Vodafone Lifts Fiscal 2027 Outlook as Growth Hits Three-Year High

Vodafone raised its fiscal 2027 outlook after first-half growth accelerated, with the midpoint of updated guidance implying organic growth of 7% in adjusted EBITDAaL (earnings before interest, tax, depreciation, amortisation and lease costs) and 21% in adjusted free cash flow. Group service revenue growth reached 6.4% in the second quarter, the highest rate in three years, with gains in both Europe and Africa. First-half adjusted EBITDAaL also grew 6.4% on stronger revenue and expanding margins.

The company did not disclose the monetary ranges of the revised guidance on the call. CFO Pilar López said Vodafone had already expected to reach the upper end of its previous ranges in July, but execution in the U.K., Germany, Africa and Türkiye supported the upgrade.

What does the upgrade mean for the European outlook?

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 the pressure point. Vodafone reported consistent growth in consumer broadband and business services there, but it announced 2,300 additional role reductions, bringing the planned cut in German headcount to 40% since its transformation began. The new reductions will take place over the next couple of years.

Analysts also pressed on a non-cash impairment to the German business. López said nearly three-quarters of the charge stemmed from higher German government bond yields and their effect on the discount rate, which the company increased to 8% from 7.5% at its last disclosure. She also cited the court ruling as a factor.

On litigation, Vodafone took a small provision related to an ongoing class action and does 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.

Where does the German customer base stand?

Vodafone said it had not seen significant competitive changes in German mobile pricing 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 losses occurring in DSL areas.

How much is the cost program delivering?

The company 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 longer-term plan targets 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, while payroll, energy and tower lease costs remained headwinds.

Vodafone took full ownership of VodafoneThree in the U.K. in July. Since then it has raised annual cost and capital expenditure synergy targets and expects U.K. operating cash flow to more than triple by fiscal 2032.

What drove business services and Africa?

Vodafone Business grew 6.6%, its best-ever growth rate, supported by digital services. 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; 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 is before an appeals court, has been fast-tracked, and that the court indicated the status quo would be maintained during the appeal.

Vodafone Group, headquartered in the U.K., traces its roots to Racal Telecom, established in 1984 and spun off as an independent company in 1991. Its operations span Europe and Africa, with Vodacom anchoring its African business.