Vodafone Group (NASDAQ:VOD) raised its fiscal 2027 outlook after first-half growth accelerated, saying the midpoint of its updated guidance implies organic growth of 7% in adjusted EBITDAaL and 21% in adjusted free cash flow.
The company said group service revenue growth reached 6.4% in the second quarter, its highest rate in three years, with growth in both Europe and Africa. First-half adjusted EBITDAaL also grew 6.4% as stronger revenue and expanding margins supported results.
Vodafone did not specify the monetary ranges of its revised guidance during the call. CFO Pilar López said the company had already expected to reach the upper end of its previous ranges in July, but subsequent execution in the U.K., Germany, Africa and Türkiye supported the upgrade.
European Outlook Holds Despite German Headwinds
Vodafone kept its European outlook unchanged. López said better-than-expected performance in the U.K. and Germany allowed the company to absorb a 100 million euro EBITDA impact from a European Court of Justice ruling.
“We are very confident at the midpoint of the guidance, where Europe is stable,” López said.
Germany remains a challenge, even as Vodafone reported consistent growth in consumer broadband and business services. The company said it had announced 2,300 additional role reductions there, bringing the planned reduction in German headcount to 40% since its transformation began. López said the newly announced cuts would take place over the next couple of years.
During the call, analysts also asked about a non-cash impairment to the German business. López said nearly three-quarters of the charge was associated with higher German government bond yields and their effect on the discount rate. The company increased the rate to 8% from 7.5% at its last disclosure. She also cited the court ruling as a factor.
López said Vodafone had taken a small provision related to an ongoing class action and did not expect the case to conclude before late calendar 2027 at the earliest. A potential cash payment was not included in this fiscal year’s cash-flow guidance, she said.
Vodafone said it had not seen significant competitive changes in the German mobile pricing environment or significant movements in multi-dwelling units. It attributed negative net additions to lower gross additions rather than churn, with a disproportionately high share of the losses occurring in DSL areas.
Cost Program and U.K. Ownership
Vodafone said it delivered more than 200 million euros in gross savings during the first six months of its cost program, supported by 3,000 role reductions and the first 50 million euros of U.K. synergies. It expects more than 200 million euros in net operating expense reductions for the full fiscal year.
The company’s longer-term plan calls for more than 2 billion euros in annual gross savings by fiscal 2030 across Europe and shared operations, translating into more than 1 billion euros in annual net operating expense savings. López said simplification, U.K. synergies and artificial intelligence were contributing to the program, while payroll, energy and tower lease costs remained headwinds.
Vodafone took full ownership of VodafoneThree in the U.K. in July. The company said it had since raised its annual cost and capital expenditure synergy targets and expects U.K. operating cash flow to more than triple by fiscal 2032.
Business Services and African Growth
Vodafone Business grew 6.6%, its best-ever growth rate, supported by digital services. The company said that portfolio now generates more than 2 billion euros in revenue and includes cloud, security, internet-of-things and AI-related offerings.
In Germany, digital services grew 30% in the first half. Vodafone estimated that business customers account for roughly a quarter of German revenue, with digital services representing about a quarter or more of business revenue.
Africa and Türkiye both recorded double-digit organic growth in the first half, and López said Vodafone expects the momentum to continue. The company also increased its stake in Kenyan operator Safaricom.
Asked about a Kenyan High Court ruling that declared the additional 15% stake sale void, Vodafone said the case was before an appeals court and had been fast-tracked. The company said the court had indicated that the status quo would be maintained while the appeal proceeds.
About Vodafone Group (NASDAQ:VOD)
Vodafone Group is a telecommunications company headquartered in the United Kingdom. It provides mobile and fixed-line connectivity, broadband, voice and data services to consumers, businesses and public-sector organizations.
The company also offers business technology services, including Internet of Things connectivity and digital solutions. Its operations and services span Europe and Africa, with Vodacom serving as a major part of its African business, and it works with partner networks to serve customers in other markets.
Vodafone traces its roots to Racal Telecom, which was established in 1984 and became an independent company in 1991.
