v3.26.3
Revenue Recognition
 9 Months Ended
Sep. 30, 2026
Revenue from Contract with Customer [Abstract]  
Revenue Recognition
Note 4—Revenue Recognition

We categorize revenue from our operations within the products and services listed below based on the customers we serve, as follows: (i) revenue from Business customers is primarily reflected in the 'Strategic' and 'Legacy' categories, and (ii) revenue from Mass Markets customers is primarily reflected in 'Fiber Broadband', 'Other Broadband', and 'Voice and Other' categories.

Product and Service Categories

•Strategic: Includes existing and emerging products and services in which we are significantly investing, including offerings that leverage modernized infrastructure, higher-capacity technologies, and scalable or on-demand delivery models, such as dark fiber and conduit, IP, higher speed wavelength services, colocation facilities, certain Ethernet and VPN data network services, and digital services, such as Edge Fabric and Network-as-a-Service ("NaaS");

•Legacy: Includes our services that are generally provided over legacy platforms or lower-capacity configurations, such as traditional Ethernet, IP, and VPN data network services, delivered in locations or with technologies not currently suited for scalable or on-demand models, lower-speed wavelength services, voice and private line services, as well as managed and professional services and equipment sales;

•Fiber Broadband: Under which we provide high speed broadband services to residential and small business customers utilizing our fiber-based network infrastructure, representing the fiber-based business-to-customer products and services that remain following the Mass Markets Fiber-to-the-Home divestiture;
•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.

Sales Channels

Under our Business customer revenue, we provide products and services under five sales channels to meet the needs of our enterprise and commercial customers. The five sales channels, organized by customer focus, include:

•Large Enterprise: Large enterprise customers and carriers in North America.

•Mid-Market Enterprise: Medium-sized enterprises in North America, served directly and through indirect     channel partners.

•Public Sector: U.S. Federal government, state and local governments, and research and education institutions.

•Wholesale: Other communication companies providing wireline, wireless, cable, voice, and data center services.

•International and Other: Multinational and global enterprise customers and carriers.

By organizing our offerings through these customer-focused sales channels, we streamline operations and deliver targeted solutions.

Reconciliation of Total Revenue to Revenue from Contracts with Customers

The following tables provide total revenue by sales channel and product category. They also provide the amount of revenue that is not subject to Topic 606, but is instead governed by other accounting standards. The amounts in the tables below include revenue for the Mass Markets Fiber-to-the-Home business prior to its sale on February 2, 2026:
Three Months Ended September 30, 2026Nine Months Ended September 30, 2026
Total Revenue
Adjustments for Non-ASC 606 Revenue (1)
Total Revenue from Contracts with CustomersTotal Revenue
Adjustments for Non-ASC 606 Revenue (1)
Total Revenue from Contracts with Customers
(Dollars in millions)
Sales Channel and Product Category
Large Enterprise
Strategic$584 (149)435 1,675 (416)1,259 
Legacy226 — 226 707 — 707 
Total Large Enterprise Revenue810 (149)661 2,382 (416)1,966 
Mid-Market Enterprise
Strategic250 (6)244 734 (18)716 
Legacy180 (1)179 570 (3)567 
Total Mid-Market Enterprise Revenue430 (7)423 1,304 (21)1,283 
Public Sector
Strategic150 (30)120 525 (84)441 
Legacy279 — 279 900 (1)899 
Total Public Sector Revenue429 (30)399 1,425 (85)1,340 
Wholesale
Strategic258 (70)188 774 (211)563 
Legacy349 (35)314 1,134 (111)1,023 
Total Wholesale Revenue607 (105)502 1,908 (322)1,586 
International and Other
Strategic37 — 37 106 (1)105 
Legacy33 — 33 109 — 109 
Total International and Other70 — 70 215 (1)214 
Business Revenue by Product Category
Strategic1,279 (255)1,024 3,814 (730)3,084 
Legacy1,067 (36)1,031 3,420 (115)3,305 
Total Business Revenue2,346 (291)2,055 7,234 (845)6,389 
Mass Markets by Product Category
Fiber Broadband17 — 17 126 (2)124 
Other Broadband179 (14)165 576 (47)529 
Voice and Other173 (28)145 483 (30)453 
Total Mass Markets Revenue369 (42)327 1,185 (79)1,106 
Total Revenue$2,715 (333)2,382 8,419 (924)7,495 
Three Months Ended September 30, 2025Nine Months Ended September 30, 2025
Total Revenue
Adjustments for Non-ASC 606 Revenue (1)
Total Revenue from Contracts with CustomersTotal Revenue
Adjustments for Non-ASC 606 Revenue (1)
Total Revenue from Contracts with Customers
(Dollars in millions)
Sales Channel and Product Category
Large Enterprise
Strategic$507 (101)406 1,448 (279)1,169 
Legacy275 — 275 869 — 869 
Total Large Enterprise Revenue782 (101)681 2,317 (279)2,038 
Mid-Market Enterprise
Strategic236 (7)229 704 (18)686 
Legacy228 (1)227 720 (4)716 
Total Mid-Market Enterprise Revenue464 (8)456 1,424 (22)1,402 
Public Sector
Strategic135 (25)110 404 (73)331 
Legacy341 — 341 1,036 — 1,036 
Total Public Sector Revenue476 (25)451 1,440 (73)1,367 
Wholesale
Strategic255 (73)182 779 (217)562 
Legacy400 (40)360 1,267 (125)1,142 
Total Wholesale Revenue655 (113)542 2,046 (342)1,704 
International and Other
Strategic34 (1)33 101 (3)98 
Legacy45 — 45 142 — 142 
Total International and Other79 (1)78 243 (3)240 
Business Revenue by Product Category
Strategic1,167 (207)960 3,436 (590)2,846 
Legacy1,289 (41)1,248 4,034 (129)3,905 
Total Business Revenue2,456 (248)2,208 7,470 (719)6,751 
Mass Markets by Product Category
Fiber Broadband225 (3)222 651 (9)642 
Other Broadband230 (23)207 732 (71)661 
Voice and Other176 (7)169 508 24 532 
Total Mass Markets Revenue631 (33)598 1,891 (56)1,835 
Total Revenue$3,087 (281)2,806 9,361 (775)8,586 
____________________________________________________________________
(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.
The following table provides details of our gross operating lease revenue:

Three Months Ended September 30,Nine Months Ended September 30,
2026202520262025
(Dollars in millions)
Operating lease revenue
$307 272 898 799 
Percentage of operating revenue11 %9 %11 %9 %

Customer Receivables and Contract Balances

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

September 30, 2026December 31, 2025
(Dollars in millions)
Customer receivables, net of allowance of $33 and $57(1)
$1,148 1,316 
Contract assets26 33 
Contract liabilities(2)
773 647 
______________________________________________________________________
(1)    As of December 31, 2025, this amount excluded $13 million of customer receivables, net associated with the disposal group classified as held for sale.
(2)     As of December 31, 2025, this amount excluded $32 million of contract liabilities associated with the disposal group classified as held for sale.

Contract liabilities are included within Deferred revenue on our consolidated balance sheets and 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 typically ranges from one to five years depending on the service.

During the three and nine months ended September 30, 2026, we recognized $55 million and $409 million of revenue that was included in contract liabilities of $647 million as of January 1, 2026, including contract liabilities that were classified as held for sale. During the three and nine months ended September 30, 2025, we recognized $60 million and $425 million of revenue that was included in contract liabilities of $733 million as of January 1, 2025.

Performance Obligations

As of September 30, 2026, we expect to recognize $6.1 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, 2026, the transaction price related to unsatisfied performance obligations that are expected to be recognized for the remainder of 2026, 2027, and thereafter was $940 million, $2.7 billion and $2.5 billion, respectively.

These amounts exclude:

•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

•contracts that are classified as leasing arrangements or government assistance that are not subject to ASC 606.
Contract Costs

Acquisition Costs

•Includes commission fees paid to employees as a result of obtaining contracts.

•Amortized acquisition costs are included in Selling, general and administrative expenses in our consolidated statements of operations.

Fulfillment Costs

•Includes third-party and internal costs associated with the provision, installation, and activation of services to customers, including labor and materials consumed for these activities.

•Amortized fulfillment costs are included in Cost of services and products in our consolidated statements of operations.

We amortize deferred acquisition and fulfillment costs based on the transfer of services on a straight-line basis over the average contract life of ap    proximately 50 months for Mass Markets customers and 38 months for Business customers.

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

Three Months Ended September 30, 2026Nine Months Ended September 30, 2026
Acquisition Costs
Fulfillment Costs
Acquisition Costs
Fulfillment Costs
(Dollars in millions)(Dollars in millions)
Beginning of period balance(1)
$160 290 196 264 
Costs incurred26 57 81 168 
Amortization(26)(44)(81)(129)
Change in contract costs held for sale— — (36)— 
End of period balance
$160 303 160 303 
______________________________________________________________________
(1)    The beginning balance for the nine months ended September 30, 2026 excluded $24 million and $21 million of acquisition costs and fulfillment costs, respectively, associated with the disposal group classified as held for sale.


Three Months Ended September 30, 2025Nine Months Ended September 30, 2025
Acquisition CostsFulfillment CostsAcquisition CostsFulfillment Costs
(Dollars in millions)(Dollars in millions)
Beginning of period balance(1)
$210 241 203 222 
Costs incurred34 57 106 166 
Amortization(30)(41)(95)(117)
Change in contract costs held for sale— (3)— (17)
End of period balance(2)
$214 254 214 254 
______________________________________________________________________
(1)    The beginning balance for the three months ended September 30, 2025 excluded $14 million of fulfillment costs associated with the disposal group classified as held for sale.
(2)    The ending balance for the three and nine months ended September 30, 2025 excluded $17 million of fulfillment costs associated with the disposal group classified as held for sale.
We include deferred acquisition and fulfillment costs in Other current assets, net and Other assets, net on our consolidated balance sheets and assess them for impairment on a quarterly basis.