Endava Analysts Cut Their Forecasts After Q4 Results

Endava (DAVA) reported mixed Q4 results, beating EPS estimates but narrowly missing sales, yet provided robust FY2026 adjusted EPS guidance significantly above consensus. While the company achieved a record order book and advanced AI integration, management expressed caution due to a volatile operating backdrop and client spending recalibrations. Consequently, analysts lowered price targets despite the strong long-term earnings outlook, indicating a re-evaluation of valuation.

Analysis

Endava plc (DAVA) presented a dichotomous financial picture in its fourth-quarter report, characterized by strong underlying fundamentals and future guidance overshadowed by near-term operational caution. The company significantly beat earnings expectations, posting a quarterly EPS of 32 cents against a 16-cent consensus, while narrowly missing on revenue with $249.31 million versus a $249.95 million estimate. The forward-looking guidance for FY2026 is notably robust, with an adjusted EPS forecast of $1.11-$1.27 substantially exceeding the 85-cent market estimate, and revenue guidance ($1.013B-$1.033B) that brackets the $1.020B consensus. CEO John Cotterell highlighted strategic progress, including a record-high quarterly order book and significant strides in AI integration, with over half of staff now utilizing AI in projects. However, this optimism was tempered by a cautious outlook, citing a "volatile" operating backdrop and clients recalibrating spending timelines. This cautious tone is reflected in analyst actions; despite maintained Buy ratings from Needham and Guggenheim, all cited analysts significantly lowered their price targets, indicating a re-evaluation of the company's valuation in light of the immediate macro headwinds.

Key Decisions for Investors

• Investors must weigh the company's robust long-term earnings power, evidenced by the strong FY2026 EPS guidance and a record order book, against the clear short-term operational volatility and client spending delays acknowledged by management.
• The significant price target reductions from multiple analysts, including those with 'Buy' ratings, suggest a valuation reset is underway, and positions should be evaluated based on an individual's tolerance for near-term uncertainty versus long-term growth potential.
• Given the disconnect between the record order book and cautious revenue outlook, it is critical to monitor future earnings calls for the rate of backlog conversion into recognized revenue, which will serve as the primary indicator of easing client-side pressures.