Earnings call transcript: Vodafone Q2 2025 sees revenue growth, dividend increase

Vodafone Group PLC reported a notable acceleration in service revenue growth to 5.8% for the second quarter of 2025, with Europe returning to growth at 0.5%. The company committed to delivering at the upper end of its fiscal year 2026 guidance and announced a planned 2.5% increase in its final FY26 dividend. Vodafone's stock closed at $11.70, marking a 1.04% increase from the previous close, reflecting positive investor sentiment.

Key Takeaways

• Vodafone achieved 5.8% growth in group service revenue, with Europe returning to positive growth.
• Organic adjusted EBITDA increased by 6.8%.
• Over €3 billion was returned to shareholders through buybacks.
• A 2.5% increase in the final FY26 dividend was announced.
• The company completed a merger in the UK, forming a leading mobile operator.

Company Performance

Vodafone's second-quarter results highlight a strong performance, particularly in its service revenue and EBITDA growth. The European market's return to growth is a positive indicator, contrasting with previous periods of stagnation. The company's strategic acquisitions and mergers, such as the UK merger and the acquisition of Telecom Romania's assets, have bolstered its market position.

Financial Highlights

• Revenue Growth: 5.8% in group service revenue.
• Organic Adjusted EBITDA: Increased by 6.8%.
• Dividend: Announced a 2.5% increase in the final FY26 dividend.

Outlook & Guidance

Vodafone is optimistic about its future, expecting to deliver at the upper end of its FY 2026 guidance. The company is introducing a progressive dividend policy and is focused on operational excellence and sustainable cash flow growth.

Executive Commentary

CEO Margarita expressed confidence, stating, "Vodafone will now grow," emphasizing the company's strategic direction. Incoming CFO Pilar Lopets highlighted her focus on driving simplification and productivity, which aligns with Vodafone's transformation goals.

Risks and Challenges

• Competitive Market: The mobile market in Germany remains highly competitive, posing a challenge to growth.
• Integration Efforts: Ongoing integration plans, particularly in the UK, require careful execution.
• Market Saturation: Saturation in mature markets could limit growth potential.
• Macroeconomic Pressures: Global economic conditions may impact consumer spending and investment.

Vodafone's Q2 2025 earnings call underscores its strategic initiatives and market resilience, with a positive outlook for the coming fiscal year. The company's focus on growth, innovation, and shareholder returns positions it well amid competitive and economic challenges.

Full transcript - Vodafone Group PLC ADR (VOD) Q2 2026:

Margarita, CEO, Vodafone: Hello, everyone. We are pleased with our performance in the first half, which was in line with our expectations. Germany and Europe as a whole stabilized and we continue to grow well in Africa and Turkey. During the first half of the year, we completed the reshaping of the group with our merger in The UK forming the country's leading mobile operator, as well as the acquisition of Telecom Romania's assets. Across the group, we have continued to make operational progress as we deliver on our strategic priorities of customers, simplicity and growth.

In The UK, we made a fast start with the integration and I'm pleased that we are already delivering on our promise of network and customer experience improvements. In Germany, we continue to progress with our turnaround. Customer experience is also improving. We're investing in growth opportunities in B2B and driving value in mobile and fixed through disciplined execution. Stepping back, our solid performance in the first half has given us the confidence to confirm that we expect to deliver at the upper end of our FY 2026 guidance.

We have also announced that we are committing to a progressive dividend from this year. But before we go into the detail of our performance, I would also like to mention that as this is Luca's final results, we are also joined today by Pilar Lopets, our incoming CFO. Welcome, Pilar. Could you tell us a bit about yourself?

Pilar Lopets, Incoming CFO, Vodafone: Thank you, Margarita. I'm thrilled to have joined Vodafone a few weeks ago. A little bit about myself. I grew up in the telco sector, spending almost two decades at a major European operator, experiencing the significant technological and societal changes that connectivity drove in the 2000s and 2010s. During my time there, I was the CFO of businesses that competed with Vodafone throughout Europe.

And I saw firsthand what a powerful competitor Vodafone can be and how strong the brand is across our markets. I then spent time outside the sector working for a global technology company at what was a really exciting time as we began with the cloud transformation first and then moved into the AI revolution. In every role that I do, I aim to drive simplification and productivity, but always with the customer as my number one priority. I strongly believe it is these two elements which will drive sustainable growth and shareholder value in any industry.

Margarita, CEO, Vodafone: It's really great to have you with us, Pilar. And that leads on to the results of this quarter. Luca, could you share the financial highlights?

Luca, Outgoing CFO, Vodafone: Thank you very much, Margalita. As you mentioned, we had a good performance in the first half. Group service revenue growth accelerated to 5.8% in Q2, supported by growth across both Europe and Africa. Europe's return to growth of 0.5% was supported by the stabilization in Germany and growth in The UK. It was really great to see The UK perform so well in the first full quarter with Vodafone three up and running.

In Germany, despite intense mobile competition, we grew service revenue by 0.5% in the quarter. This was driven by two anticipated factors: the end of the impact of the MDU TV law change and the ongoing acceleration in wholesale revenue. Our emerging markets portfolio continued to deliver strong growth in euro terms with Turkey and Vodacom continuing to perform very well. Our B2B business grew at 2.9% in Q2. Encouragingly, we continue to see strong demand for digital services, which is growing double digit.

On the profitability front, we had a particularly good first half with an overall 6.8% organic growth in adjusted EBITDA. Cash flow was impacted by the usual in year phasing impacts. And importantly, given our solid performance in the year so far and the positive outlook ahead, we have confirmed that we now expect to deliver at the upper end of the growth guidance that we set out at the beginning of the year.

Margarita, CEO, Vodafone: Thank you, Luca. As I mentioned earlier, in addition to good financial performance, we have continued to make good operational progress with our strategic priorities. Looking at our two biggest markets in turn. The mobile market in Germany remains very competitive, but Vodafone's progress is visible. With our cable network once again recognized for its speed and quality in independent tests, we also reached two significant milestones during the quarter.

We are now marketing OXG fiber to 1,000,000 homes and we have now seamlessly migrated 11,000,001 on one customers onto our mobile network. We also continue to improve customer experience. Customer satisfaction is significantly higher than it was two years ago. We are closing the gap to the incumbent and we are now leading the market in some segments. In B2B, we are investing in exciting opportunities, as you will have seen a few weeks ago when we announced the acquisition of a major cloud service specialist in Germany.

From a commercial perspective, we have been driving value by taking several actions to increase ARPU for new acquisition in broadband as well as offering differentiated mobile propositions such as flexible device financing and five year guarantees for devices. Looking at Germany as a whole, we have the right assets, the right team, and the right investment. It's now all about solid and consistent execution. Moving to The UK, we are performing well and have made a fast start in the integration of Vodafone and three. We are delivering on our commitment to build a best in class mobile network.

But don't just take our word for it. Independent testers have already highlighted measurable improvements. We are also already seeing improvements in customer loyalty in the three brand as we start to apply our industry leading customer based management practices. More broadly, we are already capturing some of the unique opportunities available to us in The UK. We are applying our coherent and rigorous multi brand strategy in mobile and cross selling Vodafone largest fiber footprint to three customers as well as FWA to Vodafone customers.

Of course, this is just the beginning of a major multiyear integration, and we have taken the first steps to deliver on our significant synergy targets. From the group's perspective, it is the improving trends in Germany, our growth trajectory in The UK and strong positions in growing markets across Europe, Africa and Turkey that give me confidence on our growth outlook. Luca, perhaps you could talk us through what this means for capital allocation.

Luca, Outgoing CFO, Vodafone: You will recall that we refreshed our capital allocation framework in March 2024, reflecting the new shape of the Group. Since then, this balanced framework has served us well. It ensures that we invest in our business at the right level, maintain a strong and flexible balance sheet and deliver returns for our shareholders. Since then, we've delivered on our commitments, including the return of over €3,000,000,000 of capital to shareholders via buybacks with a further €1,000,000,000 still to do as well as more than €2,000,000,000 in dividends. Dividends.

Now that the shape of the group is complete and we are delivering on our FY twenty twenty six growth guidance, it is the right time to also deliver on our ambition to grow our dividend over time. As our anticipated multiyear growth trajectory is now underway, I am pleased to say that we are now moving to a progressive dividend policy from this year. This includes a planned 2.5% increase in the final FY26 dividend.

Margarita, CEO, Vodafone: Thank you, Luca, for your support in delivering these results, but most importantly for your contribution to Vodafone and to me personally over the last two years. The team here will really miss you.

Luca, Outgoing CFO, Vodafone: Yeah. Thank you, Margarita. It's obviously difficult to leave after all the progress we've made. But as this is my last set of results at Vodafone, I would really like to express my sincere thanks to the entire Vodafone team for the support I've been given during my time here. Now leaving is never easy, even more so at this moment.

However, I will watch Vodafone with great pride as it continues its growth journey. And I definitely know you're all in strong hands with Pilar taking the finance helm.

Pilar Lopets, Incoming CFO, Vodafone: Thank you, Luca. Looking at the Q2 results today, it's clear I've joined Vodafone at an exciting time where there is real momentum across the business. I'm looking forward to continuing the drive for operational excellence during the next phase of the group's transformation and most importantly, delivering on our commitment to generate sustainable cash flow growth for our shareholders in the years ahead.

Margarita, CEO, Vodafone: Two and a half years ago, I said that Vodafone must change and we have changed both where we operate and how we operate. And earlier this year, I also very clearly said that Vodafone will now grow. I'm pleased that today Vodafone is growing service revenue in Europe and Africa. For the very first time, we are only operating in geographic markets with the right conditions, sustainable market structures and good local scale. We have a unique mix of a strong consumer connectivity business, significant B2B operations, compelling geographic diversification and direct exposure to high growth opportunities such as IoT and digital and financial services.

And our balance sheet is now in a strong position providing us with significant flexibility. But we have much more to do with particular focus areas being the operational turnaround in Germany and the execution of our integration plans in The UK. Our objective continues to be to improve our customer experience across our markets, further simplify our business and deliver sustainable cash flow growth in FY 2026 and beyond.

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