Revenue Recognition

9 Months Ended

Sep. 30, 2025

Revenue from Contract with Customer [Abstract]

Revenue Recognition

Note 4—Revenue Recognition

We categorize our revenue derived from our operations based on the customers we serve, as follows: (i) revenue derived from serving our Mass Markets customers are categorized primarily within the first three categories listed below, (ii) revenue derived from servicing our Business customers are categorized primarily in the 'Harvest', 'Nurture' and 'Grow' categories listed below, and (iii) revenue derived from serving our affiliates are categorized in the 'Affiliate Services' category listed:

•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 services, professional services, and other ancillary services, (ii) federal broadband and state support payments, and (iii) equipment, IT solutions and other services;

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

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

•Nurture, which includes our more mature offerings, including primarily ethernet;

•Grow, which includes existing and emerging products and services in which we are significantly investing, including our dark fiber and wavelengths services; and

•Affiliate Services, which are (i) communications services that we provide to our affiliates and also provide to external customers and (ii) application development and support services that we provide to our affiliates, as described further in Note 8—Affiliate Transactions.

Reconciliation of Total Revenue to Revenue from Contracts with Customers

The following tables provide our total revenue by product and service category as well as 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 September 30, 2025				Nine Months Ended September 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)
Other Broadband	$	186	(17)	169	588	(54)	534
Voice and Other	111		(4)	107	336	(1)	335
Fiber Broadband	78		(3)	75	246	(9)	237
Harvest	199		(29)	170	633	(92)	541
Nurture	79		(2)	77	248	(7)	241
Grow	31		(2)	29	97	(6)	91
Affiliate Services	477		(12)	465	1,441	(36)	1,405
Total revenue	$	1,161	(69)	1,092	3,589	(205)	3,384

	Three Months Ended September 30, 2024				Nine Months Ended September 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)
Other Broadband	$	226	(19)	207	716	(60)	656
Voice and Other	127		(2)	125	391	(10)	381
Fiber Broadband	92		(3)	89	289	(9)	280
Harvest	225		(29)	196	704	(92)	612
Nurture	90		(2)	88	268	(6)	262
Grow	33		(2)	31	100	(4)	96
Affiliate Services	570		(12)	558	1,676	(36)	1,640
Total revenue	$	1,363	(69)	1,294	4,144	(217)	3,927

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

Operating Lease Revenue

Qwest leases various data transmission capacity, office facilities, switching facilities, and other network sites to third parties under operating leases. Lease and sublease revenue are included in Operating Revenue in our consolidated statements of operations.

For the three months ended September 30, 2025 and 2024, our gross rental revenue was $66 million and $67 million, respectively, which represented 6% and 5%, respectively, of our operating revenue for three months ended September 30, 2025 and 2024. For the nine months ended September 30, 2025 and 2024, our gross rental revenue was $205 million and $209 million, respectively, which represented approximately 6% and 5%, respectively, of our operating revenue for the nine months ended September 30, 2025 and 2024.

Customer Receivables and Contract Balances

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

	September 30, 2025		December 31, 2024
	(Dollars in millions)
Customer receivables, less allowance of $19 and $23 (1)(2)	$	168	205
Contract liabilities(3)	219		244

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(1)Customer receivables includes affiliate receivables.

(2)     As of September 30, 2025, this amount excluded $11 million of customer receivables, net associated with the disposal group classified as held for sale.

(3)     As of September 30, 2025, this amount excluded $11 million of contract liabilities associated with the disposal group classified as held for sale.

Contract liabilities consist of 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 ranges from one to five years depending on the service. Contract liabilities are included within Deferred revenue in our consolidated balance sheets. During the three and nine months ended September 30, 2025, we recognized $18 million and $158 million, respectively, of revenue that was included in contract liabilities of $244 million as of January 1, 2025, including contract liabilities that were classified as held for sale. During the three and nine months ended September 30, 2024, we recognized $14 million and $162 million, respectively, of revenue that was included in contract liabilities of $269 million as of January 1, 2024.

Performance Obligations

As of September 30, 2025, we expect to recognize approximately $1.9 billion of revenue in the future related to performance obligations associated with existing customer contracts that are partially or wholly unsatisfied. As of September 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 $303 million, $701 million and $918 million, 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), and (ii) contracts that are classified as leasing arrangements that are not subject to ASC 606 and (iii) the value of unsatisfied performance obligations for contracts which relate to the disposal group.

Contract Costs

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

	Three Months Ended September 30, 2025			Nine Months Ended September 30, 2025
	Acquisition Costs		Fulfillment Costs	Acquisition Costs	Fulfillment Costs
	(Dollars in millions)
Balance at beginning of period(1)	$	46	44	51	46
Cost Incurred	5		11	16	32
Amortization	(7)		(8)	(23)	(25)
Change in contract costs held for sale	—		(1)	—	(7)
Balance at end of period(2)	$	44	46	44	46

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(1)    The beginning balance for the three months ended September 30, 2025 excluded $6 million of fulfillment costs associated with the disposal group classified as held for sale.

(2)    The ending balance for both the three and nine months ended September 30, 2025 excluded fulfillment costs associated with the disposal group classified as held for sale of $7 million.

	Three Months Ended September 30, 2024			Nine Months Ended September 30, 2024
	Acquisition Costs		Fulfillment Costs	Acquisition Costs	Fulfillment Costs
	(Dollars in millions)
Balance at beginning of period	$	56	47	58	46
Cost incurred	6		7	25	26
Amortization	(9)		(8)	(30)	(26)
Balance at end of period	$	53	46	53	46

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 communications 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 47 months for Mass Markets customers and 34 months for Business customers, respectively. We include amortized fulfillment costs in cost of services and products and amortized acquisition costs are included in selling, general and administrative expenses 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 assets, net on our consolidated balance sheets. We assess deferred acquisition and fulfillment costs for impairment on a quarterly basis.