Breaking Down Endava plc (DAVA) Financial Health: Key Insights for Investors

You're looking at Endava plc (DAVA) and seeing a business that finished its 2025 fiscal year with what looked like a solid foundation, but the recent market signals defintely demand a closer look at the engine room. The company posted full-year revenue of £772.3 million, a respectable 4.3% increase, and delivered an Adjusted Diluted EPS (earnings per share) of £1.13, suggesting stability in a tough macro environment. But here's the quick math: the operational volatility is real, with the most recent quarter showing an 8.6% year-over-year revenue decline, which is a sharp turn. That immediate slowdown is why management had to lower its full-year 2026 revenue guidance to a range of £735.0 million to £752.0 million, signaling a near-term contraction. You need to know if the record-high order book they exited FY2025 with can offset the current client spending caution, and if their AI-native strategy is translating into revenue, or just hype.

Revenue Analysis

You need a clear picture of where Endava plc (DAVA) actually makes its money, especially with the current market volatility. The headline takeaway is that the company delivered an annual revenue of £772.3 million for the fiscal year ending June 30, 2025, representing a year-over-year increase of 4.3%. This growth is defintely slower than in past years, but the constant currency growth rate-which strips out the effect of fluctuating exchange rates-was a more solid 6.3%.

Endava's revenue primarily comes from providing next-generation IT services, focusing on digital transformation and creating customized software for clients. They are a pure-play service provider, not a product company, and their revenue is segmented by the geographic location of their customers and the industry vertical (the type of business) they serve. This service model means revenue is tied directly to client project pipelines, which explains the CEO's cautious outlook despite a record-high order book.

Here's the quick math on where your investment is grounded, based on the full FY2025 figures:

The most significant change is the shift toward North America, which now contributes 38% of total revenue, up from 33% in the prior year. This is a strategic win, as the US market often commands higher pricing and larger transformation deals. Still, the reliance on the UK and Europe remains substantial, accounting for over half of the business combined. Diversification is happening, but slowly.

Another crucial point is client concentration. Endava's Top 10 clients accounted for 36% of total revenue in FY2025, an increase from 32% in the prior year. This rising concentration is a near-term risk. If one of those top clients cuts spending, the impact on quarterly results would be immediate and painful. You need to watch that metric closely. For a deeper dive into the risks and opportunities, you can read the full post: Breaking Down Endava plc (DAVA) Financial Health: Key Insights for Investors.

What this estimate hides is the underlying volatility in the market. The company noted that many clients are recalibrating the timing of spending, which means projects are being deferred, even if the long-term contracts are still signed. This is why the quarter ending September 30, 2025 (Q1 FY2026), saw a year-on-year revenue decline of 8.6%. That's a clear signal of the near-term operating backdrop remaining challenging.

• North America is the new growth engine.
• Client concentration risk is rising.
• The market environment is causing project delays.

The core business-digital transformation services-is still in demand, but the timing is unpredictable.

Profitability Metrics

You're looking for a clear read on Endava plc's (DAVA) core profitability, and the short answer is that while the headline numbers look thin, the operational efficiency is actually solid, especially when you look at the adjusted figures. For the full fiscal year 2025 (FY2025), Endava reported total revenue of £772.3 million, marking a 4.3% year-over-year increase. The real story, though, is in the margins, which show a business under pressure but still delivering positive profit.

Here's the quick math on the core IFRS (International Financial Reporting Standards) margins for FY2025:

• Net Profit Margin: The Net Profit for the year was £21.2 million, which gives a Net Profit Margin of about 2.74%.
• Operating Profit Margin: Using the Profit Before Tax of £24.1 million as a close proxy for operating profit, the Operating Margin comes in at approximately 3.12%.

The company's focus on non-IFRS metrics-which strip out non-cash items like share-based compensation and amortization-tells a more optimistic tale. The Adjusted Profit Before Tax (a key measure of operating performance) was £82.1 million, translating to an Adjusted Operating Margin of 10.6% of revenue. That's a much healthier figure that reflects the underlying cash-generating power of the business model.

Operational Efficiency and Cost Management

The gap between the IFRS Operating Margin (3.12%) and the Adjusted Operating Margin (10.6%) is your immediate red flag for non-cash expenses, but it also highlights how much cost management matters here. The challenge is in the Gross Profit Margin, which measures how efficiently Endava delivers its services before factoring in overhead like sales and administration. While the full FY2025 Gross Profit is not explicitly detailed in the summary IFRS figures, the Q4 2025 Gross Margin was reported at 24.90%. This is where the pressure is. You need to see a higher figure to fund the growth and overhead.

To be fair, the company is actively trying to improve its cost base and capital allocation. Endava announced a $100 million share repurchase program in Q2 FY2025, a clear signal of confidence in their cash flow outlook and long-term strategy. This is a concrete action to return value to shareholders while navigating a volatile market.

Comparison with Industry Averages

When you stack Endava up against its peers in the broader IT Services and Professional Services space, the profitability picture is mixed, but it clarifies the risk. For a pure Professional Services firm (like high-end consulting), the average Gross Margin for 2025 often sits in the 55% to 65% range. Endava's lower gross margin is typical for a high-labor, outsourced technology services model, but it still shows a significant difference in pricing power or cost of delivery.

However, the company's Net Profit Margin of 2.74% is very close to the 3.00% average seen in the Advertising/Information Services sector as of January 2025, which is a closer proxy for the lower-margin, high-volume digital services component of their business. The Adjusted Operating Margin of 10.6% is also right in line with the 10.90% pre-tax operating margin for that same sector. This suggests that while the IFRS Net Profit is lean, Endava's core operations are performing at the competitive average for its segment of the market.

The trend shows a slight dip in the non-IFRS profitability; the Adjusted Profit Before Tax margin was 11.2% in the prior year, falling to 10.6% in FY2025. That's a small compression, but it's a trend you defintely need to monitor. If you want to dive deeper into who is betting on this model, you can check out Exploring Endava plc (DAVA) Investor Profile: Who's Buying and Why?

Next Step: Portfolio Managers: Model the impact of a 50 basis point (0.5%) drop in Gross Margin on the Net Profit to stress-test the current valuation by next Tuesday.

Debt vs. Equity Structure

When you look at a company's balance sheet, the debt-to-equity (D/E) ratio is the quickest way to see how it finances its growth-is it leaning on lenders or shareholders? For Endava plc (DAVA), the picture for the fiscal year ending June 2025 shows a healthy, conservative level of financial leverage (the use of borrowed money to finance assets).

As of June 2025, Endava plc's financial structure is clearly equity-heavy. The company's total debt is a modest fraction of its shareholder equity, which is exactly what you want to see in a high-growth, capital-light IT services firm. Your risk profile here is low, but you should still monitor the rising trend in debt.

Here's the quick math on Endava plc's financing mix for FY2025, with all amounts in millions of U.S. Dollars:

This debt profile is manageable, but it's important to note the long-term debt component, which makes up the vast majority of the company's liabilities. At $291 million, it's a significant commitment, but one that is well-covered by the equity base.

Debt-to-Equity Ratio: A Conservative Stance

Endava plc's Debt-to-Equity ratio for the quarter ending June 2025 stood at 0.39. To be fair, this is a slight worsening from its 12-month average of 0.31, but it remains a very strong indicator of financial health.

What this estimate hides is the context of the industry. For IT Consulting & Other Services, the industry average D/E ratio is around 0.7173. A ratio below 1.0 is generally considered healthy, and the technology sector often operates with lower leverage than capital-intensive industries like utilities. Endava plc's ratio of 0.39 is significantly below the industry average, suggesting a conservative management approach to leverage. This is defintely a good sign for investors concerned about financial risk.

• Endava plc D/E Ratio (Jun. 2025): 0.39
• IT Consulting Industry Average D/E Ratio: 0.7173

Financing Strategy and Capital Allocation

Endava plc's financing strategy is a pragmatic blend that prioritizes equity, but also uses debt to fund growth, likely for acquisitions or capital expenditures, without heavily diluting shareholders. The company's net debt to EBITDA is about 1.8 times, which is considered a manageable level. However, the interest coverage ratio (EBIT/Interest Expense) is a bit low at 3.9 times, which is worth watching, as it indicates how easily operating profit covers interest payments.

In terms of capital allocation, Endava plc's board authorized the repurchase of up to $50 million of additional shares in May 2025, which is a clear signal of confidence in their cash flow outlook and a commitment to returning capital to shareholders. This action balances the use of debt for growth with a commitment to equity value, showing a balanced capital structure philosophy.

For a deeper dive into the company's full financial picture, you can check out the full post: Breaking Down Endava plc (DAVA) Financial Health: Key Insights for Investors.

Liquidity and Solvency

You need to know if Endava plc (DAVA) can cover its near-term obligations, and the quick answer is yes, they can. Their liquidity position is strong, which is a key stability indicator, but you also need to see how cash generation is trending in this volatile market.

The company's liquid assets are more than double their short-term debt, which is defintely a point of strength. For a technology services firm like Endava plc, the Current Ratio (current assets divided by current liabilities) and the Quick Ratio (Current Ratio excluding inventory) are nearly identical. The latest figures show both the Current Ratio and the Quick Ratio at approximately 2.32. This high ratio signals that Endava plc has ample resources to meet its obligations without relying on future sales or financing. That's a very comfortable buffer.

Here's the quick math on why those ratios are so high:

• Current Ratio of 2.32: Means for every £1.00 of debt due in the next twelve months, Endava plc holds £2.32 in assets that can be converted to cash within the same period.
• Quick Ratio of 2.32: The near-zero difference from the Current Ratio confirms the business model has almost no inventory, so all current assets are highly liquid, primarily cash and accounts receivable.

Analyzing the working capital trends (current assets minus current liabilities) for the fiscal year 2025 (FY2025, ended June 30, 2025) shows some pressure, though the overall position remains robust. The change in Accounts Receivable (A/R) for FY2025 was a negative impact of -£18.6 million, meaning clients were slower to pay or billings increased faster than collections. Likewise, the change in Accounts Payable (A/P) was a -£21.58 million impact, suggesting the company paid its own bills faster or accrued less, which is a cash outflow. This tightening of working capital is a trend to watch, but it's not a crisis given their cash reserves.

Looking at the cash flow statements gives you the real picture of where the money is moving. For the full FY2025, Net Cash from Operating Activities was £52.8 million, a slight decrease from £54.4 million in the prior year. This is the engine of the business, and while still positive, the flat-to-down trend reflects the cautious spending environment mentioned by management. The most recent quarter, Q1 FY2026 (ended September 30, 2025), showed a rebound in operating cash flow to £12.3 million, up from £4.4 million in the same period last year.

The Investing and Financing cash flow trends are also important. In FY2025, Endava plc continued to invest, with Capital Expenditures (CapEx) at -£4.7 million and cash used for acquisitions at -£6.83 million. On the financing side, the company's confidence in its cash flow is clear: they repurchased approximately 6.7 million ADSs for $111.2 million as of August 29, 2025, as part of their share repurchase program. This is a significant use of capital, a sign of returning value to shareholders, but it does draw down the cash balance, which stood at £47.2 million at the end of Q1 FY2026.

The main liquidity strength is the high current and quick ratio, but the near-term risk is the volatile operating cash flow, which management attributes to clients recalibrating spending. Keep an eye on the Mission Statement, Vision, & Core Values of Endava plc (DAVA) to see if their strategic focus on AI can stabilize and grow that operating cash flow in the coming quarters.

Valuation Analysis

You're looking at Endava plc (DAVA) after a brutal year, trying to figure out if the market has overcorrected or if there's more pain ahead. The quick answer is that the stock looks cheap on an asset basis but still carries a high earnings multiple, suggesting investors are betting heavily on a strong, near-term turnaround in profitability.

The market has clearly punished Endava plc. The stock price has cratered, decreasing by 75.07% over the last 12 months, trading near its 52-week low of $6.10 as of November 2025. This massive drop from its 52-week high of $34.94 reflects the cautious operating environment and client spending recalibrations that CEO John Cotterell has noted. That's a huge value destruction, and it's why the current valuation metrics are so mixed.

Here's the quick math on the key valuation multiples, using trailing twelve months (TTM) data as of November 2025:

• Price-to-Earnings (P/E) Ratio: 32.72. This is high for a company whose diluted EPS for the fiscal year 2025 was £0.36. It signals that the market still views Endava plc as a growth stock, expecting earnings to rebound sharply from the TTM diluted EPS of $0.20.
• Price-to-Book (P/B) Ratio: 0.71. This is the startling number. A P/B ratio under 1.0 means the stock is trading for less than the value of its net assets (shareholders' equity). Honestly, this suggests a deep undervaluation on a pure balance sheet basis, a rare sight for a technology services company.
• Enterprise Value-to-EBITDA (EV/EBITDA): 16.85. This multiple, which accounts for debt and cash, is still relatively high, especially when compared to the company's historical median of 46.75. The EV-to-EBITDA ratio of 16.85 for a company facing revenue headwinds suggests that while the P/B is low, the market is pricing in a significant future improvement in operating cash flow (EBITDA).

What this estimate hides is the market's current skepticism about the pace of that earnings rebound. The high P/E of 32.72 and the low P/B of 0.71 create a classic value trap signal: cheap assets, but expensive earnings, indicating a high risk to future profitability forecasts.

Endava plc does not pay a dividend, so the dividend yield is 0.00%, and the payout ratio is not applicable. Instead, the company focuses on reinvesting capital, which is typical for a growth-oriented tech firm, though they did announce a $100 million share repurchase program earlier in FY2025.

Wall Street's consensus reflects this mixed picture, landing firmly on Hold. Out of the analysts covering the stock as of November 2025, the breakdown is 1 Sell, 8 Hold, and 3 Buy ratings. The average 12-month price target is $18.00, which is a massive premium to the current price of $6.13. This delta suggests analysts believe the stock is defintely undervalued at its current level, but the 'Hold' signals a lack of conviction for a strong, immediate catalyst.

For a deeper dive into the full financial picture, check out the complete analysis here: Breaking Down Endava plc (DAVA) Financial Health: Key Insights for Investors.

Risk Factors

You're looking at Endava plc (DAVA) and seeing a strong push into AI, but the near-term financial picture is complicated by a few significant headwinds. The core risk is external-the uncertain macroeconomic environment-which is causing a tangible slowdown in client commitment, even as the opportunity pipeline grows. This is a classic IT services challenge: clients want innovation, but they are defintely slow to sign the big checks.

For the fiscal year 2025 (FY2025), Endava reported a total revenue of £772.3 million, which was a 4.3% increase year-over-year, but the Q4 FY2025 revenue actually decreased by 3.9% year-over-year, showing the immediate impact of client spending recalibration. This volatility is a major operational risk that directly hits the top line.

Here are the most pressing risks you need to consider:

• Macroeconomic Headwinds: Clients are delaying or reducing discretionary spending, leading to slower conversion of the sales pipeline into actual revenue. This is the primary external risk.
• Client Concentration: An increasing reliance on a small number of clients. The top 10 clients accounted for 37% of total revenue in Q4 FY2025, up from 34% in the prior year, meaning any single client loss would have a disproportionately large financial impact.
• Sector-Specific Weakness: Three key industry verticals experienced significant revenue declines in FY2025, signaling a need for a pivot or a deeper market slump in those areas.

The sector-specific challenges are clear in the FY2025 numbers. The Payments vertical revenue decreased by 19.0%, while Technology, Media, and Telecommunications (TMT) dropped by 13.2%, and Mobility was down by 11.7%. These are not minor dips; they reflect a broad client pullback in those specific markets. Plus, regional performance is uneven, with softness noted in the UK and Rest of World regions.

The company is addressing these issues with a clear set of mitigation strategies. They're focusing on what they can control, and that's smart. One clean move: they authorized an additional share repurchase program of up to $50 million, which signals management's confidence in the long-term cash flow outlook, even with the near-term revenue pressure.

Their operational and strategic responses are centered on efficiency and future-proofing:

• AI-Native Strategy: Over half of the workforce is now utilizing Artificial Intelligence (AI) in projects, aiming to position Endava as a leader in Gen AI-enabled transformation, which should drive new demand as the technology settles down.
• Cost and Margin Control: They've implemented strong cost control, particularly over Selling, General, and Administrative expenses (SG&A), and executed a business optimization effort that included a headcount reduction, resulting in a £5.5 million charge in Q2 FY2025.
• Strategic Deal Focus: Securing large, multi-year strategic deals, such as a five-year agreement with Reed Exhibitions, helps stabilize the revenue base against project-based volatility. They are also exploring innovative pricing models, like transaction-based pricing, to better align with client value.

Here's the quick math on the client concentration risk: an average spend per client from the top 10 increased by 28% year-over-year in Q3 FY2025, reaching £7.5 million. That's great for growth, but it's also a higher-stakes game if a single client decides to pull back. What this estimate hides is the potential for an unexpected credit or contract renegotiation, like the one that impacted Q1 FY2026 results, which goes straight to the bottom line.

For a deeper dive into the company's full financial picture, you can check out the main post: Breaking Down Endava plc (DAVA) Financial Health: Key Insights for Investors.

Growth Opportunities

You're looking for where Endava plc (DAVA) goes from here, and the short answer is that the company is actively pushing into high-growth areas like Artificial Intelligence (AI) and Healthcare to offset a volatile short-term market. While the macroeconomic environment has caused clients to delay spending, the strategic foundation for future growth is defintely being laid now.

Endava plc finished Fiscal Year 2025 (FY2025) with total revenue of £772.3 million, a solid 4.3% increase year-over-year, or 6.3% at constant currency, but the cautious outlook for the near-term is real. The next major growth cycle hinges on their shift to an AI-native model and their efforts to diversify their client base and geographic footprint.

AI and Product Innovation: The Core Driver

The most significant long-term growth driver is Endava plc's deep integration of AI into its service delivery, moving past simple talk to real-world application. Over half of their workforce is now using AI in client projects, which is a clear marker of progress toward becoming an AI-native company. This focus is translating into large, strategic deals, like the multi-year relationship secured with a leading payments company, valued at up to $100 million, which will leverage their AI and advanced engineering capabilities.

• AI-Native Shift: Over 50% of employees now use AI in projects.
• Innovative Pricing: Rolling out transaction-based pricing models to align with client product growth.
• Record Order Book: Exited FY2025 with its highest ever quarterly order book.

Strategic Partnerships and Market Expansion

Endava plc is not relying on organic growth alone; they are building a network of strategic alliances to enhance their service offerings. Partnerships with tech giants like OpenAI, AWS, Microsoft, and Google Cloud are already contributing to deal flow and delivering new opportunities. Plus, they are actively working to reduce their concentration risk by expanding beyond their traditional strongholds in the UK and Financial Services.

Geographically, North America is the primary target for expansion, accounting for 38% of Q4 FY2025 revenue. Sector-wise, the focus is on Healthcare and Retail, with Healthcare revenue showing explosive growth of 103.8% in FY2025, indicating that their expertise is highly transferable to these new verticals.

Future Revenue and Earnings Estimates

Here's the quick math on the near-term picture: the company's guidance for Fiscal Year 2026 reflects the current market caution. For FY2025, the Adjusted Diluted Earnings Per Share (EPS) was £1.13. For FY2026, the guidance is lower, in the range of £0.82 to £0.94 per share. Similarly, the FY2026 revenue guidance is between £750 million and £765 million, a slight decline from the FY2025 actual of £772.3 million.

What this estimate hides is the record signed value and the increasing importance of their largest clients. The average spend per client from their top 10 customers increased from £24.1 million to £27.9 million in FY2025, a sign of deep client stickiness and a narrow economic moat (a sustainable competitive advantage) that is hard to replicate.

The core competitive advantage remains their nearshoring delivery model, which places agile project teams in similar time zones to their North American and European clients, ensuring constant dialogue and prompt project delivery-a crucial factor for complex digital transformation (DT) work. To dive deeper into the current financial stability, you should check out the full post at Breaking Down Endava plc (DAVA) Financial Health: Key Insights for Investors.

Next Step: Portfolio Managers, ensure your valuation models incorporate the lower FY2026 guidance but assign a higher terminal growth rate based on the long-term AI and diversification strategy.