Endava plc reported Q2 FY2026 revenue of £184.1 million, a 5.9 % decline from £195.6 million in the same quarter last year. Diluted earnings per share fell to a loss of £(0.13), while adjusted diluted EPS stood at £0.16, down from £0.30 in Q2 FY2025. The company’s adjusted profit‑before‑tax margin contracted to 5.8 % from 11.2 % year‑over‑year, reflecting the impact of ongoing AI‑native transformation investments.
Margin compression is driven by higher headcount and training costs associated with recruiting NextGen AI talent and expanding the partner ecosystem, as CEO John Cotterell noted: “Over the past several quarters we have been investing heavily in our pivot towards AI to establish Endava as an AI leader. These investments have encompassed recruitment and training of NextGen Talent, introducing a shift towards becoming AI Native, building our Partner ecosystem and evolving our engagement strategy.” The company also reported a slight decline in adjusted profit before tax margin, underscoring the short‑term cost burden of the transformation.
Revenue mix remained concentrated in North America (40 %) and the United Kingdom (31 %), with Europe contributing 23 % and the rest of the world 6 %. By industry, Payments accounted for 19 % of revenue, Business‑to‑Consumer (BCM) 22 %, Insurance 9 %, Technology, Media & Telecom (TMT) 16 %, Mobility 9 %, Healthcare 12 % and Other 13 %. The mix shift toward higher‑margin AI‑enabled services helped offset some of the revenue decline, but the overall contraction reflects weaker demand in legacy segments.
Management guided for third‑quarter revenue of £182.0 million to £185.0 million and an adjusted EPS of £0.18 to £0.21, a modest downward revision from earlier guidance. For the full fiscal year, Endava now expects revenue between £736.0 million and £750.0 million and adjusted EPS of £0.80 to £0.86. CFO Mark Thurston said: “We expect full‑year fiscal 2026 revenue between £736 million–£750 million and adjusted diluted EPS between 80p–86p.” The guidance signals a cautious outlook amid continued margin compression, while still maintaining a positive trajectory for the year.
The results beat revenue estimates of £179.9 million but missed adjusted EPS expectations of £0.21, a miss of roughly £0.05 per share. Investors appear to be weighing the promise of the long‑term AI transformation against the clear near‑term financial pressures, resulting in a cautious initial reaction to the earnings report.
Endava’s strategic pivot to an AI‑native delivery model, underpinned by the Dava.Flow framework, is intended to build a higher‑margin, outcome‑based business. While the current quarter shows short‑term revenue erosion and margin compression, the company’s continued share repurchase program and strong cash position provide a buffer as it invests in talent, training and partner ecosystems. The long‑term upside hinges on the successful scaling of AI‑enabled services and the ability to convert early investments into sustainable profitability.
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