Endava delivered a solid top-line performance in QQ1 2025 with revenue of GBP195.1 million, up 3.5% year over year (CC up 5.2%), and sequential growth under a backdrop of margin normalization pressures. The quarter featured meaningful progression from the company’s AI-driven core modernization strategy and the GalaxE acquisition, which together expanded North American exposure, healthcare revenue, and nearshore delivery capabilities. While revenue grew, profitability remained modest—net income of GBP2.25 million and a net margin of ~1.15% against a gross margin of ~25%, with an adjusted PBT margin of 9.9% in the prior year period signaling the need for GalaxE-related synergies to drive margin expansion in the back half of FY2025.
Management framed QQ1 2025 within a broader “digital shift” toward AI-enabled core modernization, arguing that clients now require deep core transformations rather than peripheral digital upgrades. Endava highlighted its Dava.X framework and seven modernization accelerators (Chronos, Ray, Morpheus, and others) as accelerants to faster, lower-risk transformations, supported by a diversified, global delivery footprint including India. Management projects margin improvement in the second half as GalaxE-integrated systems and processes ramp, underscored by explicit guidance for FY2025: Q2 revenue GBP195–GBP197 million with 8.5–9.5% CC growth and EPS of GBP0.24–GBP0.25, and FY2025 revenue of GBP800–GBP810 million with 10.0–11.5% CC growth and EPS of GBP1.12–GBP1.17. These targets assume FX of GBP1 = USD1.30 and EUR1.19.
Strategically, Endava’s combination of AI leadership, core modernization capabilities, an expanded U.S. footprint via GalaxE, and a stronger nearshore/offshore mix position the company to capture larger, multi-year transformation programs. However, investors should monitor longer decision cycles, integration costs, and competitive dynamics in a still-uncertain macro environment as headwinds to near-term margin expansion persist.Overall, the QQ1 2025 readout reinforces Endava’s thesis that AI-embedded core modernization is a structural growth driver, with the potential for meaningful upside if the pipeline converts in the second half of FY2025.