Endava plc

Revenue for the quarter ended March 31, 2026 was GBP 178.5 million, down from GBP 194.8 million a year ago, an 8.4% decrease and a 6.4% decline in constant currency. Loss before tax was GBP 372 million, including a noncash goodwill impairment of GBP 364.6 million, versus profit before tax of GBP 13.6 million last year. Adjusted PBT was GBP 3.2 million versus GBP 24.6 million, adjusted PBT margin was 1.8% versus 12.6%, and adjusted diluted EPS was 5p versus 34p. Adjusted free cash flow was negative GBP 3.1 million, cash and cash equivalents were GBP 48.4 million, and borrowings were GBP 195.8 million. For Q4 FY2026, Endava guided to revenue of GBP 181 million to GBP 185 million and adjusted diluted EPS of 9p to 13p. For full-year FY2026, it guided to revenue of GBP 721.8 million to GBP 725.8 million and adjusted diluted EPS of 45p to 49p.

John Cotterell framed the quarter as one of Endava’s most challenging in recent years, citing uneven demand, extended deal cycles, and clients scrutinizing spend. He emphasized that the company is deliberately pivoting from traditional digital transformation toward AI-native, outcome-based work, pointing to growth in AI-driven revenue, Dava.Flow adoption, and new partnerships with Mastercard and Google. His tone was cautious on near-term execution but constructive on the strategic shift, repeatedly arguing that the AI opportunity is real even if deals are taking longer to close.

Mark Thurston said revenue miss drivers included delayed Middle East work, softer client demand, and large outcome-based contracts taking longer than planned. He highlighted the GBP 364.6 million goodwill impairment and GBP 23.2 million deferred tax asset charge as noncash one-off items, and said the Q3 adjusted tax rate was 17%, expected to rise to 37% in Q4, with full-year adjusted tax around 25%. He also noted negative free cash flow of GBP 3.1 million due to March billing timing, expects most receivables to be collected by the end of June, and said leverage reduction is a focus ahead of a refinancing in FY2027.

Analysts pressed on whether AI adoption will translate into bookings faster, and management said AI-driven deals are coming through but are more complex and take longer to close, often 5-6 months versus an expected 3-4 months. Questions also focused on capital allocation and borrowings; management said deleveraging matters, but Q4 cash should improve as receivables are collected. On revenue weakness, management said it was not seeing major vendor consolidation or broad share loss, but rather pressure from client caution, Middle East disruption, and a transition away from T&M toward newer AI-driven models. Management also said outcome-based contracts are not being rejected by clients, just slowed by legal, regulatory, and contracting complexity.