Endava Shares Face Continued Pressure After Disappointing Results

Endava US29260V1052

Endava's latest quarterly earnings report has placed its stock under renewed scrutiny. The digital transformation specialist fell short of market expectations for both revenue and profit in the first quarter of its 2026 fiscal year, prompting a downward revision of its full-year outlook. This performance has led several analysts to adopt a more cautious stance, with price targets being cut and some investment ratings downgraded. The central question now is whether the company can execute its stated strategic realignment without enduring prolonged revenue and margin challenges.

The market's reaction to the quarterly figures has been notably reserved. Research firm Guggenheim reduced its price target on Endava shares from $18 to $15, although it maintained a "Buy" rating. Its analysts pointed to what they see as a still-attractive risk-reward profile over the medium term, citing management's conservative guidance and the current valuation. In contrast, William Blair took a more direct step by downgrading the stock from "Outperform" to "Market Perform," citing a growth outlook that is proving more difficult than initially anticipated.

These adjustments followed the company's release of its Q1 FY2026 results for the period ending September 30. Endava reported earnings per share of $0.15, missing the consensus estimate of $0.18—a shortfall of approximately 16.7%. Revenue came in at £178.2 million, also below the projected £188.78 million. In response, the consensus forecast for the full 2026 fiscal year now anticipates a negative revenue growth of around 3%.

Dissecting the Quarterly Performance and Revised Forecast

Citing a shift in its deal mix, Endava's management explained the current weakness. The company is focusing on pursuing larger contracts, but this has coincided with a decline in conversions and volumes within its smaller to mid-sized project segment. Management has characterized the current demand environment as "fluid," noting an acceleration of its shift toward future strategic priorities. This transition, while intended for long-term benefit, is creating near-term uncertainty in the revenue pipeline and may lead to volatile growth and margin patterns.

Consequently, Endava has formally lowered its annual guidance. The company now expects revenue in the range of £735 million to £752 million. The midpoint of this new range implies a year-over-year decline of roughly 3.5%. This is a significant step down from the previous forecast of £750 million to £765 million, which had suggested only a modest 0.5% dip. Technically, the stock remains under pressure, with a recent closing price of €5.65 and a stark year-to-date decline of 81.04%.

In a separate governance update, Endava's Annual General Meeting on December 10 saw shareholders broadly approve all resolutions. The annual financial statements were confirmed with 99.92% of votes, directors were re-elected, and PwC was reappointed as auditor.

The Path Forward: Key Factors to Watch

Looking ahead, Endava's stock is likely to remain susceptible to volatility in the near term. Market experts suggest that two concrete developments will be critical for a sustained recovery:

• Stabilizing the conversion rate of smaller and mid-sized engagements to create a broader and more reliable revenue pipeline.
• Successfully securing a sufficient number of larger contract wins to offset the softness in other business areas and support the revised FY2026 forecast.

While the average analyst price target—adjusted in mid-November following the earnings release—remains significantly higher than the current trading price, hovering around $16.30 to $16.40, future estimates are contingent on execution. Should Endava consolidate its deal pipeline, growth and margins could see improvement. However, if demand signals remain "fluid," further downward revisions to profit and revenue targets are a distinct possibility.