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Amdocs Limited reported healthy earnings, with strong headline profit numbers supported by solid earnings fundamentals. The company's profit was reduced by $81m due to unusual items, but analysts expect an improved result in the current quarter. Earnings per share have grown 13% per year over the last three years, and the company's return on equity is considered favorable.

Title: Amdocs Limited Reports Strong Q3 Earnings Despite Revenue Decline

Amdocs Limited (DOX) reported better-than-expected third-quarter fiscal 2025 results, with non-GAAP earnings of $1.72 per share, surpassing the midpoint of the management’s guidance of $1.68-$1.74 and increasing 6.2% year over year [1]. The company's revenues of $1.14 billion exceeded the consensus mark of $1.13 billion, but compared to the year-ago quarter, revenues were down 8.4% on a reported basis due to the phase-out of certain business activities [1].

Excluding the effect of phase-out business activities, revenues were up 3.5% year over year in pro forma constant currency. Managed services revenues rose 4.1% year over year to $771.5 million. The company ended the third quarter with a 12-month backlog of $4.15 billion, down $20 million sequentially [1].

The non-GAAP operating income increased 5.3% year over year to $244.7 million, while the operating margin expanded 280 basis points (bps) to 21.4%. Amdocs had cash and short-term investments of $342.5 million as of June 30, 2025, compared with $324 million as of March 31, 2025. Long-term debt was $646.7 million as of June 30, 2025, almost flat to the March 31, 2025’s level of 646.6 million. During the third quarter, it generated an operating cash flow of $241.2 million and a free cash flow of $211.8 million [1].

Amdocs initiated guidance for the fourth quarter and updated the outlook for fiscal 2025. For the fourth quarter, the company expects revenues to be in the band of $1.125-$1.165 billion (mid-point $1.145 billion). The Zacks Consensus Estimate for revenues is pegged at $1.14 billion, suggesting a year-over-year decline of 9.6%. Amdocs expects non-GAAP earnings per share to be between $1.79 and $1.85. The Zacks Consensus Estimate for earnings is pegged at $1.79 per share, indicating a year-over-year rise of 5.3% [1].

For fiscal 2025, Amdocs updated revenue decline rate guidance to 9.0-10.0% from 9.1-10.9% forecasted previously. The mid-point of the new guidance range suggests a decline of 9.5%. The Zacks Consensus Estimate for revenues is pegged at $4.51 billion, suggesting a year-over-year decline of 9.9%. Non-GAAP operating margin is still anticipated to be in the range of 21.1-21.7% for fiscal 2025. Non-GAAP earnings per share are now expected to grow in the band of 8.0-9.0%, up from 6.5-10.5% forecasted previously. The Zacks Consensus Estimate for earnings is pegged at $6.96 per share, indicating a year-over-year rise of 8.1%. The company continues to expect free cash flow between $710 million and $730 million [1].

Amdocs carries a Zacks Rank #3 (Hold). Some better-ranked stocks that investors can consider in the Zacks Computers - IT Services industry are CDW CDW, Genpact G, and EXL Service EXLS, each carrying a Zacks Rank #2 (Buy) [1].

References

[1] https://www.nasdaq.com/articles/amdocs-q3-earnings-surpass-expectations-revenues-fall-y-y