Why Endava Stock Was Tanking on Tuesday

Endava (DAVA) stock plunged over 25% after the company reported disappointing Q1 FY26 results, missing analyst consensus for both revenue and non-IFRS earnings per share. Revenue declined nearly 9% year-over-year to £178 million ($234 million), while adjusted EPS was £0.15 ($0.20), attributed by management to an unexpected client credit and unclosed strategic opportunities. The company also issued cautious guidance for FY26, projecting revenue of £735 million to £752 million, with the low end falling below FY25 figures, and adjusted EPS of £0.80 to £0.88.

Analysis

Endava (DAVA) reported a significantly disappointing Q1 FY26, with revenue declining almost 9% year-over-year to £178 million ($234 million) and non-IFRS EPS of £0.15 ($0.20). Both figures missed analyst consensus estimates of £189 million ($249 million) revenue and £0.18 ($0.24) EPS, leading to a sharp 25%+ stock decline against a rising S&P 500.

Management attributed the underperformance to an unexpected client credit and the failure of non-large strategic pipeline opportunities to convert into revenue. This explanation highlights potential execution issues and challenges in securing new business, directly impacting the company's top-line growth and profitability.

Further compounding concerns, Endava issued cautious FY26 guidance, projecting revenue of £735 million to £752 million ($968 million to $990 million), with the low end nearly 3% below FY25. Adjusted EPS is forecast at £0.80 to £0.88 ($1.05 to $1.16), indicating a sustained period of slower growth and reduced profitability.

Key Decisions for Investors

• Investors should closely monitor Endava's client retention and new business conversion rates, as these were cited as primary drivers for the Q1 miss.
• Re-evaluate DAVA's growth prospects and profitability targets given the significant downward revision in FY26 guidance.
• Exercise caution and consider potential for further analyst downgrades until tangible operational improvements are demonstrated.