Why Endava Stock Plummeted This Week

Endava (DAVA) shares plunged 29.5% last week following the release of its Q1 FY2026 results, which ended September 30. The company reported significant misses on both sales and earnings, with revenue declining 8.7% year-over-year, and subsequently lowered its full-year guidance, now projecting a 3.5% annual sales decline at the midpoint. This performance has raised investor concerns regarding the effectiveness of its artificial intelligence strategies.

Analysis

Endava (DAVA) stock experienced a significant sell-off last week, plummeting 29.5% while the broader S&P 500 saw a slight gain and the Nasdaq Composite a minor decline. This sharp valuation contraction was triggered by the release of its Q1 FY2026 results, which ended September 30, revealing substantial misses on both sales and earnings.

For Q1, Endava reported non-GAAP earnings of 0.15 British pounds ($0.20) and sales of 178.2 million pounds ($234.5 million). Sales unexpectedly declined 8.7% year-over-year, or 7.3% on a currency-adjusted basis, falling short of the company's previous guidance.

Management further exacerbated concerns by lowering full-year sales guidance to a range of 735-752 million pounds, implying an annual decline of 3.5% at the midpoint, a notable downgrade from the prior target of a 0.5% decline. This performance has called into question the forward trajectory of Endava's artificial intelligence strategies, which investors had hoped would contribute positively.

Key Decisions for Investors

• Monitor subsequent quarterly reports for signs of sales stabilization or positive shifts in guidance.
• Evaluate the company's revised strategy for AI integration and its potential to drive future growth.
• Assess the current valuation against revised growth prospects and industry comparables following the significant stock price decline.