Vodafone Group PLC (VOD.US) reported a 6.5% year-over-year increase in total revenue for the third quarter of fiscal year 2026, reaching €10.5 billion. The company also projected that its full-year profit and cash flow would meet or exceed the upper end of its guidance range. However, its stock price experienced its largest single-day decline in a year on Thursday, driven by weaker-than-expected performance in its largest market, Germany.

The revenue growth was primarily supported by an increase in service revenue, as well as contributions from the consolidation of Three UK and Telekom Romania assets. Group service revenue rose by 7.3% to €8.5 billion, with organic growth of 5.4%, although the pace of growth was slightly slower than in the previous quarter. Strong performance in Turkey and African markets helped offset negative impacts from currency fluctuations.

The African market remained the company's core growth engine, delivering 13.5% organic service revenue growth for the second consecutive quarter. All segments within the region showed expansion, and the financial services business continued to accelerate. In the UK, service revenue declined organically by 0.5%, mainly due to a previously disclosed one-off item from the prior year. Nonetheless, the integration of Three UK is progressing as planned.

Other European operations returned to growth, with service revenue increasing organically by 1.2%. Despite intensified competition in Portugal and Romania, operating performance improved across most markets in the region. In Turkey, service revenue grew by 3.7% when measured in euros.

Vodafone's enterprise division reported 3% organic service revenue growth, driven by sustained demand for digital services and strong performances in Turkey and Africa. However, growth was partially offset by a high comparative base in the UK market.

In Germany, Vodafone's largest market, service revenue increased only moderately by 0.7% to €2.7 billion, falling short of market expectations for a stronger rebound. Analysts had anticipated growth of around 1.02%. The company had previously added 1&1 AG as a wholesale customer, raising hopes for a recovery. Following the announcement, Vodafone's shares fell as much as 6.8% in London trading.

A company spokesperson noted that wholesale revenue in Germany improved in the previous quarter due to the partnership with the smaller operator 1&1 AG, helping return the market to growth. However, this benefit was offset in the latest quarter by a one-time impact related to changes in the timing of payments to service providers.

Vodafone CEO Margherita Della Valle has been implementing an ambitious turnaround strategy for over two years, focusing on streamlining operations and divesting assets. During this period, the company completed the sale of its Italian and Spanish operations and merged its UK business with Three UK. Della Valle’s strategy to refocus on a few key markets has been well received by analysts.

In Germany, intensified competition and a regulatory change previously led to the loss of millions of customers, hampering revenue growth. However, the impact of a new regulation prohibiting housing associations from bundling TV packages with rent has largely subsided.

For the quarter, Vodafone's earnings before interest, taxes, depreciation, and amortization after leases (EBITDAaL) grew organically by 2.3% to €2.8 billion. Year-to-date for fiscal 2026, EBITDAaL increased by 5.3% to €8.5 billion, in line with the company's interim expectations. Operating profit, however, fell significantly by 52.7% to €500 million.

Vodafone reaffirmed its fiscal 2026 outlook, expecting full-year core results to be at the upper end of its target range. Adjusted EBITDA is projected between €11.3 billion and €11.6 billion, while adjusted free cash flow is expected to be in the range of €2.4 billion to €2.6 billion.

The company also stated it would maintain its progressive dividend policy, planning a 2.5% increase in the annual dividend per share for fiscal 2026. Since May 2024, Vodafone has completed a €3.5 billion share buyback program and announced a new €500 million share repurchase initiative in its latest earnings report.