Q4 2025 Amdocs Ltd Earnings Call

Speaker #2: with that , And I'll turn it over to Shouki .

Speaker #3: Thank you, Matt, and thank you all for joining us on the earnings call today. Starting on slide six, I want to express my sincere appreciation to our global team as we close out another year of important progress.

Speaker #3: Your dedication and commitment have drive solid financial results with our consistent guidance . And you did it while executing our strategy to support our telco with customers cutting edge cloud , digital AI based and solutions .

Speaker #3: To briefly recap , fiscal 2025 , revenue grew up by 3.1% in a pro forma constant currency , which adjusts for our decision here ago to phase out certain low margin , business non-core activities to sharpen Amdocs strategic focus .

Speaker #3: While also resulting in visibility stronger, highlights among double delivered, we see the many growth in cloud, which contributes over 30% of total revenue this year.

Speaker #3: Share of revenue for long term managed services reached a record 66% . Further supporting Amdocs business already strong resilience Portability . improved by 300 basis points , including 60 basis points from ongoing business transformation and efficiency gains we .

Speaker #3: maintain our And commitment to technology , innovation and product leadership our investments , tailoring to serve our customers . Key imperative . business This includes B2B modernization , next gen monetization , fiber networks , and of course , generative AI , where this year I'm proud to say we made a successful transition from proof of concept trials to winning actual generative AI related deals .

Speaker #3: Overall , we delivered non-GAAP earnings per diluted share growth of 8.5% in fiscal 2025 and achieve our target to deliver double digit expected total shareholder return , including our dividend yield .

Speaker #3: Now , let's take a close look at our first quarter performance , beginning with the financial slide seven revenue of 1.15 billion was above the midpoint of guidance up and 2.8% from a year ago in performing constant currency profitability improved by 20 basis points sequentially .

Speaker #3: Non-GAAP diluted earnings per share was $1.83, slightly above the guidance midpoint, and we ended the quarter with a 12-month backlog of $4.19 billion, up $40 million sequentially and 3.2% from a year ago.

Speaker #3: Growth in backlog was driven by sales strong momentum this quarter contribute to our overall long book term business of . A slide eight shows pipeline to deal conversion was well balanced across our key operating regions , and strategic domains , showcasing proven Amdocs ability to scale our customer activities by continuously delivering fresh innovation over cloud .

Speaker #3: We in signed a multiyear managed services SaaS agreement with AT&T to . Deliver Entitlement server capabilities via our cloud platform , and we won new monetization and cloud awards migration Lumen Technologies in the US .

Speaker #3: And tell us in Canada , we expected a recent momentum in a generative AI domain with a we extended our recent momentum in generative AI domain with an exciting new award , a Telefonica Germany , and we expanded our international footprint with new monetization and digital modernization awards at BT in the U.K.

Speaker #3: , Altice in France , Telia in Finland , Katy in South Korea , and Claro Brazil . Several quarters were struck among under long term managed services agreements .

Speaker #3: Further deepening our customer relationship . This this includes an exciting landmark multi-year strategic agreement with PLDT in the Philippines , which expands our long term standing managed service engagement to accelerate its IT modernization and streamline business processes through AI and generative AI capabilities .

Speaker #3: Rounding operational highlights, Amdocs is engaged in the execution of complex, mission-critical transformation projects, closely working with our customers as a key partner.

Speaker #3: was Q4 another quarter of consistent execution in which we achieved important project milestone at AT&T . Comcast , Bell Canada , BT , everything , everywhere , Vodafone and Vodafone .

Speaker #3: Three , PDT and end the UAE . I am also proud to say that Amdocs ensures smooth customer operation during the high volume launch on Apple's iPhone 17 .

Speaker #3: In September, we will test our footprint, turning to slide consumer growth. I would like to experience B2B monetization and streamline generative investments with Gen Automate.

Speaker #3: In September, we are testing our consumer footprint, turning to slide 10. Our growth experiences in B2B will monetize and streamline generative investments with Gen Automate, which will accelerate our additional cloud services for customers in the digitalized space.

Speaker #3: Demand for our cloud native solution and proven ability to accelerate public , private , and hybrid cloud migration remains strong as we continue our strategy of moving critical system workloads and that enable application innovation , agility , and cost savings for all our customers in the US , Lumen Technologies selected Amdocs to support its cloud transformation moving mission critical VSS application to Google Cloud to strengthen its foundation , Telus in Canada expanded its multi-year managed service agreement Amdocs with to migrate on premise wireless monetization operation to Google Cloud , enabling the faster launch of new consumer and enterprise offerings , improve customer experience and reliability , and reduce operational costs and Bell Canada , in collaboration with Amdocs , is migrating system existing to the cloud to enhance scalability , strength , resiliency and achieve operational efficiencies .

Speaker #3: Demand for our cloud native solution and proven ability to accelerate public , private , and hybrid cloud migration remains strong as we continue our strategy of moving critical system workloads and that enable application innovation , agility , and cost savings for all our customers in the US , Lumen Technologies selected Amdocs to support its cloud transformation moving mission critical VSS application to Google Cloud to strengthen its foundation , Telus in Canada expanded its multi-year managed service agreement Amdocs with to migrate on premise wireless monetization operation to Google Cloud , enabling the faster launch of new consumer and enterprise offerings , improve customer experience and reliability , and reduce operational costs and Bell Canada , in collaboration with Amdocs , is migrating system existing to the cloud to enhance scalability , strength , resiliency and achieve operational efficiencies . based platforms , including Amdocs , Our SaaS , Amdocs market eSIM one and Amdocs Connect , are also contributing to growth with rising customer adoption to provide few examples , we signed a multiyear managed services agreement to deliver with AT&T Entitlement Server capabilities via eSIM cloud platform .

Speaker #3: This continued to expand our eSIM SaaS platform momentum , adding over 100 million devices to it . Additionally , Amdocs connect X has already more than 15 customers , including consumer , Cellular and PLDT , who are deploying the generative AI native platform to quickly launch existing new digital brands .

Speaker #3: Adding to the list, I'm pleased to announce that Orange Belgium has selected Amdocs to lead the modernization initiative on their prepaid stack.

Speaker #3: Leveraging our connected platform . This project includes real time charging and next generation scalable architecture designed to support their needs . It will the needs it will drive efficiency while transforming the user experiences with modern digital .

Speaker #3: First journeys that will redefine engagement for Orange Belgium prepaid subscribers. Looking forward, cloud will remain a primary focus for Amdocs as we continue to support our global telco customer base.

Speaker #3: Many of which are only just getting started on their multi-year cloud journeys . Now , let's talk about generative AI and data on slide 11 .

Speaker #3: Following the generative AI related deals , we recently announced with a IND , UAE Altice , Optimum and Consumer Cellular . I am excited to report that Telefonica Germany , one of the country's largest collaboration billing selected quad play for both Amdocs to .

Speaker #3: Providers, enterprise expanded consumer and service. As part of Telefonica's deployment of new generative AI in Germany, trial use cases show an upsell of Telefonica offers to proof of concept (POC) products, enabling the leveraging of conversion to actual points that.

Speaker #3: Automate generative AI. This project is exciting, and we are pleased with the initial results we are seeing. For example, one of the first service providers to integrate generative AI was in the UAE, a customer that is already achieving double-digit improvement in performance.

Speaker #3: Net Promoter scores after deploying image agents . Such progress reflects Amdocs core telco platform and data services expertise built vectorized image platform , which we have deployed in collaboration with Nvidia and other generative AI leaders .

Speaker #3: Moreover, I believe our recent success demonstrates the pivotal role Amdocs is playing in helping accelerate generative AI adoption in the telecom industry.

Speaker #3: In addition to cloud and generative AI , we secured important wins in the strategic domain this quarter has highlighted on slide 12 . As previously announced , finalized a significant ten year digital modernization and managed service agreement with BT in the UK to deliver a B2C mobile platform for its prepaid and postpaid modern segments .

Speaker #3: We signed a multi-year strategic agreement with Telia Finland to build its next generation digital BSS enhanced and with advanced AI capabilities , and AT&T Mexico closed a new program digital with Amdocs to enhance self-service experiences , expanding its digital selling capabilities .

Speaker #3: Here in the US , we signed a multi-year software and IT service agreement with Fidium , a next generation American fiber , internet and network service provider , and a new logo for which Amdocs will modernize and manage its .

Speaker #3: IT operation . While supporting its broader digital transformation strategy . Elsewhere in the US , a leading tier two operator selected Amdocs for additional five year renewal of their BSS ecosystem service providers .

Speaker #3: Providers are also adopting next generation monetization solution to support their wireless and fiber infrastructure elements . Amdocs recently signed an expanded multi-year billing transformation agreement with artist Francis SFR to consolidate multiple billing operations to a unified , cloud ready platform , and we signed a new agreement with South Korea's telecom operator , KT , to upgrade and modernize its charging system to time to accelerate market and to boost operational efficiency .

Speaker #3: This quarter was also we also expanded our activities with the two largest operators in Brazil First . , Amdocs entered an agreement with Claro Brazil to implement a real time billing platform designed to enable full scale converging across its multiple line of business .

Speaker #3: Clara also extended its multi-year service contract with Amdocs , second in the network domain . We signed a modernization agreement with Telefonica , Vivo to provide a future ready foundation for ongoing operation by deploying our latest OS products .

Speaker #3: Further underlying Amdocs' expertise and growth potential in the network domain, we have expanded our managed services agreement with Globe in the Philippines to include network strategy and planning, mobile access engineering, and optimization to enhance service quality and operational agility.

Speaker #3: We delivered the successful go-live of Amdocs and the vast network inventory platform for Vodafone Ireland, and we continue to expand our network activities with Vodafone Greece.

Speaker #3: discussing Before our 2026 fiscal wanted to outlook , I circle back on generative AI to share our thoughts with respect to our strategy and investment plans .

Speaker #3: As presented on slide 14, over the past couple of years, we've shared our belief that generative AI holds immense potential to transform the telecom industry.

Speaker #3: We've been closely working with customers to deliver tangible improvements in critical areas such as customer care and network operation while building out generative AI capabilities in our platform.

Speaker #3: As the technology matures , the industry advanced and we see the progression from POCs to production , we believe there is now the potential , the potential to unlock even greater opportunities to enhance experiences , agility and efficiency , to fully capture this for and for Amdocs we are our customers , accelerating our generative AI investment , which we expect will open new pathway for future growth across our entire customer base , irrespective of the OS version .

Speaker #3: includes a fast This tracking , the development of what we call a core , cognitive a next generation platform built on the solid foundation of Amdocs amazed in integrates and capabilities such as agent to agent and MCP technologies .

Speaker #3: Our Vector Telecom expertise and the development of genetic services in the coming quarters. We'll share more about our vision for our AI-powered telecom operating system.

Speaker #3: customer For our . This investment in generative AI may represent a substantial shift in how they will adopt future software and services . Notably , we believe it promises to simplify and their digital accelerate transformation journey to the and cloud delivered under our outcome based model .

Speaker #3: Overall , we focused and intentional investment . We expect Cognitive core to as a long term emerge engine for growth Amdocs by enabling us to better serve our full spectrum of customers , from those running current platforms seeking cost effective line of business modernization to top tier innovators .

Speaker #3: We are already modernizing on Amdocs' next-gen platform to lead with future-ready digital experiences. Now let me comment on the current operating environment outlook for our fiscal year 2026.

Speaker #3: We are entering fiscal 2026 with a healthy 12 month backlog , visibility , and strong overall book of long term business support . Supported by a recent win momentum with our unique tech lead and outcome based accountability model , Amdocs is strongly positioned within our service serviceable addressable market of nearly 60 billion to monetize the rich pipeline of opportunities across cloud , digital network and generative AI and data .

Speaker #3: That said , we are closely watching for any impacts of the uncertain global macroeconomic environment on us and our customers . Demand spending behavior , tying everything together with our outlook on fiscal , on site 16 , we expect revenue growth in the range of 1.7% to 5.7% .

Speaker #3: As reported, we expect growth of 1.0% to 5.0% in constant currency for the full year of Fiscal 2026. Regarding our ability to achieve this, we expect the non-GAAP operating margin to roughly increase by 20 basis points year over year at the midpoint of our target range, as we balance our strategic long-term growth investment with the benefits of ongoing cost and efficiency gains across the business.

Speaker #3: All up, we expect to deliver a non-GAAP diluted earnings per share growth of between 4% to 8% in fiscal 2026, the midpoint of which equates to an expected total shareholder return in the high single digits, including our dividend.

Speaker #3: With that, let me turn the call over to Tamara for remarks.

Speaker #4: Thank you and hello , everyone . Thank you for joining us . Before I begin in today's comments , I will compare certain financial metrics on a performance basis , which adjusts prior year , fiscal year , 24 revenue by approximately $600 million to reflect the phase out of certain low margin non-core business activities , which were substantially already seized in the first quarter of fiscal 2025 .

Speaker #4: To further assist you, modeling the regional mix of this revenue was similar to the overall company, and it contributed roughly $150 million per quarter to begin.

Speaker #4: I'm pleased with our solid financial performance for the fourth fiscal quarter . As detailed on slide 18 . Q4 revenue of approximately $1.15 billion was up 2.8% year over year in constant currency revenue exceeded the midpoint of our guidance , with no impact from foreign currency movements as compared to our guidance , assumptions reflecting the phase out of certain business activities reported revenue declined by 9% from a year ago on a regional basis .

Speaker #4: North America improved more than 2% sequentially, posting its strongest quarter of the fiscal year. Europe declined, reflecting normal business fluctuations following a record quarter in the previous quarter.

Speaker #4: The rest of the world was slightly lower on a sequential basis , reflecting mixed trends . With our strong sales momentum , we have clear to visibility continued growth in the rest of the world , but quarterly trends may fluctuate given the project orientation of our customer activities in this region .

Speaker #4: Down the income shifting statement, the non-GAAP operating margin of 21.6% improved by 290 basis points from a year ago, driven by the announced phase-out of low-margin, non-core business activities and the benefits of ongoing efficiency gains within our operations.

Speaker #4: Non-GAAP operating margin improved by 20 basis points sequentially. Interest and other expenses amounted to roughly $10.3 million in Q4. On the bottom line, non-GAAP diluted EPS of $1.83 was slightly above the midpoint of guidance.

Speaker #4: Diluted GAAP EPs of $0.88 included the restructuring charge of $0.60 per share resulting from certain transformational actions . We have taken to optimize our workforce allocation , technology mix , infrastructure , workspace and other resources .

Speaker #4: As we prepare to accelerate the internal adoption of generative AI in fiscal 2026, excluding this restructuring charge, diluted GAAP was at the high end of the $141 to $149 guidance range.

Speaker #4: The quickly summarize our full year 2025 financial performance results were consistent with the original guidance we provided a year ago, shown as on slide 19.

Speaker #4: was up 3.1% in constant currency, above the midpoint of guidance. Revenue on the bottom line, we delivered non-GAAP diluted earnings per share growth of 8.5% in fiscal year 2025, consistent with the midpoint of guidance and driven by sustained revenue growth of 300 basis points.

Speaker #4: Improvement in non-GAAP operating profitability and the benefits of our share repurchase activity . Turning to slide 20 . This year , we delivered double digit growth in cloud , which exceeded 30% of overall revenue as compared with roughly 25% in the prior year .

Speaker #4: Highlighting further the ongoing diversification of our business and growing traction in international markets, half of our top 12 customers are international customers, two of which are new logos added in the last ten years.

Speaker #4: A slide 20 shows . Additionally , continue to we expand our footprint with long standing customers and new logos in North America . A great example is charter , with which we had limited business a decade ago , but is now one of our top ten customers .

Speaker #4: Over the years , we have also added new logos in North America , such as consumer Cellular , Infinium . In fiscal 2025 , turning to slide 21 .

Speaker #4: Managed services revenue was a record $3 billion in fiscal 2025, up 3.1% from a year ago. Managed services as a share of overall revenue also reached a new high of 66% in fiscal 2025.

Speaker #4: Further strengthening our business resilience as we maintained high renewal rates and expanded our customer activities under long term agreements . I alluded to earlier , several of our key deals signed in the fourth quarter were struck under multiyear , managed engagements .

Speaker #4: The most significant being our landmark agreement with PLDT from the Philippines , for which Amdocs will manage its complete IT services requirements , covering architecture implementation , operations and performance outcomes with end to end accountability .

Speaker #4: Additionally, we expanded our managed services agreements with Globe in the Philippines to include network operations and at Atlas in Canada to cover the migration of its wireless monetization operations to Google Cloud.

Speaker #4: Managed services can also be a spearhead in winning new customer logos. Such was the case with Fidium in the U.S., for which Amdocs will serve as the primary exclusive partner to maintain and operate its services.

Speaker #4: IT fiber operation across multiple applications while supporting its IT transformation as its preferred development partner. Moving to the balance sheet and cash flow highlights on slide 22.

Speaker #4: DSO of 74 days was down by two days sequentially and unchanged year over year , reflecting normal fluctuations in the business activity and receivables , net of deferred revenue , rose by $62 million sequentially in Q4 and was relatively flat compared to a year ago .

Speaker #4: Aggregating both the short term and long term balances . As a reminder , the net difference between unbilled receivables and deferred revenue fluctuates from quarter to quarter , in line with normal business activities , our as well as progress on multi-year transformation programs driven by a strong fourth quarter free cash flow before restructuring payments was $735 million in fiscal 2025 and above .

Speaker #4: Our guidance range of $710 million to $730 million, including restructuring payments of $90 million, reported free cash flow was $645 million for the year.

Speaker #4: Overall, we finished fiscal 2025 with a healthy cash balance of approximately $325 million and an available $500 million revolving credit facility, providing ample liquidity to support our ongoing business needs.

Speaker #4: While retaining the capacity to fund our future strategic growth, switching to capital allocation on slide 23, this quarter we repurchased $136 million of our shares.

Speaker #4: up to We had $1 billion of remaining repurchase authority as of September 30th , 2025 . We paid cash dividends of $58 million in the fourth fiscal quarter .

Speaker #4: Looking to fiscal 2026, we expect free cash flow to be between $710 million and $730 million, not including additional payments we expect to make under our current restructuring program.

Speaker #4: Our free cash flow outlook equates to a conversion rate of roughly 90% relative to expected non-GAAP net income and translates to a healthy free cash flow yield of roughly 8% relative to Amdocs' current market capitalization.

Speaker #4: Regarding our capital allocations for the coming year, we expect to return the majority of our free cash flow to shareholders. This includes dividends, for which we plan to announce a proposed 8% increase in our quarterly cash payment to a new rate of $0.569 per share, subject to shareholders' approval at the annual meeting in January 2026.

Speaker #4: Moving to slide 24 . 12 months backlog was 4,000,000,000.19 at the end of Q4 , up 3.2% from a year ago . We expect 12 month backlog to represent roughly 90% of our forward looking revenue .

Speaker #4: Further underscoring the importance of this metric as a leading indicator of our business. Now, turning to our revenue outlook on slide 25.

Speaker #4: We are continuing to closely monitor the prevailing level of macroeconomic , geopolitical , business and operational uncertainty in the current business . The first , the full fiscal 2026 financial guidance reflects what we consider to be the most likely outcomes based on the information we have today .

Speaker #4: But we cannot predict all possible scenarios for the full fiscal year 2026. We expect revenue growth of between 1.7% and 5.7%, as reported, and between 1% and 5% in constant currency. We expect our strong performance.

Speaker #4: Sales momentum in fiscal 2025 is expected to contribute to fiscal year 2026 revenue growth. We assume a stronger second half of the fiscal year as we ramp up activities on recently secured deals.

Speaker #4: On the end, our fiscal year 2026 revenue guidance assumes a revenue decline at T-Mobile due to reduced discretionary spending. Our annual guidance also incorporates some contribution from inorganic deal activity. As for the first fiscal quarter, we expect revenue to be between $1.135 billion and $1.175 billion.

Speaker #4: Moving down the income statement, we expect non-GAAP operating margins within a new and improved target range of 21.3% to 21.9% in fiscal 2026.

Speaker #4: The midpoint of which is roughly 20 basis points higher than the prior year . Our outlook reflects an intentional decision to accelerate our , sales and marketing investments with respect to generative AI and next generation cognitive Core platform , while balancing this with ongoing cost and efficiency gains , resulting from continued our focus on operational excellence and the internal deployment , automation , generative AI based across tools our business .

Speaker #4: Our outlook additionally excludes restructuring charges we may take, wrapping everything together on slide 27. We expect to deliver non-GAAP diluted earnings per share growth of 4% to 8% in fiscal 2026.

Speaker #4: This outlook assumes pressure from below the line in the year items ahead. We anticipate a moderate increase in our non-GAAP effective tax rate to a rate for fiscal year 2026 of between 16% to 19%, primarily driven by a combination of regulatory changes, including the implementation of the Pillar Two global minimum tax and other evolving international tax requirements.

Speaker #4: In the fiscal quarter of 2026 , our non-GAAP effective tax rate is expected to be the annual above range . Additionally , we anticipate higher finance costs this year resulting from a reduced cash balance and funding strategic long of our term growth plans .

Speaker #4: Overall, we expect to deliver a high single-digit expected total shareholder return in fiscal 2026, assuming the 6% midpoint of our non-GAAP diluted EPS growth outlook.

Speaker #4: Plus our dividend yield of roughly 2.7% based on the new dividend we payment , announced today . With that , back to you , Shuchi .

Speaker #3: Thank you, Tamara. I am pleased with our solid financial performance and continued strategic progress in fiscal 2025. I am excited by our technological advancements and the potential to open new growth opportunities by accelerating our generative AI investment in the year ahead.

Speaker #3: With that, we are happy to take your questions.

Speaker #1: Certainly, and our first question for today comes from the line of Herren Timothy from Oppenheimer. Your question, please.

Speaker #5: Thanks, guys. You've had a lot more experience with AI at this point. Can you just talk about maybe qualitatively how impactful you think it will be to the telecom industry?

Speaker #5: How much do you think it can improve productivity over time and generate kind of new services? And related to that, I guess the same thing?

Speaker #5: You know , internally , you know , how much can it improve your own productivity internally ? I realize you are reinvesting a lot of that productivity in R&D and and in investing for longer growth .

Speaker #5: term Thanks

Speaker #5: .

Speaker #3: Tim you . are , and we our Thank in the in the GI offering . A internally , as you mentioned , we are using more and more a generative AI lifecycle .

Speaker #3: . And benefits not And in the more . is this I would say . software to a It's gradually . And cost to development capabilities quality to speed .

Speaker #3: Many items that we see using this technology the offering perspective to , to , from to customers , the initial offering that we and have are deploying right which we successfully converting actual POCs to deals , was more a , I would say , add ons on top system , you know , some agents in the call center care for and things like these type of capabilities , which are which .

Speaker #3: Now we are doing well with many customers. We have mentioned and are pretty successful. The next generation, or what I would say the next gen of our AI capabilities, is what we discussed today, what we call Cognitive Core.

Speaker #3: idea The is to layer add a on top of our base systems or the different one that we are supporting today , and actually create a new model that can support a activity genetic agent to agent and actually a completely disrupt and change the way we are running this operation today .

Speaker #3: And part of the investment that we are going to discussed , we accelerate this series to build this layer . And I think it's going to be it will take some time to deploy it , and we believe it's going to be extremely exciting and give completely new capabilities to our customers in the area .

Speaker #3: And we definitely believe that this will be another very important growth engine for Amdocs for the years to come.

Speaker #5: And do you have a rough idea when that will hit the market?

Speaker #3: 26 .

Speaker #3: 26 . Mid

Speaker #5: Thank you much very .

Speaker #1: Thank you. And our next question comes from the line of George Notter from Wolfe Research. Your question, please.

Speaker #6: Thanks very much . I want I guess to just Hi , guys . probe the the decision to kind of reallocate more capital into the business from an R&D heard perspective .

Speaker #6: I what you said about , you know , building more Agentic capability . I just looking for guess I'm sort of the puts and takes .

Speaker #6: Right? You're implementing AI internally. You've been on a path of year-over-year efficiency gains. This coming year is going to be more like 20 basis points.

Speaker #6: Is that is that the amount of the investment that incremental , you know , 50 or so basis points ? Is that the right way to look at it ?

Speaker #6: And, are there some other gross factors we should look at?

Speaker #4: Yeah, most of the margin story here is this intentional decision to invest more into this opportunity that we see as an exciting one.

Speaker #4: So, at the same time, as you said, we are continuing to enjoy these productivity gains. We do want to reinvest in making sure we are capturing this growth opportunity.

Speaker #4: It's not just R&D; it's also in the sales and marketing aspects. The go-to-market strategy is how we are going to support and accelerate our coverage of the different opportunities in the pipeline.

Speaker #4: So I would say it's both, and definitely we would like to see that keeping, you know, and accelerating the momentum. We think we can bring on that aspect.

Speaker #4: You know, we talked in the last two quarters about the fact that we are moving proof of concept from feasibility to actual commercial deals.

Speaker #4: continue We to see that with the examples of Telefonica Germany . We mentioned now and and Etisalat , that is much , much more true .

Speaker #4: And adding more and more use cases, PLDT, as part of a large mega deal that we just signed, is going to include adoption of our platform.

Speaker #4: So we are continuing to see more and more commercial pickup on that aspect. And I think that there's a great opportunity there.

Speaker #6: Got it . Okay . And then also , I just wanted to ask about your conversations customers . You know , obviously the company prices contracts .

Speaker #6: Got it . Okay . And then also , I just wanted to ask about your conversations customers . You know , obviously the company prices , its Its businesses on outcomes , not , you know , a billable hours times rate model .

Speaker #6: I , times get that . But I assume your customers do expect that you're using AI internally to improve efficiency . And I'm wondering if there's some expectation from customers to to get better pricing or contract prices from you guys as part of that , that realization , I'd like to hear more about how those conversations going are and know , at the moment of , at the you know , contracting with customers , are you seeing that pricing impact or pressure your role onto down Amdocs or not ?

Speaker #6: Thanks .

Speaker #3: So this is not new . I mean , yes , now the I think the the most discussed item generative AI , but this we had the situation pretty much every renewal situation , you over then know , we changed technology move to the cloud .

Speaker #3: So technology is evolving . Definitely there is discussion like this with AI and what we are trying to do . And obviously is a business model is for the most part , as you mentioned , is outcome based .

Speaker #3: So this is helping a bit . And I think what is more important that whenever we renew or sign new agreement , we are doing a lot of effort very successfully to to completely change the scope of the by agreement adding a transformation to the cloud generative AI capabilities and other automation and other that we products So have .

Speaker #3: and yes , there is pressure customer expects to to see saving . But as you mentioned , because we are not in cut a rate type of relationship and as part of the discussion , on one hand we show the customer efficiencies .

Speaker #3: On the other hand, we are expanding the scope of our activities by adding new products, new services, and AI capabilities. So between the two, I think we are doing a pretty good job in minimizing the impact.

Speaker #4: And I think just to add on that , our offering is very rich . And typically what happens is that we get into these dialogues with customers looking on their own total cost ownership , how of they want to achieve this kind of savings or what benefits they are looking for in terms of improving customer experience and other pain points .

Speaker #4: They have . So engaging in this dialogue , we have a lot of tools to go into this , you know , to to go back to a point of mentioning additional scope .

Speaker #4: So we can take a bigger wallet share of what they need to invest in and give them the benefits that they're looking for.

Speaker #4: So it's not just , you know , a dialogue on , okay , what do we do for you right now and how are we pricing it ?

Speaker #4: Moving forward, it's a whole different dialogue that is emerging. We've seen this quarter a lot of managed services expansion and extensions.

And and I think just to add on that our often is very rich. And typically what happens is that we get into these dialogues with customers, looking on their or on total cost of ownership, how they want to achieve this kind of savings or what benefits they're looking for in terms of improving customer experience and other pain points. They have so engaging in this dialogue, we have a lot of tools to go into this, you know, to manage to go back to Shooks point of mentioning additional scope. So we can take a bigger wallet share of what they need to invest in and give them the benefits that they're looking for. So it's not just you know, a dialogue on. Okay, what do we do for you right now? And how are we pricing it? Moving forward, it's a whole different dialogue that is emerging. And we've seen this quarter a lot of managed Services expansion and extensions and that has been part of this discussion. And as you can see, we are expanding the 12 months, backlog beyond that. I feel very good about the fact that it's expanding our book of business. Beyond the 12 months that we are, including in the backlog.

so,

So, I think the method works. We can bring them the value while giving them the TCO reduction they're looking for and looking how to bring more and more of our offering to support their needs.

Thank you.

Thank you. As for my dearest ladies and gentlemen, if you do have a question at this time, please press *1, 1 on your telephone. Our next question comes from the line of Tolani from Bank of America. Your question, please?

Hi guys, I have like 5 questions to stop me when I'm going to 2 months. I tell.

um,

Uh, cash flow is down next year.

Why, why is it? Um,

And then, um, I, I, I, I have, I'm, I'm not asking the question in any order. I'll maybe I'll ask two at a time. But, uh, also, uh, the growth, if I take your midpoint on a constant currency basis, the growth is not showing, uh, much acceleration from this year. It's actually slightly below Street expectations.

What are the puts and takes in the growth? Because you also made the disclosure that T-Mobile is going to be down in 2026. So can you kind of elaborate on the good parts and the parts that are maybe more flat-ish and declining? I thought after some discontinuation of businesses, growth should.

Somewhat accelerate, uh, from where we are or where we were.

Thanks, Joe. So, just to cast off first, we ended the dash adjusted casual $202 million to $735 million, but we started the year on exactly the same guidance range that we are starting now, $7 million to $7.30 million. You know, we want to be appropriately conservative, so I don't see that as a cash flow decline. We are more or less at the same level.

Going to the second half of the year, as it's naturally, taking a small time to ramp up deals that we are capturing. Um, so that's why we said that within the fiscal year 26, we will see a stronger second half growth. At the same time, we see this positive aspect, we do see the pressure of lower discretionary spending in T-Mobile. And this is why we feel we want to be, uh, absolutely transparent about the decline we expect. There it is a major customer. I, I just want to give some context. Uh, T-Mobile has been a long time relationship for us. We are supporting their billing, their activities across all their key Brands, you know, magenta MetroPCS. Now use cellular. Um and and this is obviously a core activity of what we do for them. And we are very focused on continuing to bring value. But at the same time, we need to acknowledge the fact that they are reducing some discretionary spend. So yes, the positives there are some negatives uh but I believe that overall looking on the sales activity,

And how strong we finish 2025. We feel good about our future.

Good. Uh, can you elaborate on your top 10 customers? Um, that's number 1. This is kind of you normally give, uh, this time of the year, you give the, uh, disclosure in the K if you have the data.

And then just on T-Mobile, they announced they made a disclosure that they are starting to transfer customers to a new billing system. They made this announcement a few days ago. And the question is, is this kind of the end of a project? That's why revenues are going to be down? And is this normal for big transformational projects? At the end, you start to see a decline when you say discretionary spending.

It looks like things are being pushed out, and I'm wondering if it's really things that are being pushed out or being prioritized versus the big contract that is basically done.

So, that to the point on on the top customers, um, we are typically giving this information in our annual report that is coming out in December and we will do the same uh, this year. Um, I will just say that, as I mentioned on the preferred remarks, we are happy to see the customers of this vacation evolving, in a positive way, with more customers entering, I would say the high thresholds of our business. Uh, including many International names that we've added including relationship that a long time ago. Were relatively small, like Charter and are now a top customer. And and we've, you know, when we look on into our relationship with T-Mobile, we cannot comment on the specific project with a specific program plans, Etc, on a single customer basis. But I can definitely tell you that we've taken all the reasonable assumptions. You know, in terms of the outcomes that we also

Saying, with relation to us, the guidance that we've given, um, so more to come, of course, in terms of what we can release moving forward. But, uh, I feel that we have taken everything we know as of today into the guidance.

Last question, I promised you 5 questions. So last question, um, you in the last year, you implemented AI in order to save uh to to improve margins in order to to reduce costs and you've done it very successfully.

And now you are talking about increased costs.

Tell us about the margin trajectory meaning.

You know, on one hand, you are reducing expenses. On the other hand, you're spending more. What drives the increase in spend, and how soon could it translate into accelerated growth?

Uh, I, I, I, by the way, congratulations on the world if we speak. Um,

I, I, I ... the best way to tell it if we did not have...

All the tools of capabilities we developed.

Uh, we just AI.

in our,

Software on life cycle, all the engineering activities in the company.

Okay, actually doing everything much faster and better and with higher quality.

Got it. So

If I take a step back for investors, there are long-term considerations, and looking at endos as a kind of safe, relatively low-risk investment for the long term.

The question that I'm asking is, you've had tremendous success in the last 1 or 2 years, with big projects with big customers. You are doing great in Cloud. We're starting to see signs of GenAI, but the growth is still the same. In the sense that even before you decided to discontinue some operations, you were growing between 3% to 4%. Now the guidance is for the same growth; maybe it accelerates in the second half, but we're still in the same neighborhood of growth.

The question is, if you look out without giving us guidance for growth, like specific guidance, when you look out and you say where you want to position the company as a CEO a few years down the road. Do you think that what you're doing today and your activity in cloud and your activity in Gen AI could it change the growth profile of the company? Meaning, can you grow sustainably above the current 3% to 4%?

Going into new markets and new tabs. So sorry, it's a long-winded answer, long-winded question. But I, I'm just trying to understand kind of the longer term. What you have in mind the longer term goals for the company in terms of growth.

I think the answer will be shorter than the question, but I think in the last couple of years.

And the main.

Goals engine of Amos was the cloud.

And in order for us to break these 3% and to go to a...

to um,

Mid-single digits is what we would like to achieve. We need the more than one go engine. As big as it is, you know, it's already become 30%. So we really believe.

That we, the investment we do in, within unique offering.

And we are going to, to have more than 1 significant, uh, cost engine like cloud. And we believe that what we develop right now in Genai will be another 1 and the, and the answer to your question. I think, if in the minute we established 2 3 growth engine, then we can be there. And this is a, Our intention.

Got it. Great. Thank you.

Thank you. Our next question comes from the line of Shlomo Rosen. Bob from STE4, your question please?

Hi guys, this is Adam on for Slowmo. Um, what is the organic constant currency growth implied in the guidance for our fiscal Q1 2026 and FY 2026? There are some comments around some contribution from inorganic deal activity. If you could talk about that, please.

We expect to have roughly half of the growth coming from organic sources. When we started the 2025 projections, we talked about some inorganic contributions, and eventually, it was less than half of the overall growth.

You know, we leave some flexibility for that, of course. Um, if you look back on the kind, you know, just on the type of deals we signed even this quarter in Q4, we already see the regulation to pass the positions and the benefits it's bringing. So we feel this is a very important way for us to capture strategic growth opportunities. You know, whether it's fiber, some of those small deals that we've done in 2025, but around the fiber growth opportunity as an example. Um, so we want that liberal to stay open and contribute to the company.

Okay. And, uh, the change in AI spend, um,

Where are you seeing customers put their budgets in capital? And how does that match up to the areas where you're stepping up investments in GenAI?

and,

so file and, and

Most of the investment.

Well, building agents and use cases to support, as I said, to improve activities in the call center.

Both for a digital application, both for commerce and care.

And what we build right now, or by the way, that the other thing we talked about is actually GenI. It's all about data. So how to prepare the data to be available in real time?

To support the agents and what we are talking about right now, it's a completely different scale. It means that we are going to augment.

our call billing systems or call monetization system.

To be, as I said, will allow agent to agent and all the capabilities of a Genting. Um

Options. This is a different scale of capabilities, which is relevant for every Amdocs customer everywhere. We believe that from a scale perspective, it's a.

Much bigger than what we've done so far.

Okay? And there are some comments about pressure from below the line items. Um, just on a modeling side, um, what areas are you specifically referring to and what's driving that?

Uh, referring specifically to tax rate, as we see more regulatory changes around the world, like the Pillar Two minimum tax, as well as other countries that are putting some new regulations, we elevated the effective tax rate range from...

15 to 17 to 16 to 19. Uh, so that would be 1 point, and the other 1 is financing costs. As we are starting the year with a lower cash balance and continue to have plans to invest in some strategic growth areas, we will see some higher finance expense costs. So that's what we refer to as items below the operating income line.

Thank you.

Thanks. Thank you. This does conclude the question-and-answer session of today's program. I'd like to hand the program back to Matt Smith for any further remarks.

Okay, thanks operator. Excuse me, thanks everyone for joining the call tonight. If you've got any additional questions, please give us a call and the IR group here. And with that, have a great evening. Thanks a lot.

Thank you, ladies and gentlemen, for your participation. In today's conference, this does conclude the program. You may now disconnect. Good day.