue from dark fiber and conduit of $112 million, partially offset by declines in other products, including declines in wavelength services by $42 million.

For the year ended December 31, 2023 compared to December 31, 2022, we saw an increase of $244 million primarily in our IP, wavelengths, dark fiber, enterprise broadband and colocation products and services.

• Nurture decreased $532 million and $635 million, respectively, approximately $88 million and $262 million of which was associated with the sale of the divested businesses.

The remainder of the declines were principally attributable to declines in traditional VPN services of $314 million and $261 million, respectively, and declines in Ethernet services of $117 million and $112 million, respectively.

• Harvest decreased by $408 million and $732 million, respectively, approximately $70 million and $370 million of which was associated with the sale of the divested businesses.

The remainder of the decline was principally attributable to a $252 million and $265 million decline, respectively, in legacy voice and private line services.

• Other decreased by $159 million and $25 million, respectively.

For the year ended December 31, 2024 as compared to December 31, 2023, approximately $93 million of this decline was attributable to the above-mentioned sale of select CDN contracts in late 2023 and decreases in equipment sales revenue of approximately $29 million.

For the year ended December 31, 2023 as compared to December 31, 2022, approximately $48 million of the decline was attributable to decreased CDN revenue leading up to the above-mentioned sale, partially offset by an increase in equipment sales revenue of $35 million.

Business segment expense decreased by $576 million for the year ended December 31, 2024 compared to December 31, 2023 and decreased $371 million for the year ended December 31, 2023 compared to December 31, 2022.

For the year ended December 31, 2024 compared to December 31, 2023 this decrease was primarily driven by (i) a decrease of $209 million due to the above-mentioned sale of the EMEA business and select CDN contracts in 2023, (ii) a $166 million reduction in overall network expense and (iii) a decrease of $138 million in employee-related costs.

For the year ended December 31, 2023 compared to December 31, 2022, the decrease was primarily due to (i) the sale of the divested businesses of $230 million, (ii) an $81 million decrease in employee-related costs, and (iii) a $68 million decrease in other network related costs.

Business segment adjusted EBITDA as a percentage of revenue was 52%, 52% and 55% for the years ended December 31, 2024, 2023 and 2022.

Business Segment Revenue

Business segment revenue decreased $471 million in 2025 compared to 2024.

Business segment revenue decreased $1.2 billion in 2024 compared to 2023 driven by a $547 million decrease from the sale of the EMEA business and the sale of select CDN contracts in the fourth quarter of 2023.

Business Segment Product Categories

For 2025 compared to 2024, and for 2024 compared to 2023, the following were the primary drivers within each product category:

• Grow increased $219 million in 2025.

This was primarily as a result of:

◦ an increase of $112 million in revenue from dark fiber and conduit;

◦ an increase of $74 million from growth in IP services.

• Grow decreased $115 million in 2024.

This was primarily as a result of:

◦ a decrease of $272 million from the sale of the divested business in 2023;

◦ a decrease of $42 million in revenue from wavelength services;

◦ an offsetting increase of $112 million in revenue from dark fiber and conduit;

◦ an offsetting increase of $107 million from growth in IP services.

• Nurture decreased $458 million in 2025.

This was primarily as a result of:

◦ a decrease of $344 million principally attributable to declines in traditional VPN services;

◦ a decrease of $116 million from declines in Ethernet services.

• Nurture decreased $528 million in 2024.

This was primarily as a result of:

◦ a decrease of $88 million from the sale of the divested business in 2023;

◦ a decrease of $314 million principally attributable to declines in traditional VPN services;

◦ a decrease of $117 million from declines in Ethernet services.

• Harvest decreased $211 million in 2025.

This was primarily as a result of:

◦ a decrease of $162 million principally attributable to declines in legacy voice services;

◦ a decrease of $67 million from declines in other legacy products and services;

◦ an offsetting increase of $17 million in private line revenue attributable primarily to temporary rate increases.

• Harvest decreased $408 million in 2024.

This was primarily as a result of:

◦ a decrease of $70 million from the sale of the divested business in 2023;

◦ a decrease of $252 million from declines in legacy voice services and private line services.

• Other decreased $21 million in 2025.

This was primarily as a result of:

◦ a decrease of $11 million in SAP solutions consulting services;

◦ a decrease of $7 million in equipment sales revenue.

• Other decreased $169 million in 2024.

This was primarily as a result of:

◦ a decrease of $93 million from the sale of select CDN contracts in 2023;

◦ a decrease of $29 million in equipment sales revenue.

Business Segment Expense

Business segment expense decreased $377 million in 2025 compared to 2024.

This was primarily as a result of:

• a decrease of $277 million in overall network expense;

• a decrease of $86 million in employee-related costs due to lower headcount.

Business segment expense decreased $580 million in 2024 compared to 2023.

This was primarily as a result of:

• a decrease of $209 million from the sale of the EMEA business and select CDN contracts in 2023;

• a decrease of $166 million in overall network expense;

• a decrease of $138 million in employee-related costs.

Business Segment Adjusted EBITDA

As a percentage of revenue, Business segment adjusted EBITDA was:

Years Ended December 31,

2025 2024 2023

Segment adjusted EBITDA as a percent of segment revenue

46 % 45 % 45 %

Mass Markets Segment

9 unchanged sentences

Total adjusted EBITDA $ 1,396 1,496 1,556 (7) % (4) %

Year ended December 31, 2024 compared to the year ended December 31, 2023 and the year ended December 31, 2023 compared to the year ended December 31, 2022.

Mass Markets segment revenue decreased by $229 million for the year ended December 31, 2024 compared to December 31, 2023 and decreased $1.4 billion for the year ended December 31, 2023 compared to December 31, 2022.

Approximately $1.1 billion of the decreases for the year ended December 31, 2023 compared to December 31, 2022 was due to the sale of our ILEC business in the fourth quarter of 2022.

More specifically, within each product category for the year ended December 31, 2024 compared to December 31, 2023 and for the year ended December 31, 2023 compared to December 31, 2022:

• Fiber Broadband revenue increased $99 million and $33 million, respectively, primarily driven by growth in the number of fiber customers associated with our continued increase in enabled locations from our Quantum Fiber buildout.

For the year ended December 31, 2023 compared to December 31, 2022, the increase was partially offset by a decrease of $41 million due to the sale of the ILEC business.

• Other Broadband revenue decreased $228 million and $768 million, respectively, primarily due to fewer customers for our lower speed copper-based broadband services.

For the year ended December 31, 2023 compared to December 31, 2022, there was an additional decrease of $563 million due to the sale of the ILEC business.

• Voice and Other decreased $100 million and $670 million, respectively.

For the year ended December 31, 2024 compared to December 31, 2023, the decrease was principally due to the continued loss of copper-based voice customers.

For the year ended December 31, 2023 compared to December 31, 2022, the decrease was due to (i) a $472 million decrease due to the sale of the ILEC business, (ii) continued loss of copper-based voice customers, and (iii) the recognition in the first quarter of 2022 of $59 million of previously deferred revenue related to the CAF II program, which lapsed on December 31, 2021.

Mass Markets segment expense decreased by $165 million for the year ended December 31, 2024 compared to December 31, 2023 primarily due to (i) a decrease of $60 million in employee-related costs, (ii) a decrease of $36 million in other network related costs, (iii) a decrease of $33 million in professional fees, and (iv) a decrease of $10 million in network expenses.

Mass Markets segment expense decreased $312 million for the year ended December 31, 2023 compared to December 31, 2022 primarily due to a $295 million decrease due to the ILEC divestiture and a $37 million decrease in professional fees, partially offset by an increase of $42 million in employee-related costs and $27 million in marketing and advertising costs.

Mass Markets segment adjusted EBITDA as a percentage of revenue was 53%, 51% and 60% for the years ended December 31, 2024, 2023 and 2022, respectively.

Critical Accounting Policies and Estimates

Our consolidated financial statements are prepared in accordance with accounting principles that are generally accepted in the United States.

The preparation of these consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of our assets, liabilities, revenue and expenses.

We have identified certain policies and estimates as critical to our business operations and the understanding of our past or present results of operations related to (i) goodwill, customer relationships and other intangible assets;

(ii) pension and post-retirement benefits;

(iii) loss contingencies and (iv) income taxes.

These policies and estimates are considered critical because they had a material impact, or they have the potential to have a material impact, on our consolidated financial statements and because they require us to make significant judgments, assumptions or estimates.

We believe that our estimates, judgments and assumptions made when accounting for the items described below were reasonable, based on information available at the time they were made.

However, actual results may differ from those estimates, and these differences may be material.

Goodwill, Customer Relationships and Other Intangible Assets

We have a significant amount of goodwill and indefinite-lived intangible assets that are assessed at least annually for impairment.

At December 31, 2024, goodwill and intangible assets totaled $6.8 billion, or 20%, of our total assets.

The impairment analyses of these assets are considered critical because of their significance to us and our segments and the subjective nature of certain assumptions used to estimate fair value.

We have assigned our goodwill balance to our segments at December 31, 2024 as follows:

Business Mass Markets Total

(Dollars in millions)

As of December 31, 2024

Mass Markets Segment Revenue

Mass Markets segment revenue decreased $235 million in 2025 compared to 2024 and decreased by $229 million in 2024 compared to 2023.

Mass Markets Product Categories

For 2025 compared to 2024, and for 2024 compared to 2023, the following were the primary drivers within each product category:

• Fiber Broadband increased $148 million in 2025 and increased $98 million in 2024.

This was primarily as a result of growth in fiber customers, primarily driven by our increase in enabled locations from our Quantum Fiber buildout, prior to our divestiture of Mass Markets Fiber-to-the-Home, as discussed further in Note 2 — Divestitures in Item 8.

• Other Broadband decreased $218 million in 2025 and decreased $226 million in 2024.

This was primarily as a result of fewer customers for lower speed copper-based broadband services.

• Voice and Other decreased $165 million in 2025 and decreased $101 million in 2024.

This was primarily as a result of continued loss of copper-based voice customers.

2025 additionally decreased $46 million due to the voluntary relinquishment of our funding received under the FCC's RDOF in the second quarter of 2025.

See the Liquidity and Capital Resources— Federal Broadband Support Programs in this Part II Item 7 for more information.

Mass Markets Segment Expense

Mass Markets segment expense decreased $135 million in 2025 compared to 2024.

This was primarily as a result of:

• a decrease of $62 million in employee-related costs due to lower headcount;

• a decrease of $20 million in overall network expense;

• a decrease of $18 million in marketing and advertising expense;

• a decrease of $15 million decrease in professional fees.

Mass Markets segment expense decreased $169 million in 2024 compared to 2023.

This was primarily as a result of:

• a decrease of $60 million in employee-related costs;

• a decrease of $36 million in other network related costs;

• a decrease of $33 million in professional fees;

• a decrease of $10 million decrease in overall network expenses.

Mass Markets Segment Adjusted EBITDA

As a percentage of revenue, Mass Markets segment adjusted EBITDA was:

Years Ended December 31,

2025 2024 2023

Intangible assets arising from business combinations, such as goodwill, customer relationships, capitalized software, trademarks and trade names, are initially recorded at estimated fair value.

We amortize customer relationships primarily over an estimated life of seven to 14 years, using the straight-line method, depending on the customer.

We amortize capitalized software using the straight-line method primarily over estimated lives ranging up to seven years.

We amortize our other intangible assets using the straight-line method over an estimated life of nine to 20 years.

Other intangible assets not arising from business combinations are initially recorded at cost.

Where there are no legal, regulatory, contractual or other factors that would reasonably limit the useful life of an intangible asset, we classify them as indefinite-lived intangible assets and such intangible assets are not amortized.

We assess our long-lived intangible assets, other than goodwill, with indefinite lives for impairment annually, or, under certain circumstances, more frequently, such as when events or changes in circumstances indicate there may be an impairment.

We carry these assets at the estimated fair value at the time of acquisition and record assets not acquired in acquisitions at historical cost.

However, if their estimated fair value is less than their carrying amount, we recognize an impairment charge for the amount by which the carrying amount of these assets exceeds their estimated fair value.

For the years ended December 31, 2024 and 2023, we concluded it was more likely than not that our indefinite-lived intangible assets were not impaired, and therefore we recorded no impairment charge for these assets.

We are required to assess our goodwill for impairment annually, or more frequently if an event occurs or circumstances change that indicates it is more likely than not the fair values of any of our reporting units were less than their carrying values.

In assessing goodwill for impairment, we may first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying value.

Our annual impairment assessment date for goodwill is October 31, at which date we assess our reporting units.

We report two segments:

Business and Mass Markets.

At October 31, 2024, we had three reporting units for goodwill impairment testing, which are (i) Mass Markets (ii) NA Business and (iii) APAC region.

Prior to their divestitures in 2023 and 2022, the EMEA and LATAM regions were also each considered their own reporting unit.

Our reporting units are not discrete legal entities with discrete full financial statements.

Our assets and liabilities are employed in and relate to the operations of multiple reporting units and are allocated to individual reporting units based on their relative revenue or earnings before interest, taxes depreciation and amortization ("EBITDA").

For each reporting unit, we compare its estimated fair value of equity to the carrying value of equity that we assign to the reporting unit.

If the estimated fair value of the reporting unit is greater than its carrying value, we conclude that no impairment exists.

If the estimated fair value of the reporting unit is less than the carrying value, we record a non-cash impairment charge equal to the excess amount.

Depending on the facts and circumstances, we typically estimate the fair value of our reporting units by considering either or both of (i) a discounted cash flow method, which is based on the present value of projected cash flows over a discrete projection period and a terminal value, which is based on the expected normalized cash flows of the reporting units following the discrete projection period, and (ii) a market approach, which includes the use of multiples of publicly-traded companies whose services are comparable to ours.

With respect to our analysis using the discounted cash flow method, the timing and amount of projected cash flows under these forecasts require estimates developed from our long-range plan, which is informed by wireline industry trends, the competitive landscape, product lifecycles, operational initiatives, capital allocation plans and other company-specific and external factors that influence our business.

These projected cash flows consider recent historical results and are consistent with our short-term financial forecasts and long-term business strategies.

Due to inherent uncertainties, actual cash flows could vary significantly from our projected cash flows.

Our determination of the discount rate is based on a weighted average cost of capital approach, which uses a market participant’s cost of equity and after-tax cost of debt and reflects certain risks inherent in the projected cash flows.

With respect to our analysis using the market approach, we estimate the fair value of a reporting unit based upon a market multiple applied to the reporting unit’s revenue and EBITDA, adjusted for an appropriate control premium based on recent market transactions.

We weigh these revenue and EBITDA market multiples depending on the characteristics of the individual reporting unit.

We also reconcile the estimated fair values of the reporting units to our market capitalization to determine whether the indicated control premium is reasonable in comparison to recent transactions in the marketplace.

Our development of estimates of fair value under both the discounted cash flow method and the market approach method are subject to inherent uncertainties and actual results could vary significantly from our estimates.

Declines in our stock price in the past were a critical factor that led us to determine that our goodwill was impaired.

Future declines in our stock price could potentially cause additional impairments of our goodwill.

Changes in the underlying assumptions that we use in allocating the assets and liabilities to reporting units under either the discounted cash flow or market approach method can result in materially different determinations of fair value.

We perform sensitivity analyses that consider a range of discount rates and a range of EBITDA market multiples and we believe the estimates, judgments, assumptions and allocation methods used by us are reasonable.

Nonetheless, changes in any of them can significantly affect whether we must incur impairment charges, as well as the size of such charges.

For additional information on our goodwill balances by segment and results of our impairment analyses, see Note 3—Goodwill, Customer Relationships and Other Intangible Assets to our consolidated financial statements in Item 8 of Part II of this report.

Pension and Post-retirement Benefits

We sponsor a noncontributory qualified defined benefit pension plan (referred to herein as our qualified pension plan, the "Lumen Combined Pension Plan" or the "Combined Pension Plan") for a substantial portion of our current and former employees in the United States.

As of January 1, 2022, we spun off a new pension plan (the "Lumen Pension Plan") from the Combined Pension Plan in anticipation of the sale of a portion of our ILEC business on October 3, 2022.

We recognized pension costs related to both plans through the sale of the ILEC business, at which time balances related to the Lumen Pension Plan were reflected in the calculation of our gain on the sale of the ILEC business and the pension obligation and assets of the Lumen Pension Plan were transferred to the purchaser.

In addition to the Lumen Combined Pension Plan, we also maintain several non-qualified pension plans for certain eligible highly compensated employees.

Due to the insignificant impact of these non-qualified plans on our consolidated financial statements, we have excluded them from the following pension and post-retirement benefits disclosures for 2024, 2023 and 2022.

See Note 11—Employee Benefits for additional information.

We also maintain post-retirement benefit plans that provide health care and life insurance benefits primarily for certain eligible retirees.

In 2024, approximately 64% of the Combined Pension Plan's January 1, 2024 net actuarial loss balance of $1.4 billion was subject to amortization as a component of net periodic expense over the average remaining service period of 13 years for participating employees expected to receive benefits under the plan.

We treated the other 36% of the Combined Pension Plan's beginning net actuarial loss balance as indefinitely deferred during 2024.

In 2024, approximately 75% of the beginning net actuarial gain of $337 million at January 1, 2024 for the post-retirement benefit plans was subject to amortization as a component of net periodic expense, with the other 25% of the beginning net actuarial gain balance for the post-retirement benefit plans treated as indefinitely deferred.

In 2023, approximately 62% of the Combined Pension Plan's January 1, 2023 net actuarial loss balance of $1.4 billion was subject to amortization as a component of net periodic expense over the average remaining service period of 14 years for participating employees expected to receive benefits under the plan.

We treated the other 38% of the Combined Pension Plan's beginning net actuarial loss balance as indefinitely deferred during 2023.

In 2023, approximately 56% of the beginning net actuarial gain of $371 million at January 1, 2023 for the post-retirement benefit plans was subject to amortization as a component of net periodic expense, with the other 44% of the beginning net actuarial gain balance for the post-retirement benefit plans treated as indefinitely deferred.

In 2022, approximately 62% of the Combined Pension Plan's January 1, 2022 net actuarial loss balance of $2.2 billion was subject to amortization as a component of net periodic expense over the average remaining service period of 14 years for participating employees expected to receive benefits under the plan.

We treated the other 38% of the Combined Pension Plan's beginning net actuarial loss balance as indefinitely deferred during 2022.

Additionally, upon the sale of the ILEC business on October 3, 2022, we recognized $564 million of net actuarial pre-tax loss related to the Lumen Pension Plan, which partially offset our gain on the sale of the business.

We treated the entire beginning net actuarial loss of $217 million at January 1, 2022 for the post-retirement benefit plans as indefinitely deferred during 2022.

In computing our pension and post-retirement health care and life insurance benefit obligations, our most significant assumptions are the discount rate and mortality rates.

In computing our periodic pension expense, our most significant assumptions are the discount rate and the expected rate of return on plan assets.

In computing our post-retirement benefit expense, our most significant assumption is the discount rate.

The discount rate for each plan is the rate at which we believe we could effectively settle the plan's benefit obligations as of the end of the year.

We selected each plan's discount rate based on a cash flow matching analysis using hypothetical yield curves from high-quality U.S.

corporate bonds and projections of the future benefit payments that constitute the projected benefit obligation for the plans.

This process establishes the uniform discount rate that produces the same present value of the estimated future benefit payments as is generated by discounting each year's benefit payments by a spot rate applicable to that year.

The spot rates used in this process were derived from a yield curve created from yields on the 60th to 90th percentile of U.S.

high quality bonds.

The table below illustrates hypothetical changes in our benefit obligation for the qualified pension plan and the post-retirement benefit plans obligation if we had selected a higher or lower discount rate.

Percentage point change Increase/(decrease) in Benefit Obligation at December 31, 2024

(Dollars in millions)

Combined Pension Plan discount rate 1 % $ (325)

Post-retirement benefit plans discount rate 1 % (133)

Published mortality rates help predict the expected life of plan participants and are based on historical demographic studies by the Society of Actuaries ("SOA").

The SOA publishes new mortality tables and projection scales on a regular basis which reflect updates to projected life expectancies in North America.

Historically, we have adopted the new projection tables immediately after publication.

The SOA did not release any revised mortality tables or projection scales in 2022, 2023 or 2024.

The expected rate of return on plan assets is the long-term rate of return we expect to earn on the plans' assets in the future, net of administrative expenses paid from plan assets.

The rate of return is determined by the strategic allocation of plan assets and the long-term risk and return forecast for each asset class.

The forecasts for each asset class are generated primarily from an analysis of the long-term expectations of various third-party investment management organizations, to which we then add a factor of 50 basis points to reflect the benefit we expect to result from our active management of the assets.

The expected rate of return on plan assets is reviewed annually by management and our Board of Directors and is revised, as necessary, to reflect changes in the financial markets and our investment strategy.

Changes in any of the above factors could significantly impact operating expenses in our consolidated statements of operations and other comprehensive loss in our consolidated statements of comprehensive income (loss), as well as the amount of the liability and accumulated other comprehensive loss of stockholders' equity on our consolidated balance sheets.

Loss Contingencies

We are involved in several potentially material legal proceedings, as described in more detail in Note 18—Commitments, Contingencies and Other Items.

On a quarterly basis, we assess potential losses in relation to these and other pending or threatened tax and legal matters.

For matters not related to income taxes, if a loss is considered probable and the amount can be reasonably estimated, we recognize an expense for the estimated loss.

To the extent these estimates are more or less than the actual liability incurred upon resolving these matters, our earnings will be increased or decreased accordingly.

If the differences are material, our consolidated financial statements could be materially impacted.

For matters related to income taxes, if we determine in our judgment that the impact of an uncertain tax position is more likely than not to be sustained upon audit by the relevant taxing authority, then we recognize in our financial statements a benefit for the largest amount that is more likely than not to be sustained.

We do not recognize any portion of an uncertain tax position if we determine in our judgment that the position has less than a 50% likelihood of being sustained.

Though the validity of any tax position is a matter of tax law, the body of statutory, regulatory and interpretive guidance on the application of the law is complex and often ambiguous, particularly in certain of the non-U.S.

jurisdictions in which we operate.

As such, our tax positions may not be sustained, which could materially impact our consolidated financial statements.

Our provision for income taxes includes amounts for tax consequences deferred to future periods.

We record deferred income tax assets and liabilities reflecting future tax consequences attributable to (i) tax credit carryforwards, (ii) differences between the financial statement carrying value of assets and liabilities and the tax basis of those assets and liabilities and (iii) tax NOLs.

Deferred taxes are computed using enacted tax rates expected to apply in the year in which the differences are expected to affect taxable income.

The effect of a change in tax rate on deferred income tax assets and liabilities is recognized in earnings in the period that includes the enactment date.

The measurement of deferred taxes often involves the exercise of considerable judgment related to the realization of tax basis.

Our deferred tax assets and liabilities reflect our assessment that tax positions taken in filed tax returns and the resulting tax basis are more likely than not to be sustained if they are audited by taxing authorities.

Assessing tax rates that we expect to apply and determining the years when the temporary differences are expected to affect taxable income requires judgment about the future apportionment of our income among the states in which we operate.

Any changes in our practices or judgments involved in the measurement of deferred tax assets and liabilities could materially impact our financial condition or results of operations.

In connection with recording deferred income tax assets and liabilities, we establish valuation allowances when necessary to reduce deferred income tax assets to amounts that we believe are more likely than not to be realized.

We evaluate our deferred tax assets quarterly to determine whether adjustments to our valuation allowances are appropriate in light of changes in facts or circumstances, such as changes in tax law, interactions with taxing authorities and developments in case law.

In making this evaluation, we rely on our recent history of pre-tax earnings.

We also rely on our forecasts of future earnings and the nature and timing of future deductions and benefits represented by the deferred tax assets, all of which involve the exercise of significant judgment.

At December 31, 2024, we established a valuation allowance of $343 million primarily related to state NOLs, based on our determination that it was more likely than not that this amount of these NOLs would expire unused.

If forecasts of future earnings and the nature and estimated timing of future deductions and benefits change in the future, we may determine that existing valuation allowances must be revised or eliminated or new valuation allowances created, any of which could materially impact our financial condition or results of operations.

See Note 16—Income Taxes to our consolidated financial statements in Item 8 of Part II of this report.

Segment adjusted EBITDA as a percent of segment revenue

56 % 55 % 52 %

LIQUIDITY AND CAPITAL RESOURCES

Overview of Sources and Uses of Cash

We are a holding company that is dependent on the capital resources of our subsidiaries to satisfy our parent company liquidity requirements.

Several of our significant operating subsidiaries have borrowed funds either on a standalone basis or as part of a separate restricted group with certain of its subsidiaries or affiliates.

The terms of the instruments governing the indebtedness of these borrowers or borrowing groups may restrict our ability to access their accumulated cash.

In addition, our ability to access the liquidity of these and other subsidiaries may be constrained by tax, legal and other limitations.

For additional information, see "—Debt Instruments and Financing Arrangements" below.

At December 31, 2024, we held cash and cash equivalents of $1.9 billion.

As of December 31, 2024, we had approximately $737 million of borrowing capacity available under our approximately $1.0 billion of revolving credit facilities, net of undrawn letters of credit issued to us thereunder.

We typically use our revolving credit facilities as a source of liquidity for operating activities and our other cash requirements.

We had approximately $59 million of cash and cash equivalents outside the United States at December 31, 2024.

We currently believe that there are no material restrictions on our ability to repatriate cash and cash equivalents into the United States, and that we may do so without paying or accruing U.S.

taxes or significant foreign taxes.

We do not currently intend to repatriate to the United States any material amounts of our foreign cash and cash equivalents from operating entities.

Our senior leadership team and our Board of Directors review our sources and potential uses of cash in connection with our annual budgeting process and throughout the year as circumstances warrant.

Generally speaking, our principal funding source is cash from operating activities, and our principal cash requirements include operating expenses, capital expenditures, income taxes, debt payments, periodic securities repurchases, periodic pension contributions and other benefits payments.

Based on our current capital allocation objectives, during 2025 we project expending approximately $4.1 billion to $4.3 billion of capital expenditures.

For the 12-month period ending December 31, 2025, we project that our fixed commitments will include (i) $52 million of scheduled term loan amortization payments (ii) $39 million of finance lease and other fixed payments and (iii) $321 million of debt maturities.

We will continue to monitor our future sources and uses of cash, and anticipate that we will make adjustments to our capital allocation strategies when, as and if determined by our senior leadership team and our Board.

We may also draw on our revolving credit facilities as a source of liquidity for operating activities and to give us additional flexibility to finance our capital investments, payments of debt, pension contributions and other cash requirements.

For additional information, see "Risk Factors—Financial Risks" in Item 1A of Part I of this report.

Impact of Divestitures

As discussed in Note 2—Divestitures of the Latin American, ILEC and EMEA Businesses to our consolidated financial statements in Item 8 of Part II of this report, we sold our Latin American, ILEC and EMEA businesses on August 1, 2022, October 3, 2022 and November 1, 2023, respectively.

As further described elsewhere herein, these transactions have provided us with a substantial amount of cash proceeds but have also reduced our base of income-generating assets that generate our recurring cash from operating activities.

For a discussion of the impact of our divestitures upon our federal income taxes, see "Liquidity and Capital Resources–Federal Income Tax Obligations.”

Impact of PCF Transactions

During the second half of 2024, we announced that Lumen and its subsidiaries sold several billion dollars of new PCF solutions.

Lumen and its subsidiaries expect to receive the majority of cash from these agreements, which include advance payments to fund network expansion projects, over the next three to four years.

Lumen and its subsidiaries will incur certain material expenditures in connection with these agreements, and expect the majority of such expenditures to be made over the same period of time.

The payments Lumen and its subsidiaries actually make and receive may vary materially from what is expected and will depend, among other things, on the timing of delivery and installation of the products and services by Lumen and its subsidiaries.

During the second half of 2024, we began receiving advance payments under these agreements, which increased our net cash provided by operating activities reflected in our consolidated statements of cash flows and our deferred revenue reflected in our consolidated balance sheets.

We anticipate that our continued receipt of cash payments under these agreements will (i) cause our consolidated cash flows to vary from quarter to quarter over the next several years and (ii) enable us to accelerate our network simplification initiatives.

In addition, we expect our consolidated capital expenditures to increase as we use these cash receipts to fund network expansion projects contemplated under such agreements.

We expect to enter into additional agreements in the future to sell products and services as part of our PCF solutions but cannot provide any assurances.

See "Risk Factors" under Item 1A of Part II of this report.

As a holding company, we rely on cash flows and capital resources from our subsidiaries to meet our parent-level liquidity needs.

Access to subsidiary cash may be limited by debt terms, tax considerations, legal restrictions or other limitations;

see "— Debt Instruments and Financing Arrangements" below and Note 7 — Long-Term Debt and Credit Facilities in Item 8.

Our primary source of liquidity is cash from operating activities.

We also use our revolving credit facilities as a source of liquidity for operating activities and our other cash requirements.

In addition, our recently completed Mass Markets Fiber-to-the-Home divestiture, which closed February 2, 2026, has generated significant cash proceeds subsequent to December 31, 2025, which have been primarily used to pay down debt as described below, but will also reduce our base of income-generating assets that generate our recurring cash from operating activities.

Key uses of cash include operating expenses, capital expenditures, debt service, income taxes, share repurchases, pension contributions, and other benefit payments.

Key balances as of December 31, 2025 included:

• Cash and cash equivalents :

• Revolving credit availability :

• Total consolidated indebtedness :

$17.8 billion

As of December 31, 2025, $76 million of our cash and cash equivalents was held outside the U.S.

Certain subsidiary debt covenants may limit upstreaming of cash.

We currently believe there are no material restrictions on our ability to repatriate cash and cash equivalents into the United States, and that we may do so without paying or accruing significant U.S.

or foreign taxes.

Other than excess foreign cash held in India, we do not currently intend to repatriate to the United States material amounts of our foreign cash and cash equivalents.

See Note 15 — Income Taxes for additional information.

We regularly review liquidity and capital allocation strategies with senior management and the Board of Directors, adjusting as strategies and conditions change.

Based on current assumptions, we believe our liquidity sources — operating cash flows, available cash, and credit capacity — will be sufficient to fund near-term requirements and strategic investments.

For additional information on risks that could affect liquidity, see “Risk Factors — Financial Risks” in Item 1A.

Cash Flow Activities

The following table summarizes our consolidated cash flow activities:

Years Ended December 31, $ Change

(Dollars in millions)

Net cash provided by operating activities $ 4,738 4,333 405

Net cash used in investing activities (4,305) (2,830) 1,475

Net cash used in financing activities (1,319) (1,851) (532)

Operating Activities

Net cash provided by operating activities increased $405 million in 2025 compared to 2024.

This was primarily as a result of:

• an increase in working capital due to general timing variability, as described below;

• an increase in deferred revenue related to receipt of advance cash payments pursuant to our recent sales of PCF solutions;

• an offsetting decrease due to higher net loss adjusted for non-cash expenses and gains;

• an offsetting decrease due to the receipt of a federal income tax cash refund in the first quarter of 2024 which was not replicated in 2025.

Cash provided by operating activities is subject to variability period over period as a result of timing differences, including with respect to the collection of receivables and payments of interest expense, accounts payable, and bonuses.

For additional information about our operating results, see "Results of Operations" above.

Investing Activities

Net cash used in investing activities increased $1.5 billion in 2025 compared to 2024.

This was primarily as a result of:

• an increase of $1.1 billion in capital expenditures;

• an increase due to $319 million lower proceeds from sales of property, plant and equipment, and other assets.

Financing Activities

Net cash used in financing activities decreased $532 million in 2025 compared to 2024 .

This was primarily as a result of:

• an increase in net proceeds from issuance of long-term debt in 2025;

• an offsetting increase in net payments of long-term debt and revolving debt in 2025 compared to 2024;

• an offsetting increase in debt extinguishment costs and fees, driven by the debt transactions in 2025 compared to those in 2024 described elsewhere herein.

See Note 7 — Long-Term Debt and Credit Facilities in Item 8 for additional information on our outstanding debt securities.

Short-term Liquidity Needs

As of December 31, 2025, we held cash and cash equivalents of $1.0 billion and had approximately $722 million of borrowing capacity available under our $954 million revolving credit facilities, net of undrawn letters of credit.

These resources, together with cash generated from operating activities and any remaining proceeds from the Mass Markets Fiber-to-the Home divestiture, which closed February 2, 2026, represent our primary sources of liquidity for the next 12 months.

As of December 31, 2025, based on our current capital allocation objectives, we project expenditures for the next 12 months to include, among others, the following:

• Capital expenditures :

We incur capital expenditures on an ongoing basis to expand and improve our service offerings, enhance and modernize our networks, fulfill our contractual obligations, and compete effectively in our markets.

We evaluate our discretionary capital expenditure projects based on a variety of factors, including expected strategic impacts (such as forecasted impact on revenue growth, productivity, expenses, service levels and customer retention) and our expected return on investment.

The amount of our capital investment is influenced by, among other things, current and projected demand for our services and products, our network and customer contract requirements, cash flow generated by operating activities, cash required for debt service and other purposes, regulatory considerations (such as governmentally-mandated infrastructure buildout requirements) and the availability of requisite supplies, labor and permits.

Our capital expenditures continue to be focused on enhancing network operating efficiencies, developing new services, and expanding our fiber network, including our Quantum Fiber buildout plan.

A portion of our 2025 capital expenditures will also be focused on replacing aged network assets.

For more information on our capital spending, see (i) "—Overview of Sources and Uses of Cash" above, (ii) "Cash Flow Activities—Investing Activities" below, (iii) —Impact of PCF Transactions above and (iv) Item 1 of Part 1 of this report.

$3.2 to $3.4 billion, primarily for network modernization and fiber expansion.

• Debt service :

$51 million in scheduled term loan amortization and $37 million of finance lease obligations.

• RDOF relinquishment :

$99 million for remittance of awards and associated fees — see "Federal Broadband Support Programs" below for further details.

We expect to fund these expenditures primarily through operating cash flows, supplemented by available cash and borrowing capacity as needed.

Based on current assumptions, we believe our liquidity sources will be sufficient to fund near-term requirements and strategic investments.

For additional information on short-term liquidity needs, see “Future Contractual Obligations” below.

Long-term Liquidity Needs

Beyond the next 12 months, we plan to refinance a substantial portion of maturing debt through future debt issuances, subject to market conditions and covenant restrictions.

Our ability to access capital markets depends on credit ratings and prevailing interest rates, and we cannot assure favorable terms for future borrowings.

We may also consider other sources of liquidity, such as equity offerings or asset dispositions, depending on market conditions.

For additional information on our credit ratings and factors that may affect our access to capital markets, see “— Future Debt Transactions” below.

For additional information on long-term liquidity needs, see “Future Contractual Obligations” below.

Impact of Strategic Transactions on Liquidity

Our liquidity and capital resources have been influenced by several strategic actions aimed at optimizing our financial position, enhancing flexibility, and supporting long-term transformation initiatives.

Key actions include:

• Recent divestitures :

The 2023 sale of our EMEA business and the 2026 sale of our Mass Markets Fiber-to-the-Home divestiture generated significant cash proceeds but reduced recurring operating cash flows.

The Mass Markets Fiber-to-the-Home divestiture is also expected to reduce our Mass Markets fiber-related capital expenditures by approximately $1 billion annually.

While this transaction is expected to reduce recurring revenue and operating cash flows, we believe it will sharpen our focus on enterprise and fiber growth and deliver significant cash proceeds to strengthen our financial position.

• PCF agreements :

Advance payments under PCF agreements increased operating cash flow and deferred revenue.

These payments vary by quarter and fund network expansion and simplification projects, which will increase capital expenditures.

We expect to enter into additional agreements in the future to sell products and services as part of our PCF solutions but cannot provide any assurances as to these additional agreements or the anticipated benefits thereof.

See "Risk Factors" in Item 1A.

We expect these and future transactions to influence cash flows, leverage, and investment capacity.

While divestitures provide immediate liquidity and PCF agreements support network expansion, they also introduce variability in operating cash flows.

We will continue to pursue opportunities aligned with our capital allocation priorities and market conditions.

Capital Expenditures

We regularly invest in capital projects to expand and improve services, enhance and modernize networks, fulfill contractual obligations, and strengthen our competitive position.

Discretionary projects are evaluated based on strategic impact such as revenue growth, productivity, service levels, customer retention, and expected return on investment.

Capital spending is influenced by demand, contractual and regulatory requirements, cash flow, and resource availability.

We expect capital spending to be focused on:

• expanding our fiber network, including our other network capacity buildout plan;

• modernizing and enhancing network efficiency and reliability;

• developing new services;

• replacing aging network assets.

These investments aim to improve service quality, drive innovation, and position us to meet future demand.

For additional details on our capital spending, see "Risk Factors" in Item 1A and “Cash Flow Activities — Investing Activities ” and “Impact of Strategic Transactions on Liquidity,” above.

Debt Instruments and Financing Arrangements

Debt Instruments

On March 22, 2024, Lumen Technologies, Level 3 Financing, Qwest and a group of consenting debtholders representing over $15.0 billion of Lumen's outstanding consolidated long-term debt completed transactions contemplated under the amended and restated transaction support agreement dated January 22, 2024 (the "TSA Transactions"), which, among other things, extended maturities of the debt instruments of Lumen and Level 3 Financing, Inc.

and provided access to approximately $1.0 billion of new Lumen revolving credit facilities maturing in 2028 to replace Lumen's former $2.2 billion revolving credit facility.

In addition, Level 3 Financing, Inc.

privately placed $1.575 billion aggregate principal amount of newly-issued first lien notes, a portion of the proceeds of which were used to reduce Lumen's consolidated indebtedness.

For more information, see Note 7—Long-Term Debt and Credit Facilities to our consolidated financial statements included under Item 8 of Part II of this annual report.

On September 24, 2024, (i) Lumen Technologies issued approximately $438 million aggregate principal amount of its newly-issued 10.000% Secured Notes due 2032 and paid approximately $14 million cash (excluding accrued and unpaid interest payable with respect to the exchanged notes) in exchange for approximately $491 million aggregate principal amount of its outstanding senior unsecured notes (which were concurrently cancelled), and (ii) Level 3 Financing issued approximately $350 million aggregate principal amount of its newly-issued 10.000% Second Lien Notes due 2032 in exchange for approximately $357 million aggregate principal amount of its outstanding senior unsecured notes (which were concurrently cancelled).

These transactions reduced the aggregate principal amount of Lumen's consolidated indebtedness by approximately $60 million.

Through open market repurchases and cash tender offers occurring throughout the year ended December 31, 2024, Lumen further reduced the aggregate principal amount of its consolidated indebtedness by approximately $769 million.

At December 31, 2024, we had:

• $13.7 billion of outstanding consolidated secured indebtedness;

• $4.6 billion of outstanding consolidated unsecured indebtedness (excluding (i) finance lease obligations, (ii) unamortized premiums, net and (iii) unamortized debt issuance costs);

• approximately $737 million of unused borrowing capacity under our revolving credit facilities, as discussed further below.

Under its credit agreements dated March 22, 2024, Lumen maintained at December 31, 2024 (i) approximately $954 million of superpriority revolving credit facilities, under which we owed nothing as of such date, and we had approximately $217 million of letters of credit issued and undrawn as of such date, and (ii) approximately $3.6 billion of drawn superpriority term loan facilities.

Under its credit agreements dated March 22, 2024, Level 3 Financing maintained at December 31, 2024, $2.4 billion of drawn secured term loan facilities.

For additional information, see (i) "—Overview of Sources and Uses of Cash," and (ii) Note 7—Long-Term Debt and Credit Facilities to our consolidated financial statements in Item 8 of Part II of this report.

At December 31, 2024, we had $220 million undrawn letters of credit outstanding, $217 million of which were issued under our revolving credit facilities, $1 million of letters of credit outstanding under our $225 million uncommitted letter of credit facility and $2 million of which were issued under a separate facility maintained by one of our subsidiaries (the full amount of which is collateralized by cash).

In addition to indebtedness under their March 22, 2024 credit agreements, Lumen and Level 3 Financing, Inc.

are indebted under their respective outstanding senior notes, and certain of Lumen's other subsidiaries are indebted under their respective outstanding senior notes.

For additional information on the terms and conditions of other debt instruments of ours and our subsidiaries, including financial and operating covenants, see (i) Note 7—Long-Term Debt and Credit Facilities to our consolidated financial statements in Item 8 of Part II of this report and (ii) "—Other Matters" below.

In 2025, we actively managed our capital structure through a series of transactions designed to enhance financial flexibility and optimize our debt profile to address upcoming maturities and support ongoing transformation initiatives.

These transactions reduced consolidated indebtedness and extended our weighted-average debt maturity profile.

Key debt balances as of December 31, 2025 included:

• Secured debt outstanding :

$12.3 billion

• Unsecured debt outstanding :

• Revolving credit availability :

For additional details on our debt and financing instruments and the debt activity below, see Note 7 — Long-Term Debt and Credit Facilities in Item 8.

2025 Debt Activity

Key transactions in 2025 included:

• Second Lien Notes Refinancing and Cash Tender Offers — Fourth Quarter :

Level 3 Financing, Inc.

issued $1.25 billion of 8.500% Senior Notes due 2036.

Net proceeds, along with cash on hand, were used to retire the following of Level 3 Financing, Inc.'s Second Lien notes pursuant to cash tender offers:

◦ $434 million 3.875% Second Lien Notes due 2030;

◦ $703 million 4.500% Second Lien Notes due 2030;

◦ $432 million 4.000% Second Lien Notes due 2031.

• Term Loan Repayments — Fourth Quarter:

We and Level 3 Financing, Inc.

repaid all $68 million of the outstanding former Term Loan B facilities due 2027.

• Second Credit Facilities Refinancing — Third Quarter :

Level 3 Financing, Inc.

amended and repriced its Term Loan B‑3 credit facility, replacing its Term Loan B‑3 with its Term Loan B‑4, maintaining $2.4 billion outstanding immediately following the transactions.

• First Lien Note Refinancings — Third Quarter :

Level 3 Financing, Inc.

issued $2.425 billion of 7.000% First Lien Notes due 2034.

Net proceeds, and cash on hand, were used to redeem Level 3 Financing, Inc.'s then outstanding First Lien notes totaling approximately $2.1 billion, including:

◦ $1.4 billion First Lien 11.000% Senior Secured Notes due 2029;

◦ $678 million 10.750% First Lien Notes due 2030.

• Cash Redemption — Third Quarter :

Level 3 Financing, Inc.

redeemed $350 million of its 10.000% Second Lien Notes due 2032 in exchange for cash.

• First Lien Note Refinancing — Second Quarter :

Level 3 Financing, Inc.

issued $2.0 billion of 6.875% First Lien Notes due 2033.

Net proceeds, and cash on hand, were used to redeem Level 3 Financing, Inc.'s then outstanding higher-coupon notes totaling $1.8 billion, including:

◦ $925 million First Lien 10.500% Senior Secured Notes due 2030;

◦ $668 million 10.500% First Lien Notes due 2029;

◦ $167 million 11.000% First Lien Notes due 2029.

• First Credit Facilities Refinancing — First Quarter :

Level 3 Financing, Inc.

amended and repriced its Term Loan B‑1 and Term Loan B-2 credit facilities, replacing its Term Loan B-1 and B-2 with its Term Loan B-3, maintaining $2.4 billion outstanding immediately following the transaction, and extending maturity to 2032.

• Cash Redemptions — First Quarter :

Lumen and Level 3 Financing, Inc.

redeemed $202 million of unsecured Senior notes in exchange for cash.

For more details on the 2025 debt activity, see Note 7 — Long-Term Debt and Credit Facilities in Item 8.

2026 Debt Activity, to date:

Key transactions to date in 2026 included:

• Senior Secured Notes :

Level 3 Financing, Inc.

issued an additional $650 million of its 8.500% Senior Notes due 2036.

Net proceeds from this offering were used to fund the purchase of $607 million of its Second Lien notes, including:

◦ $595 million 4.875% Second Lien Notes due 2029;

◦ $8 million 4.500% Second Lien Notes due 2030;

◦ $4 million 3.875% Second Lien Notes due 2030

• Repurchases of Debt Instruments:

Lumen applied $4.8 billion of the pre-tax proceeds from the Mass Markets Fiber-to-the-Home divestiture, along with cash on hand, to complete the following transactions:

◦ Redeem the following outstanding notes in full:

▪ $439 million 10.000% Secured Notes due 2032;

▪ $477 million 4.125% Superpriority Senior Secured Notes due 2030;

▪ $331 million 4.125% Superpriority Senior Secured Notes due 2029

◦ Repay all of the outstanding term loans due under our Superpriority Revolving/Term Loan A Credit Agreement;

◦ Repay all of the outstanding amounts due under our Superpriority Term B Credit Agreement in full satisfaction and discharge of its obligations thereunder.

Liquidity and Credit Facilities Availability

As of December 31, 2025, we maintained $954 million of superpriority revolving credit facilities capacity, with none outstanding and $232 million in undrawn letters of credit, and $3.5 billion of drawn superpriority term loan facilities.

As of December 31, 2025, we had $234 million of total undrawn letters of credit, including $232 million issued under our revolving credit facilities and $2 million issued under a separate facility maintained by Lumen subsidiaries, the majority of which is collateralized by cash.

In addition to indebtedness under their above-mentioned credit agreements, Lumen and Level 3 Financing are indebted under their respective outstanding senior notes, and certain of Lumen's other subsidiaries are indebted under their respective outstanding senior notes.

For detailed terms, maturities, covenants, and outstanding balances, see Note 7 — Long-Term Debt and Credit Facilities in Item 8 and "— Other Matters" below.

Future Debt Transactions

Subject to market conditions, we plan to continue to issue debt securities from time to time to refinance a substantial portion of our maturing debt, including issuing debt securities of certain of our subsidiaries to refinance their maturing debt to the extent permitted under our debt covenants and consistent with our capital allocation strategies.

The availability, interest rate and other terms of any new borrowings will depend on the ratings assigned by credit rating agencies, among other factors.

As of the filing date of this report, the credit ratings for the senior secured and unsecured debt of Lumen Technologies, Inc., Level 3 Financing, Inc.

and Qwest Corporation were as follows:

Subject to market conditions, we expect to continue issuing debt securities as needed to refinance maturing obligations, including subsidiary debt, consistent with our capital allocation strategies and covenants.

Availability, interest rates, and other terms of new borrowings will depend on credit ratings and market conditions, among other factors.

As of the filing date of this report, credit ratings for our and our subsidiaries' senior secured and unsecured debt were:

Borrower Moody's Investors Service, Inc.

2 unchanged sentences

Lumen Technologies, Inc.:

Unsecured Caa3 CCC- CCC-

Secured Caa1/Caa2 B B+

Unsecured Caa1 B BB

Secured B3/Caa1 B+ BB

Level 3 Financing, Inc.:

Unsecured Caa1 CCC- CCC-

Secured B2/Caa1 CCC+ B+/CCC

Unsecured B3 B- B-

Secured Ba3 B+ BB

Qwest Corporation:

Unsecured Caa3 B- B+

Unsecured Caa1 B BB

_______________________________________________________________________________

(1) In August 2024, Moody's upgraded the Lumen Technologies Corporate Family Rating ("CFR") to Caa1 and placed the ratings of Lumen Technologies' debt on positive outlook.

In November 2024, Standard & Poor's placed the ratings of Lumen Technologies' debt on positive credit watch.

Our credit ratings are reviewed and adjusted from time to time by the rating agencies.

Any future changes in the senior unsecured or secured debt ratings of us or our subsidiaries could impact our access to capital or borrowing costs.

We cannot provide any assurances that we will be able to borrow additional funds on favorable terms, or at all.

See "Risk Factors—Financial Risks" in Item 1A of Part I of this report.

From time to time over the past couple of years, we have engaged in various debt refinancings, redemptions, tender offers, exchange offers, open market purchases and other transactions designed principally to reduce our consolidated indebtedness, extend our debt maturities, improve our financial flexibility or otherwise enhance our debt profile.

Subject to market conditions, restrictions under our debt covenants, and other limitations, we expect to opportunistically pursue similar transactions in the future to the extent feasible.

See Note 7—Long-Term Debt and Credit Facilities to our consolidated financial statements in Item 8 of Part II of this report for additional information.

Federal Income Tax Obligations

As of December 31, 2024, Lumen Technologies had approximately $570 million of federal NOLs which, for U.S.

federal income tax purposes, may be used to offset future taxable income.

These NOLs are primarily related to federal NOLs we acquired through the Level 3 Communications, Inc.

acquisition on November 1, 2017 and are subject to limitations under Section 382.

We maintain a Section 382 rights agreement designed to safeguard through late 2026 our ability to use those NOLs.

We utilized a substantial portion of our previously available NOLs to offset taxable gains generated by the completion of our 2022 divestitures.

For additional information about our NOLs, see Note 16—Income Taxes— to our consolidated financial statements in Item 8 of Part II of this report,

We expect to use substantially all of our remaining NOLs in future periods in accordance with Section 382's annual limitations, although we cannot guarantee this.

See "Risk Factors—Financial Risks—We may not be able to fully utilize our NOLs" in Item 1A of Part I of this report.

In January 2024, we received a federal income tax cash refund of $729 million, including interest.

The amounts of our near-term future tax payments will depend upon many factors, including our future earnings and tax circumstances and the impact of any potential corporate tax reform legislation or taxable transactions.

The Inflation Reduction Act enacted in 2022, among other things, implemented a new federal corporate alternative minimum tax (“CAMT”) on adjusted financial statement income effective for tax periods occurring after December 31, 2022.

The CAMT had no material impact on our financial results as of December 31, 2024.

In addition, in 2021, the Organization for Economic Co-operation and Development (“OECD”) has issued Pillar Two model rules introducing a new global minimum corporate tax of 15% and the OECD and the majority of its participating countries continue to work toward the enactment of such tax.

(1) In February 2026, both Moody's and Fitch upgraded our corporate family ratings to B2 and B, representing a one-notch and two-notch upgrade, respectively.

Future changes in these ratings could impact our access to capital and borrowing costs.

We cannot be certain that we will be able to borrow additional funds on favorable terms, or at all.

See "Risk Factors — Financial Risks" in Item 1A.

Income Tax Obligations

Net Operating Loss Carryforwards

As of December 31, 2025, we had approximately $982 million of U.S.

federal NOLs that may be used to offset future federal taxable income.

A portion of the NOLs are subject to annual usage limits under Section 382 of the Internal Revenue Code.

We have a Section 382 Rights Agreement in place through late 2026 to help preserve our ability to use these NOLs.

We expect to use substantially all remaining NOLs in future years, but we cannot assure you we will be able to utilize these federal NOLs as projected or at all.

See Note 15 — Income Taxes in Item 8 and "Risk Factors — Financial Risks — We may not be able to fully utilize our NOLs " in Item 1A.

Tax Law Changes

In July 2025, the U.S.

1, also known as the “One, Big Beautiful Bill Act” (the “OBBBA”), which permanently allows 100% bonus depreciation, immediate expensing for domestic R&D, and favorable changes to interest expense limitations.

These provisions did not have a material impact on our 2025 effective tax rate but are expected to significantly reduce our federal income tax liability.

We filed a refund claim for approximately $400 million of federal estimated income taxes in July 2025 that we anticipate receiving in the first half of 2026.

The Organization for Economic Co-operation and Development ("OECD") has issued Pillar Two model rules introducing a new global minimum corporate tax of 15% for tax years effective after December 31, 2023.

While the U.S.

has not adopted Pillar Two legislation, various other governments around the world have enacted such legislation that is effective for tax periods after December 31, 2023.

These global minimum tax rules have increased our administrative and compliance burdens but the impact to our financial statements for the year ended December 31, 2024 was immaterial.

We anticipate further legislative activity and administrative guidance throughout 2025 and continue to monitor evolving global tax legislation.

has not adopted Pillar Two legislation, certain countries in which we operate have already adopted legislation to implement Pillar Two.

On January 5, 2026, the OECD announced the Side-by-Side ("SbS") package, implemented as administrative guidance and modifying the operation of Pillar Two rules that would fully exempt U.S.-parented groups from the application of certain Pillar Two top-up taxes.

The SbS package also extends the current Transitional Country-by-Country Reporting ("CbCR") Safe Harbor by one year, through the end of fiscal year of 2027.The Pillar Two rules have increased our compliance requirements but did not materially impact our 2025 results.

We continue to monitor evolving global and domestic tax legislation and administrative guidance.

Tax Payments and Refunds

In addition to the expected refund described above, in January 2024, Lumen received a $729 million federal income tax refund, including interest.

Future tax payments will depend on many factors, including our future earnings, tax law changes, and any taxable transactions.

Pension and Post-Retirement Benefit Obligations

We are subject to material obligations under our existing defined benefit pension plans and post-retirement benefit plans.

At December 31, 2024, the accounting unfunded status of our qualified and non-qualified defined benefit pension plans and our qualified post-retirement benefit plans was $645 million and $1.7 billion, respectively.

For additional information about our pension and post-retirement benefit arrangements, see "Critical Accounting Policies and Estimates—Pension and Post-retirement Benefits" in Item 7 of Part II of this report and Note 11—Employee Benefits to our consolidated financial statements in Item 8 of Part II of this report.

As of January 1, 2022, we spun off the Lumen Pension Plan from the Combined Pension Plan in anticipation of the sale of the ILEC business, as described further in Note 2—Divestitures of the Latin American, ILEC and EMEA Businesses to our consolidated financial statements in Item 8 of Part II of this report.

At the time of the spin-off we transferred $2.5 billion of pension benefit obligation and $2.2 billion of plan assets to the Lumen Pension Plan and we further contributed approximately $319 million of cash in September 2022.

This plan was subsequently assumed by the purchaser as part of our ILEC business divestiture on October 3, 2022.

Upon sale of the ILEC business, we recognized $403 million of net actuarial loss and prior service cost, net of tax impact, related to the Lumen Pension Plan, which partially offset our gain on sale of the business.

Benefits paid by our Combined Pension Plan are paid through the trust that holds the Combined Pension Plan's assets.

Based on current laws and circumstances, we do not expect any contributions to be required for our Combined Pension Plan during 2025.

The amount of required contributions to our Combined Pension Plan in 2026 and beyond will depend on a variety of factors, most of which are beyond our control, including earnings on plan investments, prevailing interest rates, demographic experience, changes in plan benefits and changes in funding laws and regulations.

We occasionally make voluntary contributions to our plans in addition to required contributions and reserve the right to do so in the future.

We made a voluntary contribution of $170 million to the trust for the Combined Pension Plan during 2024.

We currently do not expect to make a voluntary contribution in 2025.

Substantially all of our post-retirement health care and life insurance benefits plans are unfunded and are paid by us with available cash.

As described further in Note 11—Employee Benefits, aggregate benefits paid by us under these plans (net of participant contributions and direct subsidy receipts) were $185 million, $194 million and $210 million for the years ended December 31, 2024, 2023 and 2022, respectively.

For additional information on our expected future benefits payments for our post-retirement benefit plans, see Note 11—Employee Benefits to our consolidated financial statements in Item 8 of Part II of this report.

For 2024, our expected annual long-term rate of return on the pension plan assets, net of administrative expenses, was 6.5%.

For 2025, our expected annual long-term rate of return on these assets, net of administration expenses, remains 6.5%.

However, actual returns could be substantially different.

Our pension plan contains provisions that allow us, from time to time, to offer lump sum payment options to certain former employees in settlement of their future retirement benefits.

We record an accounting settlement charge, consisting of the recognition of certain deferred costs of the pension plan, associated with these lump sum payments only if, in the aggregate, they exceed the sum of the annual service and interest costs for the plan’s net periodic pension benefit cost, which represents the settlement accounting threshold.

The settlement threshold was not exceeded for the years ended December 31, 2024, December 31, 2023 or December 31, 2022.

In the event of workforce reductions in the future, the annual lump sum payments may trigger settlement accounting.

We maintain significant pension and post-retirement benefit plans that require ongoing cash outflows and could affect our liquidity and financial flexibility.

These obligations are sensitive to market conditions and actuarial assumptions, and adverse changes could increase funding requirements and reduce cash available for other uses.

Current Status

As of December 31, 2025, our unfunded obligations were:

• Pension plans :

• Post-retirement plans :

The expected long-term rate of return on pension assets, net of administrative expenses, was 6.5% for 2025 and is 6.5% for 2026.

Actual investment performance may differ substantially from these assumptions, which could influence future funding needs.

Lower asset returns or interest rates could increase our obligations and may require additional contributions, reducing cash available for other uses.

For additional details, see “CRITICAL ACCOUNTING ESTIMATES — Pension and Post-retirement Benefits” in Item 7 and Note 11 — Employee Benefits in Item 8.

Funding and Contributions

Benefits under the Combined Pension Plan are paid from its trust.

Based on current laws and circumstances, we do not expect required contributions in 2026.

Future contribution requirements will depend on factors such as investment performance, interest rates, demographics, plan changes, and funding regulations.

We may make voluntary contributions;

none were made in 2025.

We made a voluntary contribution to the trust for the Combined Pension Plan of $101 million in January 2026 and $170 million in 2024.

Any required or voluntary contributions could reduce available cash and impact liquidity.

We occasionally offer lump-sum settlements to certain former employees.

Settlement accounting applies only when the total lump-sum payments exceed the settlement threshold, which equals the combined annual service cost and interest cost of the net periodic pension benefit expense.

This threshold was not exceeded in 2025, 2024, or 2023.

Future workforce reductions could result in annual lump-sum payments that trigger settlement accounting, potentially increasing earnings volatility.

Post-Retirement Benefits

Substantially all post-retirement health care and life insurance benefits are unfunded and paid from operating cash.

Aggregate benefits paid under these plans, net of participant contributions and subsidies, were $172 million, $185 million, and $194 million for 2025, 2024, and 2023, respectively.

In 2026, we currently expect to pay directly $181 million of post-retirement benefits, net of participant contributions and direct subsidies.

See Note 11 — Employee Benefits in Item 8 for further discussion of expected future payments.

Future Contractual Obligations

Our estimated future obligations as of December 31, 2024 include both current and long term obligations.

At December 31, 2024, we had a current obligation of $412 million and a long-term obligation of $18.1 billion of long-term debt (excluding unamortized premiums, net and unamortized debt issuance costs).

Under our operating leases, at December 31, 2024 we had a current obligation of $340 million and a long-term obligation of $1.3 billion.

As of such date, we had current obligations related to right-of-way agreements and purchase commitments of $999 million and a long-term obligation of $2.6 billion.

Additionally, as of such date we had a current asset retirement obligation of $25 million and a long-term obligation of $132 million.

Finally, at December 31, 2024 our pension and post-retirement benefit plans had an unfunded benefit obligation, of which $189 million is classified as current and $2.2 billion is classified as long-term.

For additional information, see Note 5—Leases, Note 7—Long-Term Debt and Credit Facilities, Note 9—Property, Plant and Equipment, Note 11—Employee Benefits and Note 18—Commitments, Contingencies and Other Items.

Federal Broadband Support Programs

In January 2020, the FCC created the Rural Digital Opportunity Fund (“RDOF”) program, a federal support program designed to fund broadband deployment in rural America.

For the first phase of this program, RDOF Phase I, the FCC awarded $6.4 billion in support payments to be paid in equal monthly installments over 10 years.

We were awarded RDOF funding in several of the states in which we operate and began receiving monthly support payments during the second quarter of 2022.

We received approximately $17 million in annual RDOF Phase I support payments during 2023 and 2022.

In the third quarter of 2024, we relinquished rights to develop certain RDOF census blocks in four states, which resulted in (i) a reduction of our anticipated RDOF Phase I support payments to approximately $16 million for the year ending December 31, 2024 and $15 million each year thereafter through the program period and (ii) an expectation of payment to the federal government, which we anticipate will be approximately $10 million.

For additional information on these programs, see (i) Note 4—Revenue Recognition to our consolidated financial statements in Item 8 of Part II of this report, (ii) "Business—Regulation of Our Business" in Item 1 of Part I of this report and (iii) "Risk Factors—Legal and Regulatory Risks" in Item 1A of Part I of this report.

Federal officials have proposed changes to current programs and laws that could impact us, including proposals designed to increase broadband access, increase competition among broadband providers, lower broadband costs and increase broadband regulation.

In late 2021, the U.S.

Congress enacted legislation that appropriated $65 billion to improve broadband affordability and access, primarily through federally funded state grants.

As of the date of this report, various state and federal agencies are continuing to take steps to make this funding available to eligible applicants, including us.

We anticipate that the release of this funding would increase competition for broadband customers in newly-served areas.

Cash Flow Activities

The following table summarizes our consolidated cash flow activities for the years ended December 31, 2024 and 2023.

For information regarding cash flow activities for the year ended December 31, 2022, see "Management's Discussion and Analysis of Financial Condition and Results of Operations" in Item 7 of Part II of our Annual Report Form 10-K for the year ended December 31, 2023.

Years Ended December 31, $ Change

We maintain obligations related to debt, leases, purchase commitments, and asset retirement, among others.

Our estimated future obligations as of December 31, 2025 include:

Footnote Reference

(within next 12 months)

(beyond next 12 months)

(Dollars in millions)

Net cash provided by operating activities $ 4,333 2,160 2,173

Net cash used in investing activities (2,830) (1,201) 1,629

Net cash used in financing activities (1,851) (18) 1,833

Operating Activities

Net cash provided by operating activities increased by $2.2 billion for the year ended December 31, 2024 as compared to the year ended December 31, 2023 primarily due to (i) cash payments received in the third quarter of 2024 pursuant to our recent sales of PCF solutions and (ii) our federal income tax cash refund of $729 million, including interest, received in the first quarter of 2024.

These increases were partially offset by (i) an increase in net loss adjusted for non-cash expenses and gains, partly as a result of the sale of our EMEA business in late 2023, and (ii) a voluntary contribution of $170 million to the trust for the Combined Pension Plan during 2024.

For additional information about our operating results, see "Results of Operations" above.

Investing Activities

Net cash used in investing activities increased by $1.6 billion for the year ended December 31, 2024 as compared to the year ended December 31, 2023 primarily due to the pre-tax cash proceeds from the sale of the EMEA business in 2023, partially offset by gross proceeds from the sale of an investment in the second quarter of 2024.

Financing Activities

Net cash used in financing activities increased by $1.8 billion for the year ended December 31, 2024 as compared to the year ended December 31, 2023 due to the substantially greater payments of long-term debt and associated debt extinguishment costs and fees, partially offset by proceeds from issuance of long-term debt in 2024.

See Note 7—Long-Term Debt and Credit Facilities to our consolidated financial statements in Item 8 of Part II of this report for additional information on our outstanding debt securities.

Long-term debt (excluding unamortized premiums, net and unamortized debt issuance costs) Note 7 — Long-Term Debt and Credit Facilities $ 88 17,727 17,815

Operating leases Note 5 — Leases 366 1,551 1,917

Right-of-way agreements and purchase commitments Note 17 — Commitments, Contingencies and Other Items 1,215 1,922 3,137

Asset retirement obligations Note 9 — Property, Plant and Equipment

Pension and post-retirement benefit plans unfunded obligations

Note 11 — Employee Benefits 184 2,102 2,286

Total $ 1,873 23,429 25,302

Federal Broadband Support Programs

The FCC's RDOF program aims to support broadband expansion in rural areas throughout America.

Although we initially agreed to participate in the program in certain areas, as previously disclosed, we voluntarily relinquished the entirety of our RDOF awards.

As a result, we will no longer receive funding through the RDOF program and recognized a reduction to revenue of $46 million in our consolidated statements of operations in the second quarter of 2025.

We also incurred fees totaling $49 million in connection therewith, which are reflected in our operating expenses within our consolidated statements of operations.

In January 2026, we paid the $95 million of revenue and fees summarized above, along with an additional $4 million relating to our 2024 relinquishment as repayment of funds previously received and remittance of the fees incurred.

Federal officials continue to advance broadband‑related proposals, and Congress has authorized a $65 billion program to expand broadband affordability and access.

State and federal agencies are in the process of implementing these initiatives, and we expect that the release of associated funding may increase competition in newly served markets.

For additional information on these programs, see Note 4 — Revenue Recognition in Item 8, "Business — Regulation of Our Business" in Item 1, and "Risk Factors — Legal and Regulatory Risks" in Item 1A.

Other Matters

We have cash management and loan arrangements with a majority of our income-generating subsidiaries, in which a substantial portion of the aggregate cash of those subsidiaries is periodically advanced or loaned to us or our service company affiliate.

Although we periodically repay these advances to fund the subsidiaries' cash requirements throughout the year, at any given point in time we may owe a substantial sum to our subsidiaries under these arrangements.

In accordance with generally accepted accounting principles, these arrangements are reflected in the balance sheets of our subsidiaries but are eliminated in consolidation and therefore not recognized on our consolidated balance sheets.

For additional information, see “Risk Factors” in Item 1A of Part II of this report.

Our network includes some residual lead-sheathed copper cables installed years ago that constitute a small portion of our network.

Recent media coverage of potential health and environmental risks associated with these cables has resulted in regulatory inquiries and lawsuits, and could subject us to legislative or regulatory actions, removal costs, compliance costs or penalties.

As of December 31, 2024, we have not accrued for any such potential costs and will only accrue when such costs are probable and reasonably estimable.

For additional information about related litigation and potential risks, see Note 18—Commitments, Contingencies and Other Items to our consolidated financial statements in Item 8 of Part II of this report, and the risk factor disclosures included herein under “Risk Factors” in Item 1A of Part I of this report.

We are also involved in various other legal proceedings that could substantially impact our financial position.

See Note 18—Commitments, Contingencies and Other Items to our consolidated financial statements in Item 8 of Part II of this report for additional information.

As of December 31, 2024, we were exposed to market risk from changes in interest rates on our variable rate long-term debt obligations and fluctuations in certain foreign currencies.

Our management periodically reviews our exposure to interest rate fluctuations and periodically implements strategies to manage the exposure.

From time to time, we have used derivative instruments to swap our exposure to variable interest rates for fixed interest rates.

We have established policies and procedures for risk assessment and the approval, reporting and monitoring of derivative instrument activities.

As of December 31, 2024, we did not hold or issue derivative financial instruments for trading or speculative purposes.

As of December 31, 2024, we had approximately $6.0 billion aggregate principal amount of debt bearing unhedged floating interest rates based on the secured overnight financing rate ("SOFR").

A hypothetical increase of 100 basis points in SOFR relating to our $6.0 billion of unhedged floating rate debt would, among other things, decrease our annual pre-tax earnings by approximately $60 million.

We conduct a small portion of our business in currencies other than the U.S.

dollar, the currency in which our consolidated financial statements are reported.

Prior to the November 1, 2023 divestiture of our EMEA business, certain of our former European subsidiaries used the local currency as their functional currency, as the majority of their sales and purchases were transacted in their local currencies.

Although we continue to evaluate strategies to mitigate risks related to the effect of fluctuations in currency exchange rates, we will likely continue to recognize gains or losses from international transactions.

Accordingly, changes in foreign currency rates relative to the U.S.

dollar could positively or negatively impact our operating results.

Certain shortcomings are inherent in the method of analysis presented in the computation of exposures to market risks.

Actual values may differ materially from those disclosed by us from time to time if market conditions vary from the assumptions used in the analyses performed.

These analyses only incorporate the risk exposures that existed at December 31, 2024.

We maintain cash management and intercompany loan arrangements with most of our income-generating subsidiaries.

Under these arrangements, a significant portion of subsidiary cash is periodically advanced or loaned to us or our service company affiliate.

We repay these advances as needed to meet subsidiary cash requirements;

however, at any point in time, we may owe a substantial amount to our subsidiaries.

In accordance with GAAP, these balances are reflected on the subsidiaries’ balance sheets but eliminated in consolidation and therefore do not appear on our consolidated balance sheet.

For additional information, see “Risk Factors” in Item 1A.

Our network includes a limited number of legacy lead-sheathed copper cables.

Previous media reports regarding potential health and environmental risks associated with these cables have led to regulatory inquiries and lawsuits, and may result in legislative or regulatory actions, removal costs, compliance costs, or penalties.

As of December 31, 2025, we have not recorded any accruals for such costs and will only accrue such costs when they become probable and reasonably estimable.

For more information on related litigation and risks, see Note 17 — Commitments, Contingencies and Other Items in Item 8 and “Risk Factors” in Item 1A.

We are also involved in other legal proceedings that could materially affect our financial position.

See Note 17 — Commitments, Contingencies and Other Items in Item 8.

CRITICAL ACCOUNTING ESTIMATES

The preparation of our consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of our assets, liabilities, revenue, and expenses.

Certain policies and estimates are considered critical because they involve significant judgments and assumptions and could materially impact our financial statements.

These include:

• goodwill and intangible assets;

• pension and post-retirement benefits;

• loss contingencies;

• income taxes.

While we believe our estimates are reasonable based on information available at the time they were made, actual results may differ and could be material.

Goodwill and Intangible Assets

Historically, we had a significant amount of goodwill and have intangible assets that are assessed at least annually for impairment.

As of December 31, 2025, intangible assets totaled $4.5 billion (excluding goodwill and intangible assets classified as held for sale), representing 13% of our total assets.

Our remaining goodwill was fully impaired or reclassified as held for sale as of December 31, 2025.

The impairment analyses of these assets are considered critical because of their significance to us and our segments, the subjective nature of certain assumptions used to estimate fair value, and because it can materially impact reported results and future expense.

Allocation and Amortization

Goodwill was allocated to our reporting units within the Business and Mass Markets segments when there is a change in composition.

Intangible assets acquired in business combinations — such as goodwill, customer relationships, capitalized software, trademarks, and trade names — are recorded at estimated fair value at acquisition.

Other intangible assets, primarily capitalized software, not arising from business combinations are initially recorded at cost.

Intangible assets without legal, regulatory, contractual, or other limiting factors are classified as indefinite-lived and are not amortized.

For finite-lived intangible assets, we amortize using the straight-line method over the following estimated lives:

• Customer relationships :

• Capitalized software :

• Other intangible assets :

The amount of future amortization expense may differ materially from current amounts, depending on the results of our annual reviews.

Impairment Testing

Goodwill is tested annually as of October 31, or more frequently if events or changes in circumstances indicate potential impairment.

We first consider qualitative factors.

If necessary, we perform a quantitative test comparing the reporting unit’s estimated fair value to its carrying amount.

If fair value is lower, we record a non-cash impairment charge for the difference.

Prior to the Mass Markets Fiber-to-the-Home business divestiture, we had three reporting units for goodwill testing:

Mass Markets, NA Business, and APAC.

Prior to the divestiture in 2023, the EMEA region was considered its own reporting unit.

Our reporting units are not discrete legal entities with discrete full financial statements.

Reporting units share assets and liabilities, which are allocated based on relative revenue or EBITDA.

These allocations can materially affect fair value estimates.

For each reporting unit, we compare its estimated fair value of equity to the carrying value of equity that we assign to the reporting unit.

Intangible Assets

Finite-lived intangible assets are evaluated for impairment when triggering events or changes in circumstances occur.

Fair Value Estimation

Depending on the facts and circumstances, we typically estimate the fair value of our reporting units by considering either or both of (i) a discounted cash flow method and (ii) a market approach.

Discounted Cash Flow Method

Under the discounted cash flow method, we estimate fair value by calculating the present value of projected cash flows over a discrete period plus a terminal value based on normalized future cash flows.

• Cash flow projections :

Derived from estimates developed from our long-range plan, informed by industry trends — including wireline-specific factors — competitive landscape, product lifecycles, operational initiatives, and capital allocation strategies.

These projections consider recent historical results and are consistent with our short-term financial forecasts and long-term business strategies.

• Discount rate :

Determined using a weighted average cost of capital, reflecting market participant assumptions for cost of equity and after-tax cost of debt, and incorporating risks inherent in the projections.

• Terminal value :

Represents expected normalized cash flows beyond the discrete projection period.

• Uncertainty :

Actual cash flows may differ significantly from projections due to inherent uncertainties.

Market Approach

Under the market approach, we estimate fair value of a reporting unit based upon market multiples applied to the reporting unit’s revenue and EBITDA, adjusted for an appropriate control premium based on recent market transactions.

• Market multiples :

Derived using publicly traded companies whose services and operating characteristics are comparable to ours.

• Revenue and EBITDA :

Derived using actual results and estimates and assumptions related to the forecasted results for the remainder of the year, including revenues, expenses, and the achievement of certain strategic initiatives.

• Weighting :

Revenue and EBITDA multiples are weighted based on the characteristics of each reporting unit.

• Control premium :

Our implied control premium is a factor used to evaluate our fair value assessment and is evaluated for reasonableness, as described in the "Reconciliation" bullet below.

Our development of fair value estimates under both the discounted cash flow method and the market approach method are subject to inherent uncertainties and rely on assumptions about industry trends, competitive conditions, product lifecycles, and capital allocation.

• Reconciliation :

Estimated fair values are reconciled to our market capitalization to ensure reasonableness compared to market transactions.

Sensitivity and Risk Factors

Changes in assumptions used in the discounted cash flow method or market approach — such as asset and liability allocations — can materially affect fair value estimates, and actual results could vary significantly from our estimates and assumptions.

We perform sensitivity analyses using a range of discount rates and EBITDA multiples and believe our methods and assumptions are reasonable.

However, any changes to these inputs can significantly impact whether impairment charges are required and the magnitude of those charges.

For additional information on our goodwill balances by segment and results of our impairment analyses, see Note 3 — Goodwill and Intangible Assets in Item 8.

Pension and Post-retirement Benefits

We sponsor a noncontributory qualified defined benefit pension plan (the “Combined Pension Plan”), and several non-qualified pension plans for certain eligible highly compensated employees.

Non-qualified plans are excluded from the disclosures below due to their immaterial impact on consolidated results.

We also provide post-retirement health care and life insurance benefits to certain eligible retirees.

See Note 11 — Employee Benefits in Item 8 for detailed plan descriptions, funding status, and investment strategies.

Our obligations are based on actuarial valuations requiring significant judgment and assumptions, including discount rate, mortality rates, and expected rate of return on plan assets.

We consider these estimates critical because they involve complex actuarial models and significant judgment, and small changes can materially impact our financial condition and results of operations.

Key Assumptions

In computing our pension and post-retirement health care and life insurance benefit obligations, our most significant assumptions are the discount rate and mortality rates.

In computing our periodic pension expense, our most significant assumptions are the discount rate and the expected rate of return on plan assets.

In computing our post-retirement benefit expense, our most significant assumption is the discount rate.

Discount rate :

The discount rate reflects the rate at which obligations could be settled at year-end, determined based on a cash flow matching analysis using hypothetical yield curves from high-quality U.S.

corporate bonds and projected benefit payments.

This process ensures a uniform rate that produces the same present value of the estimated future benefit payments as is generated by discounting each year’s benefit payments by spot rates derived from yields on the 60th–90th percentile of high-quality bonds.

Mortality rates :

Mortality assumptions help predict the expected life of plan participants and are based on published tables from the Society of Actuaries (“SOA”), which update life expectancy projections for North America.

We adopt new tables immediately upon release.

No updates were issued in 2025, 2024, or 2023.

Expected rate of return :

The expected return on plan assets is the long-term return we anticipate earning on the plans’ assets, net of administrative expenses.

The rate is determined based on the strategic allocation of plan assets and long-term risk and return forecasts for each asset class.

These forecasts are primarily derived from third-party investment management organizations, to which we add a factor of 50 basis points to reflect the benefit we expect to result from our active management of the assets.

The rate is reviewed annually by management and our Board of Directors and adjusted as needed for market or investment strategy changes.

These assumptions are based on future events and are inherently uncertain, actual results may differ materially from estimates.

Management monitors these assumptions regularly and updates them based on market conditions, plan experience, and other relevant factors.

Actuarial Losses and Gains

Actuarial gains and losses arise when actual experience differs from these assumptions or when assumptions are updated.

These gains and losses are recorded in Other Comprehensive Income and amortized into earnings over time.

As of January 1, 2025, the Combined Pension Plan net actuarial loss balance was $1.4 billion with 65% subject to amortization over an average remaining service period of 9 years and 35% indefinitely deferred.

As of January 1, 2025 the post-retirement benefit plans net actuarial gain balance was $404 million with 75% subject to amortization and 25% indefinitely deferred.

As of January 1, 2024 the Combined Pension Plan net actuarial loss balance was $1.4 billion with 64% subject to amortization over an average remaining service period of 13 years and 36% indefinitely deferred.

As of January 1, 2024 the post-retirement benefit plans net actuarial gain balance was $337 million with 75% subject to amortization and 25% indefinitely deferred.

As of the January 1, 2023 the Combined Pension Plan net actuarial loss balance of $1.4 billion, 62% was subject to amortization over an average remaining service period of 14 years and 38% indefinitely deferred during 2023.

As of January 1, 2023 the post-retirement benefit plans net actuarial gain balance was $371 million with 56% subject to amortization and 44% indefinitely deferred.

Sensitivity Analysis

Changes in any of the assumptions used could significantly affect benefit obligations and expenses.

The following table illustrates the estimated impact on benefit obligations assuming a hypothetical one percentage point change in the discount rate.

Percentage point change Increase/(decrease) in Benefit Obligation

as of December 31, 2025

(Dollars in millions)

Combined Pension Plan discount rate 1 % $ (316)

Post-retirement benefit plans discount rate 1 % (125)

Similarly, changes in mortality assumptions or asset return expectations could significantly affect net periodic benefit cost and other comprehensive income.

Because these assumptions are inherently uncertain and based on future events, actual results may differ materially from estimates.

Loss Contingencies

We are involved in several potentially material legal proceedings, as described in Note 17 — Commitments, Contingencies and Other Items in Item 8.

Accounting for these matters requires significant judgment due to inherent uncertainty, complex legal interpretations, and evolving circumstances.

We recognize an expense when a loss is probable and reasonably estimable.

Determining whether a loss is probable and reasonably estimable involves significant judgment and assumptions about future events.

These assumptions include legal interpretations, regulatory developments, and estimates of potential exposure.

Actual outcomes may differ from these estimates, and such differences could materially affect our consolidated financial statements.

Changes in assumptions or new developments could significantly increase or decrease earnings.

We evaluate these and other pending or threatened tax and legal matters on a quarterly basis.

Given the significant judgment, inherent complexity, uncertainty of outcomes, varying internal and external factors, and overall potential to materially impact our financial results, we consider various aspects related to income taxes to be critical accounting estimates.

Uncertain Tax Positions

We apply the “more-likely-than-not” threshold when determining uncertain tax positions.

This involves significant uncertainty because it requires management to apply judgment and make assumptions when estimating exposures related to various tax positions.

We do not recognize any portion of an uncertain tax position if, in our judgment, the position has less than a 50% likelihood of being sustained.

The validity of any tax position is ultimately a matter of tax law;

the body of statutory, regulatory, and interpretive guidance on the application of the law is complex and often ambiguous, particularly in certain non-U.S.

jurisdictions in which we operate.

As such, our judgments may not be upheld, which could materially affect our consolidated financial statements.

Although we believe we have adequately reserved for our uncertain tax positions, no assurance can be given that the final tax outcome of these matters will not be adverse to Lumen and exceed the amount reserved.

We evaluate these tax matters on a quarterly basis.

Deferred Taxes

Our provision for income taxes includes amounts for current and deferred tax consequences.

Deferred tax assets and liabilities reflect future tax effects of:

• tax credit carryforwards;

• differences between financial statement carrying values of assets and liabilities and tax basis of those assets and liabilities;

• NOLs and other tax attribute carryforwards.

Deferred taxes are computed using enacted tax rates expected to apply in the year in which the temporary differences are expected to affect taxable income.

Changes in tax rates impacting deferred income tax assets and liabilities are recognized in earnings in the period of enactment.

The measurement of deferred taxes requires significant judgment related to the realization of tax basis.

We evaluate whether tax positions taken in filed returns are more likely than not to be sustained upon audit.

Determining applicable tax rates and timing of reversals involves judgment about future income apportionment among jurisdictions.

Changes in our practices or these judgments could materially affect our financial condition and results of operations.

Valuation Allowances

We establish valuation allowances when it is more likely than not that some or all deferred tax assets will not be realized.

This assessment considers recent pre-tax earnings, forecasts of future earnings, and the timing and nature of deductions and benefits, all of which involve the exercise of significant judgment.

We review valuation allowances quarterly and adjust as needed for changes in tax law, interactions with taxing authorities, developments in case law, or other relevant factors.

As of December 31, 2025, we had a valuation allowance of $328 million, primarily related to state NOLs expected to expire unused.

Future changes in earnings forecasts or the nature and estimated timing of future deductions and benefits may require adjustments to valuation allowances, which could materially impact our financial condition or results of operations.

We evaluate tax matters on a quarterly basis;

see Note 15 — Income Taxes in Item 8 for additional details.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis