Revenue Recognition

6 Months Ended

Jun. 30, 2025

Revenue from Contract with Customer [Abstract]

Revenue Recognition

Note 3—Revenue Recognition

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

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

•Other, which includes primarily managed and professional service solutions; and

•Affiliate Services, which includes communications services provided to our affiliates that we also provide to our external customers.

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

Reconciliation of Total Revenue to Revenue from Contracts with Customers

The following tables provide total revenue by product and service 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)
Grow	$	1,000	(178)	822	2,004	(356)	1,648
Nurture	341		(3)	338	701	(6)	695
Harvest	177		—	177	357	—	357
Other	40		—	40	71	—	71
Affiliate Services	68		(68)	—	140	(140)	—
Total revenue	$	1,626	(249)	1,377	3,273	(502)	2,771

	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)
Grow	$	929	(152)	777	1,850	(277)	1,573
Nurture	383		(4)	379	768	(8)	760
Harvest	184		—	184	379	—	379
Other	43		—	43	73	—	73
Affiliate Services	61		(61)	—	120	(120)	—
Total revenue	$	1,600	(217)	1,383	3,190	(405)	2,785

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(1)Includes lease revenue which is not within the scope of ASC 606.

Operating Lease Revenue

We lease various dark fiber and conduit, office facilities and colocation facilities 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 lease revenue was $195 million and $172 million, respectively, which represented approximately 12% and 11%, respectively, of our operating revenue for each respective period. For the six months ended June 30, 2025 and 2024, our gross lease revenue was $413 million and $318 million, respectively, which represented approximately 13% and 10%, respectively, of our operating revenue for each respective period.

Customer Receivables and Contract Balances

The following table provides balances of customer receivables, contract assets and contract liabilities:

	June 30, 2025		December 31, 2024
	(Dollars in millions)
Customer receivables, less allowance of $11 and $12	$	623	529
Contract assets	11		12
Contract liabilities	234		267

Contract liabilities are consideration we have received from our customers or billed in advance of providing the 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 $35 million and $106 million, respectively, of revenue that was included in contract liabilities of $267 million as of January 1, 2025. During the three and six months ended June 30, 2024, we recognized $13 million and $82 million, respectively, of revenue that was included in contract liabilities of $222 million as of January 1, 2024.

Performance Obligations

As of June 30, 2025, we expect to recognize approximately $4.1 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 $1.1 billion, $1.6 billion and $1.4 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) and (ii) contracts that are classified as leasing arrangements that are not subject to ASC 606.

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	Acquisition Costs	Fulfillment Costs
	(Dollars in millions)
Balance at beginning of period	$	82	133	77	127
Costs incurred	9		30	27	57
Amortization	(13)		(22)	(26)	(43)
Balance at end of period	$	78	141	78	141

	Three Months Ended June 30, 2024			Six Months Ended June 30, 2024
	Acquisition Costs		Fulfillment Costs	Acquisition Costs	Fulfillment Costs
	(Dollars in millions)
Balance at beginning of period	$	70	99	70	97
Costs incurred	12		35	24	52
Amortization	(12)		(18)	(24)	(33)
Balance at end of period	$	70	116	70	116

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 expected contract life of approximately 36 months for our business customers. We include amortized fulfillment costs in cost of services and products and amortized acquisition costs in Selling, general and administrative expenses in our consolidated statements of operations. We include the amount of deferred costs that are anticipated to be amortized in the next 12 months in Other current assets, net on our consolidated balance sheets. The amount of deferred costs expected to be amortized beyond 12 months is included in Other assets, net on our consolidated balance sheets. We assess deferred acquisition and fulfillment costs for impairment on a quarterly basis.