Endava (NYSE:DAVA) reported second-quarter fiscal 2026 revenue of GBP 184.1 million, which Chief Executive Officer John Cotterell said reflects continued investment in an “AI-native” shift and early client traction for the company’s Dava.Flow engagement model. Revenue fell 5.9% year over year but rose 3.3% sequentially from the prior quarter, and Chief Financial Officer Mark Thurston said results came in above the upper end of the company’s guidance for the period ended December 31, 2025.
AI pivot and Dava.Flow adoption
Cotterell framed the quarter around Endava’s ongoing pivot toward AI, describing investments in recruiting and training “next-gen” talent, building a partner ecosystem, and evolving engagement approaches. He said client interest is building in Dava.Flow, which the company describes as an “AI-native engagement lifecycle.”
In Q&A, Cotterell said the company is not aiming to roll Dava.Flow across its entire business immediately. Instead, Endava is focusing it on larger, outcome-based deals where higher delivery velocity could allow the company to participate in more upside. Management did not provide a specific count of clients or revenue tied to Dava.Flow, noting that client numbers could appear low while project scale is higher.
Client work and vertical momentum
Management highlighted several AI and industry engagements. Cotterell described an enterprise-scale AI project with a global payments network to modernize a chargeback dispute system, noting the effort involves using AI to interpret a complex rule book and route and analyze cases automatically. He said early results midway through a six-month project were promising, including an auditable system that could reduce manual effort and improve decision consistency.
Endava also discussed multi-year work with a specialty insurer, where the company helped establish a “ring-fenced incubator” to pursue an AI-native approach, including digitization and workflow automation. Cotterell said an AI-native workflow was stood up in roughly three weeks and a backlog of more than 50 improvement hypotheses was created.
On the commercial side, Cotterell cited:
- A PayNet-NETS joint venture (appointed Nexus Technical Operator by Nexus Global Payments) selecting Endava to design and build a cloud-native cross-border payment switch on AWS.
- Extensions of strategic delivery commitments with Endava’s two largest payments customers. In Q&A, management characterized these as primarily extensions at run-rate levels, with some incremental work, in switch/gateway-related areas focused on cost rationalization and enhanced customer value propositions.
- Work with Accor Plus to overhaul payments infrastructure and a loyalty program across Asia Pacific, including a deployment across 10 markets; Cotterell said product page conversion rose 39% in the first 30 days after launch.
- An expanded partnership with an electric vehicle manufacturer, replacing a competitor and adding an AI-enabled digital CRM work stream.
- A three-year strategic partnership with Boax to support development and expansion of its product portfolio, with additional collaboration through Endava Rise.
- A life sciences engagement to move agentic AI prototypes into governed, platform-supported products, paired with “dynamic solution squads” for outcomes-focused co-creation.
Partner ecosystem and views on AI displacement
Endava emphasized partnerships across AI model providers and hyperscalers. Cotterell said January marked the completion of the first year as an official services partner of OpenAI and that Endava is seeing demand growth as clients scale proofs of concept into enterprise-wide deployments of Enterprise ChatGPT. He cited work with Evoke to roll out enterprise-wide ChatGPT enablement and role-specific AI training. The company also discussed accelerating demand across AWS, Google Cloud, and Microsoft Azure, driven by modernization initiatives and AI adoption.
Endava also announced partnerships aimed at supporting Dava.Flow, including embedding Miro’s workspace across its delivery network and expanding agentic coding via Cognition tools. Thurston said these partnerships include software licensing and broader collaboration that adds to investment levels and weighs on margins.
Addressing investor questions about potential services displacement from foundational model providers, Cotterell argued enterprise adoption requires governance, regulatory alignment, data access, and legacy modernization—needs he said “out-of-the-box” solutions do not address. He said Endava created Dava.Flow as a replacement for Agile in agentic settings, where “people-to-machine” interactions become more important than traditional person-to-person workflows.
Financial results, cash flow, and headcount
Thurston reported loss before tax of GBP 7.2 million versus a profit of GBP 2.5 million a year earlier. Adjusted profit before tax (PBT) was GBP 10.7 million, down from GBP 21.8 million, and the adjusted PBT margin was 5.8% versus 11.2% in the prior-year period. Thurston attributed margin pressure to investment in the AI-native model and next-gen talent, estimating the shift has reduced adjusted PBT margin by about 3% through the first half of fiscal 2026.
Adjusted diluted EPS was 16 pence, compared with 30 pence a year earlier. Revenue from the top 10 clients represented 35% of revenue, and average spend per top-10 client declined to GBP 6.5 million from GBP 7.1 million; Thurston said FX movements contributed about 2% of the year-over-year decline in that metric.
By geography, North America represented 40% of revenue, Europe 23%, the U.K. 31%, and the rest of the world 6%. Thurston said North America’s decline was driven by FX headwinds and the absence of contribution from a previously lost media client. He cited weakness in payments and mobility for Europe’s decline, and noted the U.K. decline included a reclassification of a large payments client to North America as well as weakness in travel, transport, and tourism (TNT) in the U.K. Revenue in the rest of the world rose 21.8%, driven mainly by payments and TNT.
Adjusted free cash flow was GBP 20.1 million, down from GBP 31.6 million a year earlier. Cash and cash equivalents ended at GBP 68.5 million. Borrowings increased to GBP 202.7 million, which Thurston said supported funding requirements for the company’s share repurchase program. As of January 31, 2026, Endava had repurchased about 8 million ADSs for $121.9 million, with $28.1 million remaining under authorization.
Capital expenditure was 4.4% of revenue, up from 0.2% in the prior-year period, driven primarily by what Thurston described as a one-time spend on an internally developed Payments Accelerator.
Endava ended the quarter with 11,385 employees, down 2.4% year over year. Cotterell said the company is streamlining roles in softer-demand areas while broadening and upskilling its AI talent base.
Guidance and outlook factors
For the third quarter of fiscal 2026, Endava guided revenue of GBP 182 million to GBP 185 million, representing a constant-currency decline of 4% to 2.5% year over year, and adjusted diluted EPS of 18 to 21 pence. For full-year fiscal 2026, the company guided revenue of GBP 736 million to GBP 750 million (a constant-currency decline of 3.5% to 1.5%) and adjusted diluted EPS of 80 to 86 pence.
Thurston said the U.S. dollar’s weakening against the British pound remains a revenue headwind, while investments in AI-native delivery and talent continue to pressure margins. In Q&A, management also highlighted working-day impacts on quarterly sequencing and said Q4 expectations are underpinned by secured deal ramps. Management described the market backdrop as uncertain and pointed to the width of its guidance ranges as reflecting current dynamics.
About Endava (NYSE:DAVA)
Endava PLC is a publicly traded technology services company specializing in digital transformation and agile software development. The firm helps enterprise clients design, build and manage custom software solutions across industries such as financial services, payments, retail, telecommunications and media. Its service offerings span end-to-end product design, customer experience, application development, quality engineering, DevOps, automation and artificial intelligence, all delivered through agile methodologies.
Founded in 2000, Endava has grown from a small software provider into a global IT partner.
