Endava (DAVA) Q3 2026 earnings summary

Executive summary

• Revenue declined 8.4% year-over-year to GBP 178.5 million, driven by delayed client work, macroeconomic headwinds, and longer deal cycles, with challenging demand and increased client scrutiny of technology spending.

• The company is accelerating its transformation to an AI-native business, with AI-driven revenue rising from 5% to 15% of total revenue year-over-year, embedding AI across delivery, operations, and client solutions.

• A non-cash goodwill impairment of GBP 364.6 million and derecognition of a GBP 23.2 million deferred tax asset resulted in a reported loss before tax of GBP 372 million.

• Strategic partnerships with Mastercard, Google, OpenAI, and Tyl by NatWest are expanding, with new AI-native solutions and outcome-based contracts gaining traction.

Financial highlights

• Q3 FY26 revenue was GBP 178.5 million, down from GBP 194.8 million in Q3 FY25 (8.4% decrease; 6.4% in constant currency).

• Adjusted profit before tax was GBP 3.2 million (1.8% margin), down from GBP 24.6 million (12.6% margin) prior year.

• Adjusted diluted EPS was GBP 0.05, down from GBP 0.34 year-over-year; diluted EPS was GBP (7.55), down from GBP 0.18.

• Adjusted free cash flow was negative GBP 3.1 million, compared to positive GBP 17.5 million a year ago.

• Cash and cash equivalents at quarter-end were GBP 48.4 million; borrowings increased to GBP 195.8 million.

Outlook and guidance

• Q4 FY26 revenue expected between GBP 181 million and GBP 185 million, a year-over-year decrease of 3.5% to 1.0% in constant currency.

• Full-year FY26 revenue guidance is GBP 721.8 million–GBP 725.8 million, down 6.0% to 5.0% year-over-year in constant currency.

• Adjusted diluted EPS for Q4 expected between GBP 0.09–GBP 0.13; full-year FY26 guidance is GBP 0.45–GBP 0.49.

• Adjusted tax rate expected to rise to 37% in Q4, with full-year rate around 25%.