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Introduction & Market Context
Vodafone Group (LON:VOD) PLC (NASDAQ:VOD) released its Q1 FY26 trading update on July 24, 2025, reporting overall service revenue growth of 5.5% despite continued challenges in its European markets. The quarter was marked by the completion of the Vodafone Three merger in the UK on May 31, 2025, a significant strategic milestone for the company. Vodafone shares were trading at $11.30 at market close on July 23, 2025, near their 52-week high of $11.33.
Quarterly Performance Highlights
Vodafone delivered Group service revenue growth of 5.5% in Q1 FY26, demonstrating resilience in a challenging market environment. The company’s Adjusted EBITDAAL grew by 4.9% to €2.7 billion, with a margin of 29.3%, slightly down from 29.7% in the same period last year. This performance was driven by strong results in Africa and Türkiye, which helped offset weakness in European markets.
As shown in the following chart of quarterly revenue growth and adjusted EBITDAAL:
The company’s European operations continued to face headwinds, with service revenue declining by 1.3% in Q1. However, this represents an improvement compared to previous quarters, suggesting that Vodafone’s strategic initiatives may be starting to yield results. Meanwhile, Africa maintained its strong momentum with double-digit growth.
Regional Performance Analysis
Germany
Germany, Vodafone’s largest European market, saw service revenue decline by 3.2% in Q1 FY26. Excluding the impact of MDU (multi-dwelling units), the decline was more modest at 0.3%. The company noted a 2.8 percentage point improvement quarter-over-quarter, driven by higher wholesale revenues and business phasing.
The following chart illustrates Germany’s service revenue trends and customer additions:
Vodafone is implementing a value-focused approach in Germany, which has impacted broadband customer acquisition but is expected to improve profitability through reduced discounts and a focus on direct sales channels. The company also reported that 7.7 million 1&1 customers had been migrated by the end of Q1.
United Kingdom (TADAWUL:4280)
The UK market saw modest service revenue growth of 0.9% in Q1, with good growth in Consumer & Wholesale partially offset by Business decline. The completion of the Vodafone Three merger on May 31, 2025, marks a significant milestone, with financial results consolidated from June 1, 2025.
The following chart shows UK service revenue growth and customer additions:
Vodafone is now one of the fastest-growing broadband providers in the UK, covering 20.3 million households with gigabit speeds. The integration plan for the Three merger has commenced, with a focus on a multi-brand strategy and network sharing improvements.
Africa
Africa continues to be a bright spot for Vodafone, with strong performance across the region. South Africa posted service revenue growth of 2.9%, supported by pricing actions and demand for fixed connectivity. Egypt delivered exceptional growth of 43.9%, while the Internationals segment grew by 12.6%, accelerating due to strong performance in Tanzania, DRC, and Lesotho.
The following chart details the performance across Vodafone’s African operations:
A notable development in Egypt was the launch of 5G services in June 2025, which is expected to drive further growth in data services. In South Africa, 77.5% of customers now use data services, indicating significant potential for continued growth.
Türkiye and Other Europe
Türkiye delivered extraordinary service revenue growth of 63.8% in Q1 (29.6% in Euro terms), although the company noted that moderating inflation is driving a slowdown in service revenue growth. Other European markets showed modest growth of 0.2%, with continued ARPU pressure in Portugal affecting performance.
Strategic Initiatives and Business Performance
Vodafone Business continues to be a growth driver for the company, with Q1 service revenue increasing by 4.0%. Digital services now contribute 24% to Business service revenue, growing at 14.7% in Q1. The Cloud portfolio showed particularly strong growth at 21.9% year-over-year.
The following chart illustrates Vodafone Business performance:
Germany’s connectivity pressure was partly offset by digital services demand and project phasing, while the UK saw a decline due to managed services contract terminations. These results align with Vodafone’s previous earnings call, which highlighted an 18% increase in digital services and operational improvements.
Financial Guidance
For FY26, Vodafone expects Adjusted EBITDAAL to be between €11.3-€11.6 billion and Adjusted Free Cash Flow between €2.4-€2.6 billion. This guidance incorporates the impact of the UK merger and reflects the company’s confidence in its ability to deliver moderate growth despite challenging market conditions.
The following chart details Vodafone’s financial guidance for FY26:
The guidance represents growth from FY25 actual results, which showed Adjusted EBITDAAL of €10.9 billion and Adjusted FCF of €2.5 billion. The company also provided commentary on capital intensity and leverage ratio expectations, noting that the UK merger considerations include the full consolidation of Three UK and incremental debt.
Conclusion
Vodafone’s Q1 FY26 results reflect a company navigating a complex landscape of regional challenges and opportunities. While European markets continue to face headwinds, particularly in Germany, the strong performance in Africa and Türkiye, along with the strategic Three merger in the UK, position the company for potential improvement in the coming quarters. The continued growth in digital services also provides a promising avenue for future expansion.
Investors will be watching closely to see if Vodafone’s operational improvements in Germany lead to the U-shaped recovery mentioned in previous earnings calls, and how quickly the company can realize synergies from the Three merger in the UK. The next key dates for investors include the Annual General Meeting on July 29, 2025, and the H1 FY26 results on November 11, 2025.
Full presentation:
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