Key Points

Endava beat EPS estimates, but the company lowered full-year guidance on continued macro headwinds. Endava saw its number of big-spending clients fall, and it is more reliant than ever on its top customers. Until large corporations have more clarity about the economy, Endava is unlikely to see a significant uptick in new business. 10 stocks we like better than Endava Plc ›

Here's our initial take on Endava's (NYSE: DAVA) fiscal 2025 third-quarter financial report.

Key Metrics

Metric Q3 2024 Q3 2025 Change vs. Expectations Revenue £174.4 million £194.8 million 12% Met Earnings per share £0.22 £0.34 55% Beat Clients with £1 million in annual revenue 142 136 -4% n/a Headcount 11,025 11,365 3% n/a

Endava's Slow and Winding Road to Recovery

It was just more than a year ago when shares of British tech consulting firm Endava lost about half their value following a disappointing earnings report. Endava has made some progress since then, but with macro headwinds continuing to cause large clients to shun big-ticket projects, the company is finding it hard to break free of the headwinds.

Endava grew revenue by nearly 12% and earnings by 55%, but its number of customers doing at least £1 million in annual revenue fell by 4%. CEO John Cotterell said the business environment "continues to evolve rapidly and the quarter just ended has been challenging."

Things are not going to improve overnight. Endava said it now anticipates full-year revenue of between £771.5 million and £773.5 million, down from its previous range of £795 million to £800 million and below the consensus estimate of £791.29 million.

Earnings per share for the year is expected to be £1.11 to £1.13, down from a prior forecast for £1.20 to £1.23. Analysts were expecting £1.19.

There is some reason for long-term optimism in the results. Endava grew its headcount over the past year, a sign that a consulting firm believes business will pick up in the future. And Endava is making strides in diversifying its revenue sources: 37% of quarterly revenue came from North America and 35% from the United Kingdom, compared to 35% from the U.K. and just 30% from North America a year ago.

But Endava is more reliant than ever on its biggest clients. The company said that its top 10 clients accounted for 39% of revenue in the just-completed quarter, compared to 34% in the prior year.

Immediate Market Reaction

Investors are looking for a clear sign Endava's troubles are behind it, and this quarter failed to deliver. Endava shares traded down 8% in the premarket ahead of the New York Stock Exchange open.

Story Continues

What to Watch

Cotterell summed up both the bull case for Endava and the issues the company is facing in his prepared remarks, saying the desire to innovate remains strong, but clients "are slow at signing larger contracts in the current uncertain macroeconomic environment."

Eventually, tech modernization needs to happen or large corporations risk being left behind. But Cotterell said Endava's ability to convert conversations into revenue "is not happening as we would have expected."

Endava is doing what it can to get business through the door, announcing a new partnership with consulting firm Alix Partners that should help it recruit new business in the financial services, retail, automotive, and private equity sectors. But until large customers have enough certainty about the macro environment to commit to spending large sums on tech projects, Endava is likely to be stuck in neutral.

Helpful Resources

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Lou Whiteman has positions in Endava Plc. The Motley Fool has positions in and recommends Endava Plc. The Motley Fool has a disclosure policy.

Endava Sees No Relief Up Ahead was originally published by The Motley Fool

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