DAVA Stock Forecast & Price Target

Endava has demonstrated strong growth potential, as reflected by a 5% quarter-over-quarter revenue increase in North America due to a significant client reclassification, highlighting the company's expanding footprint in the payments sector. The company's investment in talent is evident through a 1.4% sequential rise in headcount and an increase in average billable headcount, which aligns with its strategy to focus on AI-driven solutions. Overall, Endava's positioning in the digital transformation market and ongoing investment in engineering capabilities suggest the potential for double-digit organic growth, especially as demand in key sectors improves and AI adoption increases.

Endava reported a revenue decline of 8.6% year-over-year for Q1 FY26, falling to £178.2 million, which marks a worrying trend compounded by a previous quarter's revenue performance that also fell short of management's guidance. The company has lowered its FY26 revenue outlook to a range of £735 million to £752 million, reflecting continued demand pressures and an unexpected client credit that has led to reduced estimates and a lack of a strong pipeline. Furthermore, management's commentary regarding higher expenses, particularly from investments in AI, raises concerns about profitability and future growth, suggesting a potentially compressed valuation below a price-to-earnings multiple of approximately 5x for FY27 estimates.