Shares of Endava Ltd (DAVA) plummeted 28.93% in pre-market trading on Thursday following the release of its fourth-quarter fiscal year 2025 results and disappointing guidance for the upcoming quarter and fiscal year 2026. The technology-driven business transformation group's cautious outlook and weaker-than-expected projections have sparked concerns among investors.

For Q4 FY2025, Endava reported a 3.9% year-over-year revenue decrease to £186.8 million, with a modest 0.7% decline at constant currency. While the company's adjusted diluted earnings per share (EPS) improved to £0.24 from £0.22 in the same period last year, the focus quickly shifted to the company's forward-looking statements.

The primary factors contributing to the sharp stock decline include: 1. Weak Q1 FY2026 Guidance: Endava projects Q1 revenue between £181.0 million to £183.0 million, representing a constant currency revenue decrease of 6.0% to 5.0% year-over-year. This is significantly below the FactSet analyst estimate of £188.8 million. 2. Cautious FY2026 Outlook: For the full fiscal year 2026, Endava expects revenue in the range of £750.0 million to £765.0 million, indicating a constant currency revenue change between -1.5% and 0.5% compared to FY2025. This guidance falls short of the FactSet consensus estimate of £766.6 million. 3. Lower EPS Projections: The company forecasts adjusted diluted EPS for FY2026 to be between £0.82 and £0.94, potentially lower than the £1.13 reported for FY2025 and well below the FactSet analyst expectation of £1.13.

CEO John Cotterell acknowledged the challenges, stating, "Despite the increase in the order book, the short term operating backdrop remains volatile and many clients continue to recalibrate the timing of spending, and therefore our outlook remains cautious." This statement highlights the ongoing uncertainties in client spending patterns, which are likely contributing to the conservative guidance.

The substantial pre-market decline in Endava's stock price reflects investor concerns about the company's near-term growth prospects and its ability to navigate the challenging economic environment. As the market digests this information, all eyes will be on Endava's ability to execute its strategy and potentially exceed these conservative projections in the coming quarters.