Revenue Recognition

6 Months Ended

Jun. 30, 2025

Revenue from Contract with Customer [Abstract]

Revenue Recognition

Note 4—Revenue Recognition

Product and Service Categories

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

•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, Unified Communications and Collaboration, 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; and

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

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

•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; and

•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.

Reconciliation of Total Revenue to Revenue from Contracts with Customers

The following tables provide total revenue by segment, sales channel and product category. They also provide the amount of revenue that is not subject to Accounting Standards Codification ("ASC") 606, "Revenue from Contracts with Customers" ("ASC 606"), but is instead governed by other accounting standards.

	Three Months Ended June 30, 2025				Six Months Ended June 30, 2025
	Total Revenue		Adjustments for Non-ASC 606 revenue (1)	Total revenue from Contracts with Customers	Total Revenue	Adjustments for Non-ASC 606 Revenue (1)	Total Revenue from Contracts with Customers
	(Dollars in millions)
Business Segment by Sales Channel and Product Category
Large Enterprise
Grow	$	427	(91)	336	843	(178)	665
Nurture	192		—	192	395	—	395
Harvest	75		—	75	154	—	154
Other	38		—	38	77	—	77
Total Large Enterprise Revenue	732		(91)	641	1,469	(178)	1,291
Mid-Market Enterprise
Grow	260		(5)	255	519	(12)	507
Nurture	154		—	154	319	—	319
Harvest	77		(1)	76	156	(2)	154
Other	9		—	9	19	—	19
Total Mid-Market Enterprise Revenue	500		(6)	494	1,013	(14)	999
Public Sector
Grow	140		(24)	116	299	(48)	251
Nurture	83		—	83	167	—	167
Harvest	137		—	137	245	—	245
Other	126		—	126	258	—	258
Total Public Sector Revenue	486		(24)	462	969	(48)	921
Wholesale
Grow	262		(69)	193	527	(144)	383
Nurture	170		(6)	164	347	(12)	335
Harvest	258		(39)	219	518	(73)	445
Other	—		—	—	3	—	3
Total Wholesale Revenue	690		(114)	576	1,395	(229)	1,166
International and Other
Grow	38		(1)	37	75	(2)	73
Nurture	35		—	35	72	—	72
Harvest	7		—	7	15	—	15
Other	2		—	2	6	—	6
Total International and Other	82		(1)	81	168	(2)	166
Business Segment by Product Category
Grow	1,127		(190)	937	2,263	(384)	1,879
Nurture	634		(6)	628	1,300	(12)	1,288
Harvest	554		(40)	514	1,088	(75)	1,013
Other	175		—	175	363	—	363
Total Business Segment Revenue	2,490		(236)	2,254	5,014	(471)	4,543
Mass Markets Segment by Product Category
Fiber Broadband	217		(3)	214	426	(6)	420
Other Broadband	245		(24)	221	502	(48)	454
Voice and Other	140		40	180	332	31	363
Total Mass Markets Revenue	602		13	615	1,260	(23)	1,237
Total Revenue	$	3,092	(223)	2,869	6,274	(494)	5,780

	Three Months Ended June 30, 2024				Six Months Ended June 30, 2024
	Total Revenue		Adjustments for Non-ASC 606 revenue (1)	Total revenue from Contracts with Customers	Total Revenue	Adjustments for Non-ASC 606 Revenue (1)	Total Revenue from Contracts with Customers
	(Dollars in millions)
Business Segment by Sales Channel and Product Category
Large Enterprise
Grow	$	377	(61)	316	755	(110)	645
Nurture	235		—	235	476	—	476
Harvest	96		—	96	199	—	199
Other	41		—	41	84	(1)	83
Total Large Enterprise Revenue	749		(61)	688	1,514	(111)	1,403
Mid-Market Enterprise
Grow	257		(7)	250	513	(13)	500
Nurture	200		—	200	413	—	413
Harvest	95		(1)	94	193	(2)	191
Other	10		—	10	20	(1)	19
Total Mid-Market Enterprise Revenue	562		(8)	554	1,139	(16)	1,123
Public Sector
Grow	128		(20)	108	253	(41)	212
Nurture	88		—	88	176	—	176
Harvest	92		(1)	91	186	(2)	184
Other	141		—	141	255	—	255
Total Public Sector Revenue	449		(21)	428	870	(43)	827
Wholesale
Grow	263		(76)	187	523	(138)	385
Nurture	186		(7)	179	378	(14)	364
Harvest	275		(37)	238	551	(75)	476
Other	2		—	2	5	—	5
Total Wholesale Revenue	726		(120)	606	1,457	(227)	1,230
International and Other
Grow	38		(1)	37	78	(2)	76
Nurture	41		—	41	83	—	83
Harvest	10		—	10	21	—	21
Other	3		—	3	7	—	7
Total International and Other	92		(1)	91	189	(2)	187
Business Segment by Product Category
Grow	1,063		(165)	898	2,122	(304)	1,818
Nurture	750		(7)	743	1,526	(14)	1,512
Harvest	568		(39)	529	1,150	(79)	1,071
Other	197		—	197	371	(2)	369
Total Business Segment Revenue	2,578		(211)	2,367	5,169	(399)	4,770
Mass Markets Segment by Product Category
Fiber Broadband	181		(3)	178	351	(7)	344
Other Broadband	298		(27)	271	613	(55)	558
Voice and Other	211		(9)	202	425	(18)	407
Total Mass Markets Revenue	690		(39)	651	1,389	(80)	1,309
Total Revenue	$	3,268	(250)	3,018	6,558	(479)	6,079

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(1)Includes regulatory revenue and lease revenue not within the scope of ASC 606.

Operating Lease Revenue

We lease various dark fiber and conduit, office facilities, colocation facilities, switching facilities, other network sites, and service equipment to third parties under operating leases. Lease and sublease income are included in Operating revenue in the consolidated statements of operations.

For the three months ended June 30, 2025 and 2024, our gross rental revenue was $265 million and $240 million, respectively, which represented approximately 9% and 7%, respectively, of our operating revenue for the three months ended June 30, 2025 and 2024. For the six months ended June 30, 2025 and 2024, our gross rental revenue was $527 million and $461 million, respectively, which represented approximately 8% and 7%, respectively, of our operating revenue for the six months ended June 30, 2025 and 2024.

Customer Receivables and Contract Balances

The following table provides balances of customer receivables, contract assets, and contract liabilities, net of amounts reclassified as held for sale:

	June 30, 2025		December 31, 2024
	(Dollars in millions)
Customer receivables, less allowance of $42 and $50(1)	$	1,220	1,193
Contract assets	19		19
Contract liabilities(2)	662		733

______________________________________________________________________

(1)    As of June 30, 2025, this amount excluded $13 million of customer receivables, net associated with the disposal group reclassified as held for sale.

(2)     As of June 30, 2025, this amount excluded $30 million of contract liabilities associated with the disposal group reclassified as held for sale.

Contract liabilities are consideration we have received from our customers or billed in advance of providing goods or services promised in the future. We defer recognizing this consideration as revenue until we have satisfied the related performance obligation to the customer. Contract liabilities include recurring services billed one month in advance and installation, and maintenance charges that are deferred and recognized over the actual or expected contract term, which typically ranges from one to five years depending on the service. Contract liabilities are included within Deferred revenue on our consolidated balance sheets. During the three and six months ended June 30, 2025, we recognized $71 million and $365 million, respectively, of revenue that was included in contract liabilities of $733 million as of January 1, 2025, including contract liabilities that were classified as held for sale. During the three and six months ended June 30, 2024, we recognized $43 million and $343 million of revenue that was included in contract liabilities of $698 million as of January 1, 2024.

Performance Obligations

As of June 30, 2025, we expect to recognize approximately $6.0 billion of revenue in the future related to performance obligations associated with existing customer contracts that are partially or wholly unsatisfied. As of June 30, 2025, the transaction price related to unsatisfied performance obligations that are expected to be recognized for the remainder of 2025, 2026, and thereafter was $1.6 billion, $2.1 billion and $2.3 billion, respectively.

These amounts exclude (i) the value of unsatisfied performance obligations for contracts for which we recognize revenue in amounts for which we have the right to invoice for services performed (for example, uncommitted usage or non-recurring charges associated with professional or technical services to be completed), (ii) contracts that are classified as leasing arrangements or government assistance that are not subject to ASC 606, and (iii) the value of unsatisfied performance obligations for contracts which relate to the disposal group classified as held for sale.

Contract Costs

The following tables provide changes in our contract acquisition costs and fulfillment costs:

	Three Months Ended June 30, 2025			Six Months Ended June 30, 2025
	Acquisition Costs		Fulfillment Costs(1)	Acquisition Costs	Fulfillment Costs(1)
	(Dollars in millions)			(Dollars in millions)
Beginning of period balance	$	210	236	203	222
Costs incurred	32		58	72	109
Amortization	(32)		(39)	(65)	(76)
Change in contract costs held for sale	—		(14)	—	(14)
End of period balance	$	210	241	210	241

______________________________________________________________________

(1)    The ending balance for the three and six months ended June 30, 2025 excluded fulfillment costs associated with the disposal group reclassified as held for sale of $14 million.

	Three Months Ended June 30, 2024			Six Months Ended June 30, 2024
	Acquisition Costs		Fulfillment Costs	Acquisition Costs	Fulfillment Costs
	(Dollars in millions)			(Dollars in millions)
Beginning of period balance	$	182	189	182	184
Costs incurred	35		49	68	85
Amortization	(32)		(34)	(65)	(65)
End of period balance	$	185	204	185	204

Acquisition costs include commission fees paid to employees as a result of obtaining contracts. Fulfillment costs include third party and internal costs associated with the provision, installation, and activation of services to customers, including labor and materials consumed for these activities.

We amortize deferred acquisition and fulfillment costs based on the transfer of services on a straight-line basis over the average contract life of approximately 47 months for Mass Markets customers and 34 months for Business customers. We include amortized fulfillment costs in cost of services and products and amortized acquisition costs in Selling, general and administrative in our consolidated statements of operations. We include the amount of these deferred costs that are anticipated to be amortized in the next 12 months in Other current assets, net on our consolidated balance sheets. We include the amount of deferred costs expected to be amortized beyond the next 12 months in Other liabilities on our consolidated balance sheets. We assess deferred acquisition and fulfillment costs for impairment on a quarterly basis.