Endava Shares Plummet as Growth Prospects Diminish

Technology services provider Endava faces mounting challenges following a disappointing quarterly performance and significantly reduced guidance. The company's latest financial revelations have triggered a massive sell-off, leaving market participants questioning its ability to recover value.

Financial institutions have moved swiftly to adjust their positions on Endava in the wake of the troubling developments:

• William Blair downgraded the stock to "Market Perform"
• Needham reduced its price target from $12 to $9
• Morgan Stanley adjusted its target downward to $8
• Guggenheim lowered its objective from $18 to $15

While several firms maintain "Buy" recommendations, the prevailing sentiment has clearly shifted toward caution as multiple downward revisions accumulate.

Quarterly Performance Misses Expectations

Endava's first-quarter results for fiscal year 2026 fell substantially short of projections. The company generated revenue of £178.2 million, representing an 8.6% year-over-year decline and missing the £188.78 million consensus estimate. The profitability picture proved even more concerning, with the company posting a £8.5 million loss compared to a £4.2 million profit during the same period last year.

Adjusted profit margins contracted significantly from 9.9% to 5.5%. Management attributed the underperformance to unexpected credits issued to a major client and several failed deal closures in the sales pipeline. Despite these operational challenges, Endava secured a strategic partnership with a payment services provider valued at up to $100 million.

Should investors sell immediately? Or is it worth buying Endava?

Guidance Reduction Signals Deeper Issues

Perhaps more alarming than the historical results is Endava's revised outlook for the full 2026 fiscal year. The company now anticipates revenue between £735 million and £752 million, projecting a 3.5% decline compared to previous growth expectations. Adjusted earnings per share guidance has been lowered to a range of £0.80 to £0.88.

This guidance revision indicates substantial operational headwinds within a challenging market environment, resulting in a significant erosion of investor confidence.

Share Price Enters Precipitous Decline

The market reaction to these developments has been severe. Following the earnings release, Endava shares collapsed by more than 25%, accelerating an existing downward trend. Since the beginning of the year, the stock has lost over 80% of its value and currently trades near its annual low.

The central question confronting stakeholders is whether Endava can execute a successful turnaround strategy or if the current decline represents the initial phase of a more permanent deterioration.