Here's our initial take on Endava's (DAVA 0.65%) financial report.
Key Metrics
| Metric | Q4 2024 | Q4 2025 | Change | vs. Expectations |
|---|---|---|---|---|
| Revenue | 194.4 million British pounds | 186.8 million British pounds | -4% | Met |
| Earnings per share | 0.22 British pounds | 0.24 British pounds | 9% | Beat |
| Clients with 1 million British pounds in annual revenue | 146 | 133 | -9% | n/a |
| Headcount | 12,085 | 11,479 | -5% | n/a |
Endava Remains Stuck in Neutral
We are now 18 months removed from British IT consulting firm Endava seeing its shares lose half their value following a disappointing earnings report, and the recovery still looks like a long-term project.
Endava beat watered-down earnings-per-share expectations in its fiscal fourth quarter, which ended June 30, but revenue declined 4% year over year. Other key metrics show no sign of growth on the horizon. Endava's headcount fell by 5% from a year ago. Headcount is a useful measure with consulting firms because they adjust hiring based on anticipated future workload.
Endava is also struggling to diversify its client base. The number of clients generating at least 1 million British pounds in revenue fell to 133 at June 30 from 146 a year ago. And the company's top 10 clients accounted for 37% of revenue in the recently completed quarter, up from 34% in the same period last year.
About 38% of revenue was generated in North America, similar to the revenue mix a year ago.
Immediate Market Reaction
Investors were disappointed with the quarter as well as with the guidance for what is to come. Endava stock, already down 52% year to date, was down another 22% in premarket trading ahead of the market opening in New York.
What to Watch
The bull case from Endava today is that the company is simply caught up in a difficult macro environment. Tariffs, inflation, and questions about the economy have put big corporate IT projects on hold, limiting new business opportunities for now.
The bear case is that AI has permanently disrupted the IT consulting industry.
Endava's guidance for its new fiscal year doesn't give bulls much to get excited about. The company sees first-quarter earnings of between 0.17 and 0.19 British pounds per share, well short of the 0.27 British pounds consensus estimate. For the year, management is forecasting earnings of 0.82 to 0.94 British pounds per share compared to a consensus estimate of 1.12 British pounds.
CEO John Cotterell remains optimistic, noting that Endava exited its fiscal year with its highest-ever quarterly order book.
This could indeed be a timing issue, as Cotterell implies in his remarks. But with the stock off more than 80% since the beginning of 2024 even before Thursday's drop, the market appears to be in no mood to give the company the benefit of the doubt.
