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CALL PARTICIPANTS
- President and Chief Executive Officer — Shuky Sheffer
- Chief Financial Officer and Chief Operating Officer — Tamar Rapaport-Dagim
- Head of Investor Relations — Matt Smith
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RISKS
- Tamar Rapaport-Dagim cited an “expected revenue decline at T-Mobile due to reduced discretionary spending,” which could dampen near-term growth.
- Rapaport-Dagim stated, “We anticipate a moderate increase in our non-GAAP effective tax rate to a rate for fiscal year 2026 of between 16% to 19%, primarily driven by a combination of regulatory changes including the implementation of the Pillar Two global minimum tax and other evolving international tax requirements.”
- Rapaport-Dagim noted, “Additionally, we anticipate higher finance costs this year resulting from a reduced cash balance and funding of our strategic long-term growth plan.”
TAKEAWAYS
- Q4 Revenue — Amdocs (DOX 1.82%) reported $1.15 billion, increased 2.8% in pro forma constant currency, but reported revenue declined 9% due to the phase-out of low-margin, non-core activities.
- Non-GAAP Operating Margin — 21.6%, up 290 basis points year-over-year and 20 basis points sequentially, reflecting efficiency gains and business mix shift.
- Non-GAAP Diluted EPS — $1.83, slightly above the midpoint of guidance.
- GAAP Diluted EPS — $0.88, includes a $0.60 per share restructuring charge related to transformational actions for generative AI adoption.
- Full-Year Revenue — Pro forma constant currency revenue up 3.1%, exceeding guidance midpoint.
- Full-Year Non-GAAP Diluted EPS Growth — 8.5%, aligned with guidance midpoint, driven by 300 basis points non-GAAP operating margin improvement and share repurchases.
- Cloud Revenue — Over 30% of total revenue in fiscal 2025, up from roughly 25% the prior year, with double-digit percentage growth.
- Managed Services Revenue — $3 billion for fiscal 2025, up 3.1%; now 66% of total revenue, marking a record high.
- Free Cash Flow — $735 million before restructuring payments in fiscal 2025; $645 million after $90 million restructuring outflows.
- Share Repurchase — $136 million repurchased in Q4; $1 billion remaining authorization as of September 30, 2025.
- Dividend — Announced proposed 8% increase to 56.9¢ per share quarterly, subject to January 2026 shareholder approval.
- Twelve-Month Backlog — $4.19 billion at Q4 end, up 3.2%; represents about 90% of forward revenue guidance.
- Fiscal 2026 Revenue Growth Guidance — 1.7%-5.7% as reported and 1%-5% in constant currency; expects stronger second half from deal ramp-up.
- Fiscal 2026 Non-GAAP Operating Margin Guidance — 21.3%-21.9%, representing midpoint growth of approximately 20 basis points year-over-year.
- Fiscal 2026 Non-GAAP Diluted EPS Guidance — 4%-8% growth; midpoint translates to expected high single-digit total shareholder return including dividends.
- Fiscal 2026 Free Cash Flow Outlook — $710 million to $730 million, equating to roughly 90% conversion from expected non-GAAP net income and about 8% free cash flow yield.
- Generative AI and Cognitive Core Platform — Management confirmed accelerated investment, with the new platform—“cognitive core”—targeting commercial launch in May 2026.
- Large Customer Wins — Multi-year or major deals signed with AT&T, BT, Orange Belgium, Telia Finland, Altice France’s SFR, KT, PLDT, Globe, Consumer Cellular, Fidium, and Vodafone Ireland and Greece, many including generative AI or cloud components.
- Telefonica Germany Deal — Multi-year collaboration will support billing for consumer and enterprise, deploying generative AI use cases leveraging Amdocs and MAGE agents for product promotion and upsell automation.
- Etisalat UAE Outcome — Integration of MAGE agents produced “double-digit improvement in Net Promoter Scores,” suggesting measurable customer impact.
SUMMARY
Management emphasized accelerating investment in generative AI and the development of the “cognitive core” platform, timing its commercial availability for May 2026. Fiscal 2026 guidance reflected modest topline growth, margin improvement, and a substantial increase in the effective tax rate due to regulatory changes. Customer wins across North America, Europe, and Asia featured cloud transformation, billing, network modernization, and rapid expansion of managed services. Free cash flow conversion and yield remain central to capital allocation strategy, with a proposed dividend increase highlighting shareholder returns. Management signaled a strong second-half weighting for new deal ramp as a driver for fiscal 2026 performance.
- Sheffer said, “we are excited about the initial results we are seeing” in generative AI, highlighting both new proof-of-concept conversions and commercial deployments.
- Rapaport-Dagim highlighted, “Managed services as a share of overall revenue also reached a new high of 66% in fiscal 2025, further strengthening our business resilience.”
- Rapaport-Dagim stated that “half of our top 12 customers are international customers, two of which are new logos added in the last ten years.”
- Sheffer confirmed that larger commercial generative AI deployment will “take some time to deploy,” anticipating substantial growth potential from the cognitive core initiative.
- Rapaport-Dagim reported anticipated “pressure from below the line items” for fiscal 2026, specifically citing a higher tax rate and increased financing costs as material headwinds.
INDUSTRY GLOSSARY
- Managed Services: Long-term contractual engagements where Amdocs manages IT, billing, network operations, or digital transformation activities for clients across multiple systems and geographies.
- Cognitive Core: Amdocs’ next-generation, generative AI-powered operational platform designed to integrate with BSS/OSS and enable agent-based automation and digital transformation at scale.
- MAGE Platform: Amdocs’ suite of generative AI digital agents used to automate customer care, commerce upsell, and service operations for telecom providers.
- Outcome-Based Model: Contracting approach where client payments are linked to achievement of specific operational or business results, rather than time and material billing.
Full Conference Call Transcript
Shuky Sheffer: With rising customer adoption, to provide a few examples, we signed a multi-year managed services SaaS agreement with AT&T to deliver entitlement server capabilities via our eSIM cloud platform. This continued to expand our eSIM SaaS platform momentum, ending over 100 million devices to it. Additionally, Amdocs ConnectX already has more than 15 customers, including Consumer Cellular and PLDT, while deploying the generative AI in the platform to quickly launch existing new digital brands. Adding to the list, I am pleased to announce that Orange Belgium has selected Amdocs to lead the Kim modernization initiative on their prepaid stock, leveraging our connected platform. This project includes real-time charging and next-generation scalable architecture designed to support their needs.
It will drive efficiency while transforming the user experiences with modern digital journeys that will redefine engagement for all Belgium prepaid subscribers. Looking forward, cloud will remain a primary focus for Amdocs as we continue to support our global telco customer base, many of which are only just getting started on their multi-year cloud journeys. Now, let’s talk about generative AI and data on slide 11. Following the generative AI-related deals we recently announced with Etisalat UAE, Altice Optimum, and Consumer Cellular, I am excited to report that Telefonica Germany, one of the country’s largest quad-play service providers, has selected Amdocs to extend its billing platform for both consumer and enterprise services.
As part of this expanded multi-year collaboration agreement, Telefonica Germany will deploy new generative AI use cases leveraging Amdocs and MAGE sales agents to enable the efficient promotion of new products and to automate the upsell of personalized offers to drive higher ARPU. This award with Telefonica Germany is another proof point that shows that we are starting to see trial POC conversion to actual generative AI projects, and we are excited about the initial results we are seeing. For example, one of the first service providers to integrate generative AI was Etisalat UAE, a customer which is already achieving double-digit improvement in Net Promoter Scores after deploying MAGE agents.
Such progress reflects Amdocs’ telco and data services expertise, building our vectorized MAGE platform, which we have deployed in collaboration with NVIDIA and other generative AI leaders. Moreover, I believe our recent success demonstrates the pivotal role Amdocs is playing as an IT player helping accelerate generative AI adoption in the telecom industry. In addition to cloud and generative AI, we secured important wins in the strategic domain this quarter as highlighted on Slide 12. As previously announced, we finalized a significant ten-year digital modernization and managed service agreement with BT in the UK to deliver a modern B2C mobile platform for its prepaid and postpaid segments.
We signed a multi-year strategic agreement with Telia Finland to build its next-generation digital BSS enhanced with advanced AI capabilities. And AT&T Mexico closed a new digital program with Amdocs to enhance self-service experiences, expanding its digital selling capabilities. Here in the US, we signed a multi-year software and IT service agreement with Fidium, a next-generation American fiber internet and network service provider, and a new logo for which Amdocs will modernize and manage its IT operation while supporting its broader digital transformation strategy. As well as in the US, a leading tier-two operator selected Amdocs for an additional five-year renewal of their BSS. Service providers are also adopting next-generation monetization solutions to support the wireless and fiber infrastructure elements.
Amdocs recently signed an expanded multi-year billing transformation agreement with Altice France’s SFR to consolidate multiple billing operations to a unified cloud-ready platform. And we signed a new agreement with South Korea’s telecom operator, KT, to upgrade and modernize its charging system to accelerate time to market and to boost operational efficiency. This quarter, we also expanded our activities with the two largest operators in Brazil. First, Amdocs entered an agreement with Claro Brazil to implement a real-time billing platform designed to enable full-scale convergence across multiple lines of business. Claro also extended its multi-year service contract with Amdocs.
Operator: Second,
Shuky Sheffer: In the network domain, we signed a modernization agreement with Telefonica Vivo to provide a future-ready foundation for ongoing operation by deploying our latest OSS products. Further underlying Amdocs’ expertise and growth potential in the network domain, we have expanded our managed services agreement with Globe in the Philippines to include network strategy and planning, mobile access engineering, and optimization to enhance service quality and operational agility. Additionally, we delivered the successful go-live of Amdocs’ advanced network inventory platform for Vodafone Ireland and continue to expand our network activities with Vodafone Greece.
Before discussing our fiscal 2026 outlook, I wanted to circle back on generative AI to share our thoughts with respect to our strategy and investment plans as presented on Slide 14. Over the past couple of years, we have shared our belief that generative AI holds immense potential to transform the telecom industry. We have been working closely with our customers to deliver tangible improvements in critical areas such as customer care and network operation while building out generative AI capabilities in our MAGE platform. As the technology matures, the industry advances, and we see the progression from POCs to production, we believe there is now the potential to unlock even greater opportunities to enhance experiences, agility, and efficiency.
To fully capture this potential for Amdocs and for our customers, we are accelerating our generative AI investment, which we expect will open new pathways for future growth across our entire customer base irrespective of the BSS/OSS version. This includes fast-tracking the development of what we call a cognitive core, a next-generation platform built on the solid foundation of Amdocs MAGE. In integration, advanced journey capabilities such as agent-to-agent MCP technologies, our vectorized telecom expertise, and the enablement of agentic services. In the coming quarter, we will share more about our vision for an AI-powered telecom operating system. For our customers, this investment in generative AI may represent a substantial shift in how they will adopt future software and services.
Notably, we believe it promises to simplify and accelerate their digital transformation and journey to the cloud delivered under our outcome-based model. Overall, with focused and intentional investment, we expect cognitive core to emerge as a long-term growth engine for Amdocs by enabling us to better serve our full spectrum of customers, from those running current platforms seeking cost-effective line of business modernization to top-tier innovators already modernizing on Amdocs’ NextGen platform to lead with future-ready digital experiences. Now let me comment on the current operating environment and our outlook for fiscal year 2026. We are entering fiscal 2026 with a healthy twelve-month backlog visibility and a strong overall book of long-term business supported by recent win momentum.
With our unique tech-led and outcome-based accountability model, Amdocs is strongly positioned within our serviceable addressable market of nearly $60 billion to monetize the rich pipeline of opportunities across cloud, data network, and generative AI and data. That said, we are closely watching for any impact of the uncertain global macroeconomic environment on us and our customers’ demand and spending behavior. Tying everything together, with our outlook on fiscal on slide 16, we expect revenue growth in the range of 1.7% to 5.7% as reported and 1% to 5% in constant currency for the full year fiscal 2026.
As to our profitability, we expect a non-GAAP operating margin to increase by roughly 20 basis points year over year at the midpoint of our target range as we balance our strategic long-term growth investment with the benefits of ongoing cost and efficiency gains across the business. All up, we expect to deliver a non-GAAP diluted earnings per share growth of between 4% to 8% in fiscal 2026, the midpoint of which equates to an expected total shareholder return in the high single digits, including our dividend. With that, let me turn the call over to Tamar for remarks.
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