What Vodafone Group (VOD) Said on Its Q2 Earnings Call

Key Points

• Vodafone raised its full-year profit and cash flow guidance after accelerating Q2 service revenue growth to 6.4% and delivering 6.4% adjusted EBITDA growth in the first half. The revised guidance midpoint implies more than 20% growth in adjusted free cash flow.
• Africa and business services were key growth drivers: Africa posted double-digit service revenue growth and an 18% increase in adjusted EBITDA, while Vodafone Business achieved record Q2 service revenue growth of 6.6%.
• Germany remains a priority for improvement, with Vodafone planning operational simplification and investment in customer experience. The company also raised VodafoneThree’s annual synergy target to £800 million by fiscal 2030 and is pursuing more than €2 billion in annual gross cost savings by fiscal 2030.

Vodafone Group NASDAQ: VOD raised its full-year profit and cash flow guidance after reporting faster service revenue growth and higher adjusted earnings in the first half of fiscal 2027, while acknowledging that Germany remains a focus for improvement.

The telecommunications company said the midpoint of its revised guidance would represent more than 20% growth in adjusted free cash flow for the year. The transcript did not provide the new guidance ranges.

Chief Financial Officer Pilar López said group service revenue growth accelerated to 6.4% in the second quarter, supporting 6.4% growth in adjusted EBITDA for the first half. Service revenue grew across every segment in the period, she said.

“Our performance in the first half demonstrates the benefits of our diversified portfolio and growth opportunities,” López said. She added that productivity improvements also contributed to earnings growth.

Africa and business services drive growth

Vodafone said Africa maintained double-digit organic service revenue growth in the first half, with growth in every market and an 18% increase in adjusted EBITDA. In Egypt, service revenue rose 36%, supported by customer growth, data demand and financial services.

Vodafone Cash revenue in Egypt grew more than 74%, and the service had 17 million customers, the company said. Vodafone also increased its stake in Safaricom during the first half, expanding its exposure to the operator and the M-PESA financial services platform.

Vodafone Business posted its highest-ever service revenue growth of 6.6% in the second quarter, López said. Revenue from its digital services portfolio was growing more than 20% year over year.

The company said it has launched an AI Concierge service for small and medium-sized businesses and expanded cybersecurity services through security operation centers in Germany, Portugal, Ireland and Romania. It has also added cloud capabilities to help customers manage and migrate workloads.

Germany remains a priority

Vodafone described its financial performance in Germany over recent years as disappointing, although it said consumer broadband and business-to-business services were growing consistently. The company plans further operational simplification and continued investment in customer experience in the market.

Germany was also the first Vodafone market to use AI-enabled agent-assist tools for customer service requests. Across the group, Vodafone said its TOBi chatbot handles more than 1 million customer interactions a day, with an 85% resolution rate.

The company said it held leading customer satisfaction positions in 12 markets. In the U.K., it launched Vodafone SuperMobile in September, offering access to its 5G standalone network and guaranteed minimum speeds. Vodafone said the majority of new iPhone customers were choosing the offering.

Cost savings and U.K. synergies

Vodafone is targeting more than €2 billion in annual gross operating expense savings across Europe and shared operations by fiscal 2030, translating into more than €1 billion in annual net savings. It said initiatives delivered in the first six months of the four-year program were worth more than €200 million in gross savings in Europe.

The company said its initiatives include simpler processes, greater automation, expanded AI use and scaled shared platforms. Vodafone also said it is targeting a 30% reduction in addressable spend.

During the first half, Vodafone took full ownership of VodafoneThree in the U.K. The company raised its annual synergy target for the business to £800 million by fiscal 2030 from £700 million and said it now expects operating free cash flow to more than triple by fiscal 2032.

Vodafone said the revised outlook marks progress toward its medium-term ambition of double-digit organic growth in adjusted free cash flow.

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.

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