Endava downgraded on weak demand and execution risks
Investing.com -- J.P. Morgan downgraded Endava to “Underweight” from “Neutral,” warning that persistent execution issues, slowing pipeline conversions, and weak client demand could continue to pressure growth and profitability despite the stock’s sharp decline.
The brokerage cut its December 2026 price target on Endava to $5 from $9 after the company reported another quarterly miss alongside a reduced full-year outlook. Analysts said the latest results reinforced investor concerns around revenue predictability and management’s ability to deliver a sustained recovery.
Endava reported fiscal third-quarter revenue of £179 million, below both Wall Street expectations and company guidance. Adjusted EPS came in at £0.05, missing forecasts as margins deteriorated sharply amid weaker utilization and higher AI-related investment spending.
Management attributed the slowdown to delayed deal conversions, macroeconomic caution among clients, Middle East-related disruptions, and longer implementation timelines for large AI-focused outcome-based contracts. JPMorgan said these challenges add to broader structural concerns around Endava’s exposure to time-and-materials contracts and inconsistent delivery execution.
The bank also lowered its fiscal 2026 and 2027 earnings estimates by more than 40%, citing slower expected growth and ongoing margin pressure. Endava now expects fiscal 2026 revenue of £722 million to £726 million, down from prior guidance of £736 million to £750 million, while adjusted EPS guidance was slashed to £0.45-0.49 from £0.80-0.86 previously.
Although JPMorgan acknowledged that earnings may be nearing a trough, analysts said the company still lacks clear catalysts for a durable reacceleration in growth. They added that several quarters of consistent execution will likely be needed before investor confidence can recover.
The report noted that AI-related revenue accounted for roughly 15% of third-quarter sales, with the company increasingly pursuing larger outcome-based AI contracts. However, JPMorgan cautioned that these deals are taking longer to close and scale, limiting near-term upside.