Vodafone Group (LON: VOD) saw its shares decline by over 5% on Thursday, despite reporting a solid Q3 FY26 trading update showcasing growth in key markets.
The market’s reaction appears to be focused on the disappointing growth expectations for Germany.
The telecom giant’s total revenue increased by 6.5% to €10.5 billion, driven by strong service revenue growth, particularly in Africa, and the consolidation of Three UK and Telekom Romania. Service revenue itself grew by 7.3% to €8.5 billion, with organic growth reaching 5.4%.
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Germany, a crucial market for Vodafone, demonstrated continued service revenue growth of 0.7%. However, this was below consensus expectations.
The UK experienced a slight organic service revenue decline of 0.5%, attributed to the absence of prior-year one-off project revenue in the Business segment. The integration of VodafoneThree is reportedly progressing as planned.
Other Europe & Türkiye posted a 1.2% organic service revenue increase, while Türkiye alone saw a 3.7% rise in service revenue in euro terms. Africa continues to be a bright spot, delivering robust organic service revenue growth of 13.5%, fueled by expansion across all markets and an acceleration in financial services.
Group Adjusted EBITDAaL increased by 2.3% on an organic basis to €2.8 billion, in line with full-year guidance expectations. Year-to-date, Adjusted EBITDAaL has grown by 5.3% organically to €8.5 billion. Operating profit, however, decreased by 52.7% to €0.5 billion due to M&A activities, including temporary non-cash accounting impacts from Indian simplification.
Vodafone has completed €3.5 billion of share buybacks since May 2024, with another €500 million tranche commencing today. This reflects a commitment to returning capital to shareholders.
The company reiterated its FY26 guidance, expecting to deliver at the upper end of its Adjusted EBITDAaL (€11.3-11.6 billion) and Adjusted free cash flow (€2.4-2.6 billion) ranges.
The company anticipates growing the FY26 dividend per share by 2.5%.
Margherita Della Valle, Group Chief Executive, stated, “We maintained good service revenue momentum in the third quarter across both Europe and Africa, supported by top-line growth in Germany, and strong contributions from Türkiye and Africa. After a fast start, we are making very good progress with the integration of our UK business. Looking ahead, we are on track to deliver at the upper end of our guidance range for both profit and cash flow.”
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