How did DOX's revenue and expenses trend in Q1 2025?

Amdocs Ltd (DOX) experienced a notable improvement in profitability during Q1 2025, despite a slight increase in revenue, primarily driven by strategic shifts and operational efficiencies.

1. **Revenue Trend**:
- DOX reported a revenue of $1.11 billion for Q1 2025, which represents a 1.7% increase year-over-year on a pro forma constant currency basis.
- This growth was driven by strong sales momentum in cloud services, which are expected to see double-digit growth for the year.
- The company's managed services revenue, accounting for 66% of the total, showed a material improvement, underscoring its strong market positioning.
2. **Expense Trend**:
- The phase-out of certain business activities contributed to a reported 10.9% year-over-year decline in revenue, but this was partially offset by the pro forma constant currency increase.
- Despite the revenue decline, DOX saw a significant improvement in profitability, with a 310 basis point year-over-year increase in non-GAAP operating margin.
- The company's 12-month backlog increased by approximately 2.7% year-over-year on a pro forma basis, reaching $4.14 billion, indicating strong future business prospects.
3. **Profitability Improvement**:
- DOX's focus on operational efficiencies and the phase-out of low-margin activities led to a substantial improvement in profitability, with GAAP diluted EPS rising above guidance to $1.33, and a non-GAAP diluted EPS of $1.66.
- The company's free cash flow decreased to $78 million from $138.6 million in the previous year, and net cash used in financing activities was $203 million, reflecting share repurchases and dividend payments.
4. **Strategic Shifts and Future Outlook**:
- Amdocs Ltd reiterated its fiscal 2025 revenue growth outlook of 1%-4.5% on a pro forma constant currency basis and aims for double-digit total shareholder returns.
- The company continues to face macroeconomic, geopolitical, and operational uncertainties, which could impact future performance.

In conclusion, while DOX faced challenges in revenue growth due to strategic shifts, the company's focus on operational efficiencies and the phase-out of low-margin activities led to a significant improvement in profitability, with a substantial increase in non-GAAP operating margin and a strong 12-month backlog indicating robust future business prospects.