00:00 Speaker A
Um, before we dive into the rest of it, I want to ask Anthropic very quickly because, um, your stock went up on the investor day and then ended up going down. I read there that there might be some concerns about Anthropic because of its dispute with the Pentagon over its current contract and the possible knock-on effects on its supply chain. What can you tell us about this?
00:30 chris
So, when you really think about what Lumen does, we are a trusted network for artificial intelligence, as relevant to Anthropic as we are to hyperscalers. They need our network to make their products work with their customers. So, um, that’s where we engage with them. Discussions with the government are clearly far removed from our current situation. But I think what we’re really seeing now is the evolution of cloud and other things, as new technology comes out, it’s disruptive, and it’s going to take a while for policy and governance to catch up. I think we’re just now seeing that happen. Um, so we’re not too worried about that. uh we’re really focused on continuing to provide them and others with the services that we do.
01:21 Speaker A
Can you tell me a little bit about how much you rely on individual clients for revenue?
01:31 chris
Yes, so our customer base is significantly diverse. Part of the reason we turned the company around was $13 billion in sales to hyperscale enterprises, such as new clouds like Anthropic. Well, neither one was really paying attention. I think this is actually a demonstration to investors that, well, we are a trustworthy AI network. We are the only ones capable of doing what AI needs to do to make it work. Uh, that’s why when we turn to the future, we’re really in a unique position.
02:11 Speaker A
Okay, so let’s talk about that place. So you’re a fiber optic company. As you said, you changed the company dramatically. For example, you sell your consumer business. Well, talk to me about networking as a surface because this is going to be a new concept to a lot of people. How does the business model work now?
02:35 chris
So, let’s quickly review what the disadvantages of enterprise networking are. Actually it’s just point to point. Everything is very still. Well, everything is being delivered very slowly. I need to get from my premises to my data center or public cloud. What we’re seeing uh the data is chasing energy. Well, data is indeed the fuel that everyone needs to consume to keep the GPU running. Well, this proliferation now you need to get from anywhere to anywhere. So it’s not just going from your on-premises to the cloud. This is from cloud to cloud, from DC to cloud. The network is a service under lock and key. So it’s our customers’ gateway to on-demand access to a programmable network where they can move data from anywhere to anywhere.
03:40 Speaker A
So they’re not leasing or buying a specific line from here to here. They just gain the ability to go where they need to go.
03:51 chris
Correct. Correct. So instead of having a bunch of network engineers sitting downstairs in a lab waiting to download petabytes of data and then move it to another location. We can provide you with a fast route that you can complete in as little time as you need. So it’s about big pipelines, low latency, but also about on-demand capabilities and programmability from anywhere to anywhere. We are the only ones building it.
04:29 Speaker A
It costs a lot to build this kind of infrastructure, and I know you’re not building this building expecting to make a profit anytime soon. So, what does this mean for investors?
04:45 chris
So there is definitely something going on. Well, let’s make use of EBIDA this year. Uh, uh, so EBIDA is really the benchmark for the industry, uh, and we’ll see it start to grow. We are committed to doing this as part of our guidance. In a few years, in 2028, we will see revenue in our business segment because we still have a legacy business that provides us with a lot of cash flow, but it is declining. But what we’re seeing is that as customers adopt NAS, it’s really starting to accelerate.
05:22 Speaker A
NAS is Network as a Service.
05:23 chris
NAS is Network as a Service. Yes. We see its quarter-on-quarter growth rate as high as 20%, 30%. So we had about 1,000 customers in August. We have 2,000 now. So it’s still starting small, but we expect to see rapid adoption as customers realize they can consume on demand and really consume on their own terms.
05:53 Speaker A
Well, how do people need to understand the competition in this space? As you said, you guys are somewhat uniquely moving to this model, but there are certainly other fiber providers out there.
06:05 chris
That’s the point. There are other fiber providers, but they are mostly point-to-point. And some things related to that. There are fiber providers, there are service providers. Well, but no fiber provider has the network flavor or the underlying capabilities and network-as-a-service capabilities that we have, the ability to digitize the network. So we’re really in a unique position that we have both, which allows us to work more deeply with our customers to provide the level of service they need in the AI ​​world.
06:48 Speaker A
Well, as I mentioned, stocks did go up yesterday and then they went down again. I have recovered a little bit today. Do you think investors got the message yesterday, or do you think Anthropic distracted them, they heard something they shouldn’t have heard, or, you know, was there a misunderstanding?
07:07 chris
No, that’s a good question. The feedback we got from yesterday’s event was fantastic. Uh, because it really shows how not only the business, but the underlying economics of the business have changed. We are moving to a consumption model. Uh, it’s more of a price times quantity uh formula and when a customer signs up, they introduce a port where they can use the service uh through the software. So it’s a more scalable model and people are very excited about it. I think what we’re seeing more broadly is that as a company we’re now starting to get more recognition in the AI ​​industry. There’s been a lot of volatility in the near term as people try to figure out what it all means. But from our perspective, uh, because we’re the only network that can do what we’re doing, and there are going to be winners and losers in the large language model space, right. Whoever wins will need our network. So we’re pretty good at that.
08:24 Speaker A
Gotta leave it there, Chris. Thank you very much for coming.
