Amdocs (DOX) Q4 2025 Earnings Call Transcript

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DATE

Tuesday, Nov. 11, 2025 at 5 p.m. ET

CALL PARTICIPANTS

• President and Chief Executive Officer — Shuky Sheffer
• Chief Financial Officer and Chief Operating Officer — Tamar Rapaport-Dagim
• Head of Investor Relations — Matt Smith

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RISKS

• Tamar Rapaport-Dagim cited an "expected revenue decline at T-Mobile due to reduced discretionary spending," which could dampen near-term growth.
• Rapaport-Dagim stated, "We anticipate a moderate increase in our non-GAAP effective tax rate to a rate for fiscal year 2026 of between 16% to 19%, primarily driven by a combination of regulatory changes including the implementation of the Pillar Two global minimum tax and other evolving international tax requirements."
• Rapaport-Dagim noted, "Additionally, we anticipate higher finance costs this year resulting from a reduced cash balance and funding of our strategic long-term growth plan."

TAKEAWAYS

• Q4 Revenue -- Amdocs (NASDAQ:DOX) reported $1.15 billion, increased 2.8% in pro forma constant currency, but reported revenue declined 9% due to the phase-out of low-margin, non-core activities.
• Non-GAAP Operating Margin -- 21.6%, up 290 basis points year-over-year and 20 basis points sequentially, reflecting efficiency gains and business mix shift.
• Non-GAAP Diluted EPS -- $1.83, slightly above the midpoint of guidance.
• GAAP Diluted EPS -- $0.88, includes a $0.60 per share restructuring charge related to transformational actions for generative AI adoption.
• Full-Year Revenue -- Pro forma constant currency revenue up 3.1%, exceeding guidance midpoint.
• Full-Year Non-GAAP Diluted EPS Growth -- 8.5%, aligned with guidance midpoint, driven by 300 basis points non-GAAP operating margin improvement and share repurchases.
• Cloud Revenue -- Over 30% of total revenue in fiscal 2025, up from roughly 25% the prior year, with double-digit percentage growth.
• Managed Services Revenue -- $3 billion for fiscal 2025, up 3.1%; now 66% of total revenue, marking a record high.
• Free Cash Flow -- $735 million before restructuring payments in fiscal 2025; $645 million after $90 million restructuring outflows.
• Share Repurchase -- $136 million repurchased in Q4; $1 billion remaining authorization as of September 30, 2025.
• Dividend -- Announced proposed 8% increase to 56.9¢ per share quarterly, subject to January 2026 shareholder approval.
• Twelve-Month Backlog -- $4.19 billion at Q4 end, up 3.2%; represents about 90% of forward revenue guidance.
• Fiscal 2026 Revenue Growth Guidance -- 1.7%-5.7% as reported and 1%-5% in constant currency; expects stronger second half from deal ramp-up.
• Fiscal 2026 Non-GAAP Operating Margin Guidance -- 21.3%-21.9%, representing midpoint growth of approximately 20 basis points year-over-year.
• Fiscal 2026 Non-GAAP Diluted EPS Guidance -- 4%-8% growth; midpoint translates to expected high single-digit total shareholder return including dividends.
• Fiscal 2026 Free Cash Flow Outlook -- $710 million to $730 million, equating to roughly 90% conversion from expected non-GAAP net income and about 8% free cash flow yield.
• Generative AI and Cognitive Core Platform -- Management confirmed accelerated investment, with the new platform—“cognitive core”—targeting commercial launch in May 2026.
• Large Customer Wins -- Multi-year or major deals signed with AT&T, BT, Orange Belgium, Telia Finland, Altice France’s SFR, KT, PLDT, Globe, Consumer Cellular, Fidium, and Vodafone Ireland and Greece, many including generative AI or cloud components.
• Telefonica Germany Deal -- Multi-year collaboration will support billing for consumer and enterprise, deploying generative AI use cases leveraging Amdocs and MAGE agents for product promotion and upsell automation.
• Etisalat UAE Outcome -- Integration of MAGE agents produced "double-digit improvement in Net Promoter Scores," suggesting measurable customer impact.

SUMMARY

Management emphasized accelerating investment in generative AI and the development of the "cognitive core" platform, timing its commercial availability for May 2026. Fiscal 2026 guidance reflected modest topline growth, margin improvement, and a substantial increase in the effective tax rate due to regulatory changes. Customer wins across North America, Europe, and Asia featured cloud transformation, billing, network modernization, and rapid expansion of managed services. Free cash flow conversion and yield remain central to capital allocation strategy, with a proposed dividend increase highlighting shareholder returns. Management signaled a strong second-half weighting for new deal ramp as a driver for fiscal 2026 performance.

• Sheffer said, "we are excited about the initial results we are seeing" in generative AI, highlighting both new proof-of-concept conversions and commercial deployments.
• Rapaport-Dagim highlighted, "Managed services as a share of overall revenue also reached a new high of 66% in fiscal 2025, further strengthening our business resilience."
• Rapaport-Dagim stated that "half of our top 12 customers are international customers, two of which are new logos added in the last ten years."
• Sheffer confirmed that larger commercial generative AI deployment will "take some time to deploy," anticipating substantial growth potential from the cognitive core initiative.
• Rapaport-Dagim reported anticipated "pressure from below the line items" for fiscal 2026, specifically citing a higher tax rate and increased financing costs as material headwinds.

INDUSTRY GLOSSARY

• Managed Services: Long-term contractual engagements where Amdocs manages IT, billing, network operations, or digital transformation activities for clients across multiple systems and geographies.
• Cognitive Core: Amdocs' next-generation, generative AI-powered operational platform designed to integrate with BSS/OSS and enable agent-based automation and digital transformation at scale.
• MAGE Platform: Amdocs' suite of generative AI digital agents used to automate customer care, commerce upsell, and service operations for telecom providers.
• Outcome-Based Model: Contracting approach where client payments are linked to achievement of specific operational or business results, rather than time and material billing.

Full Conference Call Transcript

Shuky Sheffer: With rising customer adoption, to provide a few examples, we signed a multi-year managed services SaaS agreement with AT&T to deliver entitlement server capabilities via our eSIM cloud platform. This continued to expand our eSIM SaaS platform momentum, ending over 100 million devices to it. Additionally, Amdocs ConnectX already has more than 15 customers, including Consumer Cellular and PLDT, while deploying the generative AI in the platform to quickly launch existing new digital brands. Adding to the list, I am pleased to announce that Orange Belgium has selected Amdocs to lead the Kim modernization initiative on their prepaid stock, leveraging our connected platform. This project includes real-time charging and next-generation scalable architecture designed to support their needs.

It will drive efficiency while transforming the user experiences with modern digital journeys that will redefine engagement for all Belgium prepaid subscribers. Looking forward, cloud will remain a primary focus for Amdocs as we continue to support our global telco customer base, many of which are only just getting started on their multi-year cloud journeys. Now, let's talk about generative AI and data on slide 11. Following the generative AI-related deals we recently announced with Etisalat UAE, Altice Optimum, and Consumer Cellular, I am excited to report that Telefonica Germany, one of the country's largest quad-play service providers, has selected Amdocs to extend its billing platform for both consumer and enterprise services.

As part of this expanded multi-year collaboration agreement, Telefonica Germany will deploy new generative AI use cases leveraging Amdocs and MAGE sales agents to enable the efficient promotion of new products and to automate the upsell of personalized offers to drive higher ARPU. This award with Telefonica Germany is another proof point that shows that we are starting to see trial POC conversion to actual generative AI projects, and we are excited about the initial results we are seeing. For example, one of the first service providers to integrate generative AI was Etisalat UAE, a customer which is already achieving double-digit improvement in Net Promoter Scores after deploying MAGE agents.

Such progress reflects Amdocs' telco and data services expertise, building our vectorized MAGE platform, which we have deployed in collaboration with NVIDIA and other generative AI leaders. Moreover, I believe our recent success demonstrates the pivotal role Amdocs is playing as an IT player helping accelerate generative AI adoption in the telecom industry. In addition to cloud and generative AI, we secured important wins in the strategic domain this quarter as highlighted on Slide 12. As previously announced, we finalized a significant ten-year digital modernization and managed service agreement with BT in the UK to deliver a modern B2C mobile platform for its prepaid and postpaid segments.

We signed a multi-year strategic agreement with Telia Finland to build its next-generation digital BSS enhanced with advanced AI capabilities. And AT&T Mexico closed a new digital program with Amdocs to enhance self-service experiences, expanding its digital selling capabilities. Here in the US, we signed a multi-year software and IT service agreement with Fidium, a next-generation American fiber internet and network service provider, and a new logo for which Amdocs will modernize and manage its IT operation while supporting its broader digital transformation strategy. As well as in the US, a leading tier-two operator selected Amdocs for an additional five-year renewal of their BSS. Service providers are also adopting next-generation monetization solutions to support the wireless and fiber infrastructure elements.

Amdocs recently signed an expanded multi-year billing transformation agreement with Altice France's SFR to consolidate multiple billing operations to a unified cloud-ready platform. And we signed a new agreement with South Korea's telecom operator, KT, to upgrade and modernize its charging system to accelerate time to market and to boost operational efficiency. This quarter, we also expanded our activities with the two largest operators in Brazil. First, Amdocs entered an agreement with Claro Brazil to implement a real-time billing platform designed to enable full-scale convergence across multiple lines of business. Claro also extended its multi-year service contract with Amdocs.

Operator: Second,

Shuky Sheffer: In the network domain, we signed a modernization agreement with Telefonica Vivo to provide a future-ready foundation for ongoing operation by deploying our latest OSS products. Further underlying Amdocs' expertise and growth potential in the network domain, we have expanded our managed services agreement with Globe in the Philippines to include network strategy and planning, mobile access engineering, and optimization to enhance service quality and operational agility. Additionally, we delivered the successful go-live of Amdocs' advanced network inventory platform for Vodafone Ireland and continue to expand our network activities with Vodafone Greece.

Before discussing our fiscal 2026 outlook, I wanted to circle back on generative AI to share our thoughts with respect to our strategy and investment plans as presented on Slide 14. Over the past couple of years, we have shared our belief that generative AI holds immense potential to transform the telecom industry. We have been working closely with our customers to deliver tangible improvements in critical areas such as customer care and network operation while building out generative AI capabilities in our MAGE platform. As the technology matures, the industry advances, and we see the progression from POCs to production, we believe there is now the potential to unlock even greater opportunities to enhance experiences, agility, and efficiency.

To fully capture this potential for Amdocs and for our customers, we are accelerating our generative AI investment, which we expect will open new pathways for future growth across our entire customer base irrespective of the BSS/OSS version. This includes fast-tracking the development of what we call a cognitive core, a next-generation platform built on the solid foundation of Amdocs MAGE. In integration, advanced journey capabilities such as agent-to-agent MCP technologies, our vectorized telecom expertise, and the enablement of agentic services. In the coming quarter, we will share more about our vision for an AI-powered telecom operating system. For our customers, this investment in generative AI may represent a substantial shift in how they will adopt future software and services.

Notably, we believe it promises to simplify and accelerate their digital transformation and journey to the cloud delivered under our outcome-based model. Overall, with focused and intentional investment, we expect cognitive core to emerge as a long-term growth engine for Amdocs by enabling us to better serve our full spectrum of customers, from those running current platforms seeking cost-effective line of business modernization to top-tier innovators already modernizing on Amdocs' NextGen platform to lead with future-ready digital experiences. Now let me comment on the current operating environment and our outlook for fiscal year 2026. We are entering fiscal 2026 with a healthy twelve-month backlog visibility and a strong overall book of long-term business supported by recent win momentum.

With our unique tech-led and outcome-based accountability model, Amdocs is strongly positioned within our serviceable addressable market of nearly $60 billion to monetize the rich pipeline of opportunities across cloud, data network, and generative AI and data. That said, we are closely watching for any impact of the uncertain global macroeconomic environment on us and our customers' demand and spending behavior. Tying everything together, with our outlook on fiscal on slide 16, we expect revenue growth in the range of 1.7% to 5.7% as reported and 1% to 5% in constant currency for the full year fiscal 2026.

As to our profitability, we expect a non-GAAP operating margin to increase by roughly 20 basis points year over year at the midpoint of our target range as we balance our strategic long-term growth investment with the benefits of ongoing cost and efficiency gains across the business. All up, we expect to deliver a non-GAAP diluted earnings per share growth of between 4% to 8% in fiscal 2026, the midpoint of which equates to an expected total shareholder return in the high single digits, including our dividend. With that, let me turn the call over to Tamar for remarks.

Tamar Rapaport-Dagim: Thank you, Shuky, and hello, everyone. Thank you for joining us. Before I begin into these comments, I will compare certain financial metrics on a pro forma basis, which adjust prior year fiscal year 2024 revenue by approximately $600 million to reflect the phase-out of certain low-margin non-core business activities which were substantially already ceased in 2025. To further assist your modeling, the regional mix of this revenue was similar to the overall company and contributed roughly $150 million per quarter. To begin, I am pleased with our solid financials for the fourth fiscal quarter as detailed on Slide 18. Q4 revenue of approximately $1.15 billion was up 2.8% year over year in pro forma constant currency.

Revenue exceeded the midpoint of our guidance with no impact on foreign currency movements as compared to our guidance assumptions. Reflecting the phase-out of certain business activities, reported revenue declined by 9% from a year ago. On a regional basis, North America improved more than 2% sequentially, posting its strongest quarter of the fiscal year. Europe declined, reflecting normal business fluctuations following a record quarter in the previous quarter. The rest of the world was slightly lower on a sequential basis, reflecting mixed trends. With our strong sales momentum, we have clear visibility to continued growth in the Rest of the World, but quarterly trends may fluctuate given the project orientation of our customer activities in this region.

Shifting down the income statement, non-GAAP operating margin was 21.6%, improved by 290 basis points from a year ago driven by the announced phase-out of low-margin non-core business activities and ongoing efficiency gains within our operations. Non-GAAP operating margin improved by 20 basis points sequentially. Interest and other expenses amounted to roughly $10.3 million in Q4. On the bottom line, non-GAAP diluted EPS of $1.83 was slightly above the midpoint of guidance. Diluted GAAP EPS of $0.88 included a restructuring charge of $0.60 per share resulting from certain transformational actions we have taken to optimize our workforce allocation, technology mix, infrastructure, workspace, and other resources as we prepare to accelerate the internal adoption of generative AI in fiscal 2026.

Excluding this restructuring charge, diluted GAAP was at the high end of the $1.41 to $1.49 guidance range. To quickly summarize our full-year 2025 financial performance, results were consistent with the original guidance we provided a year ago as shown on Slide 19. Revenue was up 3.1% in pro forma constant currency, above the midpoint of guidance. On the bottom line, we delivered non-GAAP diluted earnings per share growth of 8.5% in fiscal year 2025, consistent with the midpoint of guidance and driven by sustained revenue growth, a 300 basis points improvement in non-GAAP operating profitability, and the benefits of our share repurchase activity.

Turning to Slide 20, this year we delivered double-digit growth in cloud, which exceeded 30% of overall revenue as compared with roughly 25% in the prior year. Further highlighting the ongoing diversification of our business and growing traction in international markets, half of our top 12 customers are international customers, two of which are new logos added in the last ten years as slide 20 shows. Additionally, we continue to expand our footprint with long-standing customers and new logos in North America. A great example is Charter, with which we had limited business a decade ago but is now one of our top 10 customers.

Over the years, we have also added new logos in North America, such as Consumer Cellular and Fidium, in fiscal 2025. Turning to slide 21, managed services revenue was a record $3 billion in fiscal 2025, up 3.1% from a year ago. Managed services as a share of overall revenue also reached a new high of 66% in fiscal 2025, further strengthening our business resilience as we maintained high renewal rates and expanded our customer activities under long-term agreements.

As Shuky alluded to earlier, several of our key deals signed in the fourth quarter were struck under multi-year managed services engagements, the most significant being our landmark agreement with PLDT from the Philippines, for which Amdocs will manage its complete IT services requirements, covering architecture, implementation, operations, and performance with end-to-end accountability. Additionally, we expanded our managed services agreements with Globe in the Philippines to include network operations, and at TELUS in Canada to cover the migration of its wireless monetization operations to Google Cloud.

Managed services can also be a spearhead to winning new customer logos, such was the case with Fidium in the US, for which Amdocs will serve as the primary and exclusive partner to maintain and operate its IT fiber operation across multiple applications while supporting its IT transformation as its preferred development partner. Moving to the balance sheet and cash flow highlights on slide 22, DSO of seventy-four days was down by two days sequentially and unchanged year over year, reflecting normal fluctuations in business activity. Unbilled receivables net of deferred revenue rose by $62 million sequentially in Q4 and was relatively flat compared to a year ago, aggregating both the short-term and long-term balances.

As a reminder, the net difference between unbilled receivables and deferred revenue fluctuates from quarter to quarter in line with normal business activities as well as our progress on multiyear transformation programs. Driven by a strong fourth quarter, free cash flow before restructuring payments was $735 million in fiscal 2025 and above our guidance range of $710 million to $730 million. Including restructuring payments of $90 million, reported free cash flow was $645 million for the year. Overall, we finished fiscal 2025 with a healthy cash balance of approximately $325 million and an available $500 million revolving credit facility providing ample liquidity to support our ongoing business needs while retaining the capacity to fund our future strategic growth.

Switching to capital allocation on slide 23, this quarter we repurchased $136 million of our shares. We had up to $1 billion of remaining repurchase authority as of September 30, 2025. We paid cash dividends of $58 million in the fourth fiscal quarter. Looking to fiscal 2026, we expect free cash flow of between $710 million to $730 million, including additional payments we expect to make under our current restructuring program. Our free cash flow outlook equates to a conversion rate of roughly 90% relative to expected non-GAAP net income and translates to a healthy free cash flow yield of roughly 8% relative to Amdocs' current market capitalization.

Regarding our capital allocations for the coming year, we expect to return the majority of our free cash flow to shareholders. This includes dividends for which we are pleased to announce a proposed 8% increase in our quarterly cash payment to a new rate of 56.9¢ per share, subject to shareholders' approval at the annual meeting in January 2026. Moving to slide 24, twelve-month backlog was $4.19 billion at the end of Q4, up 3.2% from a year ago. We expect twelve-month backlog to represent roughly 90% of our forward-looking revenue, further underscoring the importance of this metric as a leading indicator of our business.

Now turning to our revenue outlook on slide 25, we are continuing to closely monitor the prevailing level of macroeconomic, geopolitical, business, and operational uncertainty in the current business environment. The first quarter and full-year fiscal 2026 financial guidance reflect what we consider to be the most likely outcomes based on the information we have today, but we cannot predict all possible scenarios. For the full fiscal year 2026, we expect revenue growth of between 1.7% to 5.7% as reported, and between 1% to 5% in constant currency.

We expect our strong sales momentum in fiscal 2025 to contribute to fiscal year 2026 revenue growth, and we assume a stronger second half to the fiscal year as we ramp up activities on recently secured deals. On the other end, our fiscal year 2026 revenue guidance assumes a revenue decline at T-Mobile due to reduced discretionary spending. Our annual guidance also incorporates some contribution from inorganic deal activity. As to the first fiscal quarter, we expect revenue between $1.135 billion to $1.175 billion.

Moving down the income statement, we expect non-GAAP operating margins within a new and improved target range of 21.3% to 21.9% in fiscal 2026, the midpoint of which is roughly 20 basis points higher than the prior year. Our profitability outlook reflects an intentional decision to accelerate our R&D, sales, and marketing investments with respect to generative AI and next-generation cognitive core platform, while balancing this with ongoing costs and efficiency gains resulting from our continued focus on operational excellence, automation, and the internal deployment of generative AI-based tools across our business. Our margin outlook excludes additional restructuring charges we may take.

Wrapping everything together on slide 27, we expect to deliver non-GAAP diluted earnings per share growth of 4% to 8% in fiscal 2026. This outlook assumes pressure from below the line items in the year ahead. We anticipate a moderate increase in our non-GAAP effective tax rate to a rate for fiscal year 2026 of between 16% to 19%, primarily driven by a combination of regulatory changes including the implementation of the Pillar Two global minimum tax and other evolving international tax requirements. In 2026, our non-GAAP effective tax rate is expected to be above the annual range. Additionally, we anticipate higher finance costs this year resulting from a reduced cash balance and funding of our strategic long-term growth plan.

Overall, we expect to deliver high single-digit expected total shareholders return in fiscal 2026, assuming the 6% midpoint of our non-GAAP diluted EPS growth outlook, plus our dividend yield of roughly 2.7% based on the new dividend payment we announced today. With that, back to you, Shuky.

Shuky Sheffer: I am pleased with our solid financial performance and continuous strategic progress in fiscal 2025. And I am excited by our technological leadership and potential to open new growth opportunities by accelerating our generative AI investment in the rehab. With that, I am happy to take your questions.

Operator: Certainly. And our first question for today comes from the line of Timothy Horan from Oppenheimer. Your question, please.

Timothy Horan: Thanks, guys. You have had a lot more experience with AI at this point. Can you just talk about maybe qualitatively how impactful you think it will be to the telecom industry? How much do you think it can improve productivity over time and generate new services?

Shuky Sheffer: Thank you, Tim. We are evolving our offering in the GenAI domain. Internally, as you mentioned, we are using more and more general AI capabilities in the software development life cycle and operation. This is improving gradually, and we see more and more, I would say, it's not just cost, but quality, speed, and many items that we see using this technology. From the offering perspective to customers, the initial lane offering that we have, and which we have deployed and are successfully converting POCs to actual deals, was more, I would say, add-ons on top of the system, you know.

Some agents in the call center, for care and for commerce, and things like these types of capabilities, which now we are doing with many we mentioned and are pretty successful. The next gen, the next, I would say, gen of our AI capabilities is what we discussed today, what we call cognitive core. The idea is to add a layer on the top of our BSS systems, or the different ones that we are supporting today, and actually create a new model that can support agentic activity, agent to agent, and actually completely disrupt and change the way we are running this operation today.

Part of the investment that we discussed, we are going to accelerate in this series to build this layer. And I think it's going to be, it will take some time to deploy it. We believe it's going to be extremely exciting and give completely new capabilities to our customers in the agenting area, and we definitely believe this will be another very important growth engine for Amdocs for the years to come.

Timothy Horan: And do you have a rough idea when that will hit the market?

Shuky Sheffer: May 2026.

Timothy Horan: Thank you very much.

Operator: Thank you. And our next question comes from the line of George Notter from Wolfe Research. Your question, please.

George Notter: Hi, guys. Thanks very much. I guess I wanted to just probe the decision to kind of reallocate more capital into the business from an R&D perspective. I heard certainly what you said about building more identity capability. I guess I'm just looking for sort of the puts and takes. Right? You're implementing AI internally. You've been on a path of generating 60 or 70 basis points of efficiency each year. The coming year is going to be more like 20 basis points. Is that the amount of the investment, that incremental 50 or so basis points? Is that the right way to look at it? And are there some other kind of gross factors we should look at?

Tamar Rapaport-Dagim: Yeah. Most of the margin here is this intentional decision to invest more into this opportunity that we see as an exciting one. At the same time, as you said, we are continuing to enjoy these productivity gains. We do want to reinvest in making sure we are capturing this growth opportunity. It's not just R&D. It's also in the sales and marketing aspects. The go-to-market, how we are going to support and accelerate our coverage of the different opportunities in the pipeline. So I would say it's both.

And definitely, we would like to see that, keeping know, and accelerating the momentum we think we can bring on that as you know, we talked in the last two quarters about the fact that we are moving from proof of concept and feasibility to actual commercial deals. We continue to see that with examples of Telefonica Germany we mentioned now, and it is much, much more true and adding more and more use cases. PLDT in part of a large mega deal that we just signed is going to include adoption of our MAGE platform. We are continuing to see more and more commercial pickup on that aspect. And think that there's a great opportunity there.

George Notter: Got it. Okay. And then also, I just wanted to ask about your conversations with customers. You know, obviously, the company prices its contracts, its businesses on outcomes, not, you know, a bill hours times rate model. I get that. But I assume your customers, you know, do expect that you're using AI internally to improve the efficiency. And I'm wondering if there's some expectation from customers to get better pricing or contract prices from you guys as part of that conversation. I'd like to hear more about how those, you know, at the moment of contracting with customers, are you seeing that pricing impact or pressure roll down onto Amdocs or not? Thanks.

Shuky Sheffer: So this is not new. I mean, yes. Now the most discussed item is generative AI, but this we are in a situation pretty much in every renewal situation. You know, over time, we changed technology, moved to the cloud. So technology is evolving. Definitely, there is discussion like this with generative AI. What we are trying to do obviously, is a business model, is for the most part, as you mentioned, is outcome-based. So this is helping a bit. And I think what is more important is that whenever we renew or sign a new agreement, we are doing a lot of effort very successfully to completely change the scope of the agreement.

By adding transformation to the cloud, generative AI capabilities, and other automation and other products that we have. So yes, there is pressure. Customers expect to see savings. As you mentioned, because we are not in a rate cap type of relationship, as part of this discussion, on one hand, we show the customer efficiencies. On the other hand, we're expanding the scope of our activities by adding new products and new services and generative capabilities. So between the two, I think we are doing a pretty good job in minimizing impact.

Tamar Rapaport-Dagim: And I think just to add on that, George, our offering is very rich. And, typically, what happens is that we get into these dialogues with customers looking at their own total cost of ownership, how they want to achieve this kind of savings or what benefits they're looking for in terms of improving customer experience and other pain points they have. So engaging in this dialogue, we have a lot of tools to go into this, you know, to manage to go back to Shuky's point of mentioning additional scope. So we can take a bigger wallet share of what they need to invest in and give them the benefits that they're looking for.

So it's not just, you know, a dialogue on, okay. What do we do for you right now? And how are we pricing it moving forward? It's a whole different dialogue that is emerging. And we've seen this quarter a lot of managed services expansion and extensions, and that has been part of these discussions. And as you can see, we're expanding the twelve-month backlog beyond that. I feel very good about the fact that it's expanding our book of business beyond the twelve months that we are including in the backlog. So I think the method works.

We can bring them the value while giving them the TCO reduction they're looking for and looking at how to bring more and more of our offering to support their needs.

George Notter: Thank you.

Operator: Thank you. Our next question comes from the line of Tal Liani from Bank of America. Your question, please.

Tal Liani: Hi, guys. I have, like, five questions. Just stop me when I'm going too much. I don't. Cash flow is down next year. Why is it?

Tamar Rapaport-Dagim: And then

Tal Liani: I'm not asking the question in any order. I'll maybe ask two at a time. But also, the growth, if I take your midpoint on a constant currency basis, the growth is not showing much acceleration from this year. It's actually slightly below street expectations. What are the puts and takes in the growth? Because you also made a disclosure that T-Mobile is going to be down in 2026. So can you kind of elaborate on the good parts and the parts that are maybe more flattish and declining? I thought after some discontinuation of businesses, growth should somewhat accelerate from where we are or where we were.

Tamar Rapaport-Dagim: Thanks, Tal. So I'll address the cash flow first. We ended the adjusted cash flow of 2025 strong, but we started the year with exactly the same guidance range that we are starting now, $710 million to $730 million. We want to be appropriately conservative. So I don't see that as a cash flow decline. We're more or less at the same level. When we are looking into the question into the revenue growth, as you rightfully articulated, we are seeing on the one hand an amazing sales quarter finishing 2025. Very happy about the deals we've signed.

A lot of that momentum on the sales will contribute more into the second half of the year as it's naturally taking us more time to ramp up deals that we are capturing. So that's why we said that within the fiscal year '26, we will see a stronger second half growth. At the same time, we see this positive aspect. We do see the pressure of lower discretionary spending in T-Mobile, and this is why we feel we want to be absolutely transparent about the decline we expect there. It is a major customer. I just want to give some context. T-Mobile has been a long-term relationship for us.

We are supporting their billing activities across all the key brands, Magenta, MetroPCS, now YouseSolar. And this is obviously a core activity of what we do for them, and we're focused on continuing to bring value. But at the same time, we need to acknowledge the fact that they are reducing some discretionary spend. So yes, positives, are some negatives, but I believe that overall looking at the sales activity and how strong we finished 2025, we feel good about our future.

Tal Liani: Gerard, can you elaborate on your top 10 customers? That's number one. This is kind of you normally give, this time of the year, you give the disclosure in the K. If you have the data, then just on T-Mobile, they announced they made a disclosure that they are starting to transfer customers to a new billing system. And they made it a few days ago. And the question is, is this kind of an end of a project? That's why revenues are going to be down. And is this normal for big transformational projects that the end, you start to see a decline? When you say discretionary spending, it looks like things are being pushed out.

And I'm wondering if it's really things that are being pushed out or being deprioritized versus a big contract that is basically done?

Tamar Rapaport-Dagim: So to the point on the top customers, we are typically giving this information in our annual report that is coming out in December, and we'll do the same this year. I will just say that as I mentioned in the prepared remarks, we are happy to see the customer diversification evolving in a positive way. More customers entering, I would say, the high thresholds of our business, including many international names that we've added, including relationships that a long time ago were like Charter and are now a top customer. And when we look into our relationship with T-Mobile, we cannot comment on a specific project, specific program plans, etcetera, on a single customer basis.

But I can definitely tell you that we've taken all the reasonable and in terms of the outcomes that we are seeing with relations to us, into the guidance that we've given. So more to come, of course, in terms of what we can release moving forward. But I feel that we have taken everything we know as of today into the guidance.

Tal Liani: Got it. Last question. I promised you five questions. So last question. You in the last year, you implemented AI in order to save to improve margins, in order to reduce costs, and you've done it very successfully. And now you are talking about increased costs. Tell us about the margin trajectory, meaning you know, on one hand, you are reducing expenses. On the other hand, you're spending more. What drives the increase in spend, and how soon could it translate into accelerated growth?

Shuky Sheffer: I'd tell the way, congratulations on the world, if we speak. The best way to tell it, we did not have all the tools of capabilities we develop with generative AI in our software development life cycle and all the engineering activities in the company, including operation. In a year like this, that we accelerate investment in developing our next generation, I would say, gen AI capabilities around the core system, you could see even a situation where there is some pressure on the margin.

The reason is we are able on one end to accelerate the investment in GenAI and still generate maybe a moderate, but still 20 basis points of increase in the margin, is because we have all these capabilities that we develop and continue to see progress of actually doing everything much faster and better and with higher quality.

Tal Liani: Got it. So if I take a step back for investors that are long-term and looking at Amdocs as a kind of safe relative low-risk investment for the long term. The question that I'm asking is you've had tremendous success in the last one or two years with big projects, with big customers. You are doing great in cloud. You are doing good. We start to see signs of GenAI. But the growth is still the same. In a sense that even before you decided to discontinue some operations, you were growing between three to 4%. Now the guidance is for the same growth. Maybe it accelerates second half, but we're still in the same neighborhood of growth.

The question is if you look out without giving us guidance for growth, like specific guidance, when you look out you say where you want to position the company, the CEO, a few years down the road, do you think that what you're doing today and your activity in cloud and your activity in GenAI could it change the growth profile of the company? Meaning, can you grow sustainably above the current three to 4% going into new markets and new times. So sorry. It's a long-winded question, but I'm just trying to understand kind of the longer term, what you have in mind the longer-term goals for the company in terms of growth.

Shuky Sheffer: The answer will be shorter than the question, but I think in the last couple of years, the main growth engine for Amdocs was the cloud. And in order for us to break this 3% and to go to a mid-single digit that we would like to be, we need more than one growth engine. As big as it is, you know, it's become already 30%. So, we really believe that the investments we do in this unique offering we are going to have more than one significant engine like cloud, and we believe that what we develop right now in GenAI would be another one.

And the answer to your question, I think if we in the minute we establish two, three growth engines, then we can be there. And this is our intention.

Tal Liani: Got it. Great. Thank you.

Operator: Thank you. And our next question comes from the line of Shlomo Rosenbaum from Stifel. Your question, please.

Adam: Hi, guys. This is Adam on for Shlomo. What is the organic constant currency growth implied in the guidance for our fiscal 1Q '26 and full year '26? There's some commentary around some contribution from inorganic deal activity. If you could talk about that, please.

Tamar Rapaport-Dagim: We expect to have roughly half coming from inorganic. You know, when we started the 2025 as well, we talked about some inorganic contribution and eventually it was less than half of the growth. So you know, we leave some flexibility for that, of course. And if you look back on the kind, you know, just on the type of deals we signed even this quarter in Q4, we already see direct relation to past acquisitions and the benefit it's bringing. So we feel this is a very important way for us to capture strategic growth opportunities, whether it's fiber, some of those small deals that we've done in 2025, but around the fiber growth opportunity, as an example.

So we want that lever to stay open and contribute to the company.

Adam: Okay. And the change in AI spend, where are you seeing customers put their budgets and capital, and how does that match up to the areas where you're stepping up investments in GenAI?

Shuky Sheffer: So far, and most of the investment will be building agents and use cases to support, as I said, to improve activities in the call center. Both for digital applications, for commerce and care. What we build right now, oh, and by the way, the other thing we talked about is actually in general, about data. So how to prepare the data to be available in real-time to support the agents. And what we are talking about right now, it's a completely different scale.

It's meaning that we are going to augment core billing systems or core monetization systems with the cognitive core layer that we, as I said, will allow agent to agent and all the capabilities of agenting options, this is a different scale of capabilities which is relevant for every Amdocs customer everywhere. So we believe that from a scale perspective, it's much bigger than what we've done so far.

Adam: Okay. And there's some commentary about some pressure from below the line items, just on the modeling side. Areas specifically are referring to and what's driving that?

Tamar Rapaport-Dagim: Referring specifically to the tax rate. As we see more regulatory changes around the world, like the Pillar Two minimum tax, as well as other countries that are putting some new regulations. We elevated the effective tax rate range from 15% to 17% to 16% to 19%. So that would be one point. And the other one is financing cost. As we are starting the year with a lower cash balance and continue to have plans to invest in some strategic growth areas, we will see some higher finance expense costs. So that's what we refer to as items below the operating income line.

Adam: Yeah. Thank you. Thanks.

Operator: This does conclude the question and answer session of today's program. I'd like to hand the program back to Matt Smith for any further remarks.

Matt Smith: Okay. Thanks, operator, and thanks, everyone, for joining the call tonight. If you've got any additional questions, please call. In the IR group here. And with that, have a great evening. Thanks a lot.

Operator: Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.

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