Pomegra
Amdocs shares fell as much as 44% after the company guided fiscal 2027 profit sharply lower. The cut follows a breach-of-contract dispute with T-Mobile US.
- Amdocs guided fiscal 2027 non-GAAP EPS down 26%-30% and revenue down 7%-11% on a pro forma basis.
- Both Amdocs and T-Mobile have issued notices alleging material breach and threatening termination or arbitration.
- Shares fell about 30% in regular trading on November 4 after dropping as much as 44% in after-hours trading.
Lead
Amdocs (NASDAQ: DOX) lost roughly 30% of its value in the November 4 session. It had fallen as much as 44% in after-hours trading the previous evening, after the billing and customer-software provider issued fiscal 2027 guidance far below expectations. The company cited an escalating contractual dispute with T-Mobile US (NASDAQ: TMUS), one of its largest customers. Shares opened near $43.24, down about $19, and traded at their lowest level since 2014. Premarket indications of $36 to $38 implied a drop of roughly 39% to 42%. The decline wiped out close to $3 billion in market value and left the company valued at about $3.6 billion at the lows.What Did Amdocs Report and Guide?
Amdocs delivered fiscal fourth-quarter results in line with expectations, then reset its outlook sharply lower. Revenue for the quarter ended September 30 rose 3.8% to $1.194 billion, and non-GAAP diluted EPS was $1.98, matching consensus. Full-year revenue rose 3.6% to $4.697 billion, with non-GAAP EPS up 6.0% to $7.41 and free cash flow of $562 million.
The fiscal 2027 outlook marks a sharp reversal:
- Pro forma constant-currency revenue is projected to decline 7% to 11%, or roughly $4.18 billion to $4.37 billion. Reported revenue is projected to fall 14.3% to 17.9%.
- Non-GAAP EPS is projected to decline 26% to 30%. GAAP EPS is projected to decline 17% to 25%, to roughly $3.51 to $3.88.
- Non-GAAP operating margin is guided to 19.2% to 19.8%.
- Free cash flow is guided to $440 million to $500 million, against $562 million in fiscal 2026.
- First-quarter revenue is guided to $955 million to $995 million, against a consensus near $1.2 billion. First-quarter non-GAAP EPS is guided to $1.27 to $1.33, against a consensus near $1.93.
The 12-month backlog fell 9.6% on a pro forma basis to $3.5 billion, driven largely by adjustments to T-Mobile contracts.
What Is the Dispute Between Amdocs and T-Mobile?
Amdocs and T-Mobile have each served notices asserting that the other materially breached agreements under which Amdocs supplies software and services. Both notices threaten termination, monetary relief or arbitration. Amdocs said the dispute was built into what it called conservative guidance assumptions.
T-Mobile is a relationship of roughly two decades. It was Amdocs' second-largest customer in fiscal 2025, at 19.9% of revenue, or about $900 million of roughly $4.5 billion. CEO Shimie Hortig described the situation as isolated and said the business could otherwise have shown significant growth. He declined to detail the revenue exposure.
Two other factors also weigh on fiscal 2027. The integration project for USCellular customers is finishing, and T-Mobile is reducing discretionary spending.
Why Did the Market React So Violently?
Investors reacted this way because the guidance implied a loss of earnings power that the quarterly results gave no warning of. The first-quarter EPS midpoint of $1.30 sat about a third below consensus. The full-year profit decline reversed a run of steady growth, with non-GAAP EPS up 6% in fiscal 2026.
The outcome of the dispute is also binary. If the T-Mobile agreements are terminated, the revenue loss could be larger than guided. If the parties settle, some of the guided decline could reverse.
Oppenheimer downgraded the stock to Perform from Outperform and withdrew its price target. It pointed to the weak forecast and to the risk that communications service providers are building or upgrading systems in-house. Several securities law firms have announced investigations into whether the company adequately disclosed the state of the T-Mobile relationship before November 3. Former CEO Shuki Sheffer sold about $22 million of shares at higher prices before the decline, a fact now drawing attention.
Capital Returns and Strategy
Amdocs repurchased $511 million of shares in fiscal 2026, including $83 million in the fourth quarter. Its board approved a quarterly dividend of $0.569 per share, payable January 29, 2027. It also approved a 3% increase to $0.586 from April 2027, subject to shareholder approval at the January annual meeting.
The company has been diversifying its customer base. It signed an eight-year agreement with AT&T (NYSE: T) and added partnerships with operators including Vodafone Business. It also acquired insurance technology provider EIS for about $340 million. Managed services, which are recurring and contract-based, made up 64% of fiscal 2026 revenue, or $3.023 billion. That share makes contract terms and customer concentration central to the investment case.
What Comes Next for Amdocs?
The next catalyst is whether the T-Mobile dispute moves toward settlement, termination or formal arbitration. Any filing or customer statement would reset expectations for fiscal 2027 revenue.
The January annual meeting will test the dividend increase. The first-quarter report, covering the period ending December 31, will show how much of the guided revenue gap appears immediately. Management must also show that AT&T and other new business can offset the T-Mobile loss.
Outlook
Amdocs enters fiscal 2027 with guidance built around a contested relationship with a customer that supplied about a fifth of recent revenue. The shares trade at decade lows, and the legal and commercial path with T-Mobile will largely set the revenue and earnings trajectory for the year.
Mentioned tickers: DOX, TMUS, T
