Vodafone rises on €2 bln buyback, FY26 outlook slightly beats forecasts

Investing.com -- Shares of Vodafone Group (LON:VOD) traded higher on Tuesday after the company confirmed a new €2 billion share buyback and issued guidance for FY26 that modestly topped consensus. 

The buyback follows the €8 billion sale of its Italian operations and is expected to raise Vodafone’s net leverage by 0.2x from the current 2.0x EBITDAaL. The company has also reduced net debt by €11 billion over the past two years.

Vodafone (NASDAQ:VOD) reported second-half FY25 revenue of €19,172 million, down 1.4% from company-compiled consensus. 

EBITDAaL for the period came in at €5,521 million, 1% below consensus. Group service revenue rose 5.4% year over year in H2, short of Barclays (LON:BARC)’ 5.9% forecast.

Guidance for FY26 points to adjusted EBITDAaL of €11–11.3 billion, with the midpoint slightly ahead of the €11.1 billion consensus. 

Adjusted free cash flow is expected to reach €2.6–2.8 billion, beating the consensus midpoint of €2.6 billion. However, regional guidance for Europe, excluding the U.K., came in at €7.2–7.4 billion for EBITDAaL, below the €7.5 billion expected by analysts. 

Barclays estimates U.K. operations will contribute an additional €0.4 billion in EBITDAaL and subtract €0.2 billion from free cash flow, implying a Group total of €11.4 billion and €2.3 billion respectively.

The full-year FY25 results showed continued pressure in Germany, where service revenue fell 6.0% in Q4, in line with expectations. 

Second-half EBITDAaL in the market declined 16%, 1.4% below Barclays’ forecast. Broadband net losses held steady at 7,000 for the third straight quarter.

Fixed-line revenue declines narrowed to 9.7% in Q4, and mobile service revenue remained weak, underperforming Deutsche Telekom (OTC:DTEGY) by 400 basis points.

The U.K. division remained a bright spot, posting 7% EBITDAaL growth in H2, alongside 61,000 net broadband additions. 

Organic service revenue rose 3.1% in Q4, with mobile and fixed-line segments both contributing. 

Barclays noted the U.K. outperformance, though the company expects growth to moderate next year as pricing tailwinds fade.

Emerging markets delivered strong results. Turkey saw second-half EBITDAaL growth of 75%, in line with expectations, though euro-denominated revenue growth slowed to 15% in Q4 from 96% in Q3 amid currency headwinds. 

South Africa posted a 14% EBITDAaL increase in H2, 100 basis points ahead of Morgan Stanley’s estimates.

Analysts at Barclays and Morgan Stanley (NYSE:MS) noted that the shortfall in Europe offsets some of the optimism, limiting immediate share price upside.

In the Rest of Europe segment, EBITDAaL declined 3% in H2 after a 2% gain in H1 due to tougher comparisons and softer B2B growth.

Adjusted free cash flow for FY25 was €2,548 million, 4% above consensus. This marks a return to growth after three years of decline totaling 53% since FY22. The FY26 midpoint guidance of €2.7 billion implies a 6% year-over-year increase.

Currency assumptions for FY26 guidance are based on ZAR 20.59, TRY 43.42 and EGP 56.74.