Why Shares of Endava Are Plunging This Week

Key Points

• Endava beat analysts' bottom-line expectations for the fourth quarter of fiscal 2025-

• Management projects revenue will fall in fiscal 2026 compared to the previous fiscal year.

• The company may be poised to rebound as it ended the fourth quarter of fiscal 2025 with a notably high order book.

• 10 stocks we like better than Endava Plc ›

While Endava (NYSE: DAVA) stock ripped 14.7% higher in August, shares of the tech consultant are off to an auspicious start for September. The company's disappointing fourth-quarter 2025 financial results have investors racing to click the sell button this week.

According to data provided by S&P Global Market Intelligence, shares of Endava have dropped 32.1% from the end of last Friday's trading session through the market's close on Thursday.

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The market has its eyes fixed on 2026

Reporting fourth-quarter 2025 financial results on Thursday morning before the market opened, Endava beat analysts' bottom-line expectations. Investors, however, were more fixed elsewhere, focusing on the company's declining free cash flow (FCF) and on what the company had to say about the coming year -- not about the recent performance.

Endava had been on a streak from fiscal years 2021 through 2023 with respect to growing cash flow. After reporting adjusted FCF of 82.7 million British pounds in fiscal 2021, the company posted adjusted FCF of 107.2 million British pounds and 111.5 million British pounds in fiscal 2022 and fiscal 2023, respectively. The last two years haven't been as fortuitous. In fiscal 2024, Endava reported adjusted free cash flow of 58.4 million British pounds, falling further to 48.7 million British pounds in fiscal 2025.

Investors also balked at management's guidance for fiscal 2026. Whereas Endava reported 772.3 million British pounds on the top line in fiscal 2025, management projects sales of 750 million British pounds to 765 million British pounds for the coming fiscal year.

Management sees a silver lining to the end of the fiscal year

While investors are disappointed with Endava's lackluster 2026 forecast, there's reason to be hopeful. In the press release announcing the quarterly results, John Cotterell, Endava's CEO, stated that the company ended the quarter with its "highest ever quarterly order book." Investors may not want to run out and buy shares solely based on this comment, but they may want to keep tabs on the company to see if it shows signs of returning to growth mode.

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Scott Levine has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Endava Plc. The Motley Fool has a disclosure policy.