DAVA Stock Forecast & Price Target

Endava's recent revenue growth in North America, driven by the reclassification of a large payments client, indicates a successful expansion strategy and strong demand within its core sectors. The company's focus on investing in AI initiatives, alongside a stable increase in headcount and billable team members, positions it favorably to capitalize on rising digital transformation needs. Furthermore, with a strategic emphasis on high-quality engineering capabilities and potential for tuck-in acquisitions, Endava is well-placed for double-digit organic growth in the long term, enhanced by a favorable macroeconomic environment.

Endava reported a 1Q FY26 revenue of £178.2 million, reflecting an 8.6% year-over-year decline, accompanied by a decrease of 4.6% quarter-over-quarter, indicating pressures in demand and a weakening client base. The company has lowered its full-year FY26 revenue guidance to between £735 million and £752 million, projecting a year-over-year decline of 2.5% to 4.5%, primarily due to an unexpected client credit and subdued pipeline conversion. Furthermore, management expressed concerns regarding continued demand softness and increasing expenses related to AI investments, suggesting potential downside risks to future estimates and valuation compression.