Amdocs Q2 Earnings Top Estimates, Stock Falls on Dim Q3 Profit Outlook

Amdocs Limited DOX reported better-than-expected second-quarter fiscal 2025 results. The company posted non-GAAP earnings of $1.78 per share, which came above management’s guidance of $1.67-$1.73 and increased 14.1% year over year. The figure also exceeded the Zacks Consensus Estimate of $1.71.

In the trailing four quarters, DOX’s earnings surpassed the Zacks Consensus Estimate thrice while matching once, with an average surprise of 0.1%. (Find the latest EPS estimates and surprises on Zacks Earnings Calendar.)

Amdocs’ second-quarter revenues of $1.23 billion surpassed the consensus mark of $1.12 billion. However, compared with the year-ago quarter, revenues were down 9.4% on a reported basis due to the phase-out of certain business activities. Excluding the effect of phase-out business activities, revenues were up 4% year over year in pro forma constant currency.

Despite reporting better-than-expected second-quarter results, shares of Amdocs fell 3.5% during Wednesday’s extended trading session as EPS guidance for the third quarter fell short of the Zacks Consensus Estimate.

Amdocs’ Q2 Details

Amdocs reported a decline in revenues across all regions due to the phase-out of certain business activities. North America reported revenues of $738.3 million (65% of total revenues), which plunged 10.3% year over year.

Europe revenues (16% of total revenues) of $180.7 million decreased 2.2% year over year. Rest of the World (RoW) revenues (19% of total revenues) declined 12% year over year to $209.2 million. Our model estimates for North America, Europe and RoW were pinned at $729.4 million, $166 million and $230.6 million, respectively.

Managed services revenues rose 3.7% year over year to $747 million. The company ended the second quarter of fiscal 2025 with a 12-month backlog of $4.17 billion, up $30 million sequentially. Our model estimates for managed services revenues and backlog were pegged at $675 million and $3.87 billion, respectively.

The non-GAAP operating income increased 4.7% year over year to $240.1 million, while the operating margin expanded 290 basis points (bps) to 21.3%.

Amdocs’ Balance Sheet & Cash Flow

Amdocs had cash and short-term investments of $324 million as of March 31, 2025, compared with $349 million as of Dec. 31, 2024. Long-term debt was $646.6 million as of March 31, 2025, almost flat to the Dec. 31, 2024 level.

During the second quarter, it generated an operating cash flow of $172 million and a free cash flow of $156 million. In the first half of fiscal 2025, it generated operating cash flow and free cash flow of $278 million and $235 million, respectively.

Amdocs’ Guidance Update

Amdocs initiated guidance for the third quarter and updated the outlook for full-fiscal 2025. For the third quarter, the company expects revenues to be in the band of $1.11-$1.15 billion (mid-point $1.13 billion). The Zacks Consensus Estimate for revenues is pegged at $1.13 billion, suggesting a year-over-year decline of 9.3%.

Amdocs expects non-GAAP earnings per share to be between $1.68 and $1.74. The Zacks Consensus Estimate for earnings is pegged at $1.75 per share, indicating a year-over-year rise of 8%.

For fiscal 2025, Amdocs trimmed revenue decline rate guidance to 9.1-10.9% from 8.4-11.6% forecasted previously. However, the mid-point of the new guidance range remained unchanged at a decline of 10%. The Zacks Consensus Estimate for revenues is pegged at $4.52 billion, suggesting a year-over-year decline of 9.8%.

Non-GAAP operating margin is still anticipated to be in the range of 21.1-21.7% for fiscal 2025. Non-GAAP earnings are still expected to grow in the band of 6.5-10.5%. The Zacks Consensus Estimate for earnings is pegged at $6.97 per share, indicating a year-over-year rise of 8.2%.

The company continues to expect free cash flow between $710 million and $730 million.

DOX’s Zacks Rank & Stocks to Consider

Currently, Amdocs carries a Zacks Rank #3 (Hold).

Impinj (PIPI), StoneCo STNE and Broadcom AVGO are some top-ranked stocks that investors can consider in the broader Zacks Computer and Technology sector. While Impinj and StoneCo each sports a Zacks Rank #1 (Strong Buy) at present, Broadcom carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Impinj’s 2025 earnings has been revised upward by 21 cents to $1.68 per share over the past 30 days, and suggests a year-over-year decrease of 20.4%. Impinj shares have plunged 38.4% over the past year.

The Zacks Consensus Estimate for StoneCo’s 2025 earnings has moved upward by 19 cents to $1.38 per share in the past 30 days, reflecting 2.2% year-over-year growth. StoneCo shares have plunged 20.8% in the trailing 12 months.

The Zacks Consensus Estimate for Broadcom’s fiscal 2025 earnings has been revised upward by 4 cents to $6.60 per share in the past 60 days, suggesting an increase of 35.5% from fiscal 2024’s reported figure. Broadcom shares have rallied 56.8% over the past year.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

This article originally published on Zacks Investment Research (zacks.com).

Zacks Investment Research