Turbulence at Amdocs: The veteran software company's stock crashed by approximately 45% in after-hours trading on Wall Street following a particularly weak forecast for fiscal year 2027 that surprised investors and analysts negatively.
The central factor behind the harsh forecast and the stock plunge is a complex and public legal dispute with American telecommunications giant T-Mobile, one of Amdocs's primary clients for years.
The two companies exchanged notices in which each party claims that the other committed a material breach of at least one of the agreements between them. The notices published by both companies feature threats to cancel the agreements between them and to pursue legal proceedings to obtain financial remedies, including arbitration.
Amdocs clarified that these circumstances were taken into account in formulating the conservative forecast assumptions for fiscal year 2027, including a scenario involving the termination of the agreements with T-Mobile. Concurrently, the company reported a 9.6% decline in the order backlog for the next 12 months, after adjustments, to $3.5 billion.
Legal dispute with T-Mobile clouds Amdocs' outlook
Alongside the concerning forecast for the coming year, the results for the fourth quarter and the entirety of fiscal year 2026, which ended at the end of September, were reasonable and met analysts' expectations. Annual revenues totaled $4.7 billion, representing a slight increase of approximately 3.5%-3.6% compared to the previous year, and fourth-quarter revenues reached $1.19 billion.
The annual adjusted profit stood at $7.41 per share, while earnings per share according to generally accepted accounting principles dropped to $4.68, stemming in part from restructuring expenses of $1.30 per share. Additionally, the company's board of directors approved raising the quarterly dividend by 3%, to $0.586 per share.
In an attempt to diversify the company's fields of activity beyond the telecom market, Amdocs concurrently presented two significant moves. The first is the extension of a strategic contract for an additional eight years with AT&T, its largest client, for the integration of the aOS operating system platform.
The second move is an entry into the insurance market for the first time: Amdocs completed the acquisition of EIS, a technology provider for the insurance industry, for approximately $340 million in cash, with the possibility of an additional payment subject to meeting targets. EIS offers an AI-based core platform for managing policies, billing, and claims, and the acquisition marks Amdocs's first foothold in the sector aimed at expanding its addressable market.