Amdocs (DOX) Q4 2026 earnings review
Amdocs signs AT&T, but a T-Mobile dispute cuts its outlook
Amdocs met its fourth-quarter targets, but a legal fight with T-Mobile and business exits will shrink the telecom software provider next year. Fourth-quarter revenue rose 4% to $1.19 billion, while twelve-month backlog fell 10% on a comparable basis to $3.50 billion. Chief executive Shimie Hortig initiated a fiscal 2027 plan that has reported revenue dropping 14% to 18%, which by our math leaves sales down 16% across the last three quarters of the year.
| Twelve-month backlog (comparable basis) | $3.50B -9.6% from a year ago |
|---|---|
| Q4 Revenue | $1,194M +3.8% from a year ago (+4.0% constant currency) |
| FY27 Underlying revenue outlook | -11% to -7% pro forma constant currency |
| FY27 Profit per share outlook, excluding one-offs | -30% to -26% from a year ago |
⚖️ Verdict: 🔴🔴 Very Bearish
The story got worse because slowing discretionary spending at T-Mobile escalated into mutual breach-of-contract notices that threaten to end the relationship. Even after stripping out $360 million of exited hardware and media sales, the company's plan has underlying revenue falling 7% to 11% and profit per share excluding one-offs dropping 26% to 30% in fiscal 2027. On the positive side, Amdocs signed an eight-year agreement for its new artificial-intelligence platform with AT&T and bought EIS for $340 million to enter the insurance market.
The question now is whether new artificial-intelligence contracts and the insurance purchase can return the company to growth in fiscal 2028 as management plans. Either the AT&T and international wins add enough new spending to replace T-Mobile, or artificial-intelligence automation forces Amdocs to charge less at contract renewals while debt rises. Sequential backlog movement over the next two quarters will show if the core business is expanding.
🐂 Bull Case
AT&T Signs Eight-Year Deal for AI Software
Amdocs is trying to move phone carriers onto aOS, its new artificial-intelligence operating system that automates customer service, billing and network tasks. Chief executive Shimie Hortig wants aOS to lead the company's growth. ”Today we announced a significant, eight-year strategic agreement with AT&T, our largest customer.”
Beyond AT&T, the telecom software provider signed multi-year aOS contracts with VodafoneThree in the UK, VEON in Eurasia for ten years, and Globe in the Philippines. Excluding T-Mobile and exited units, the twelve-month backlog of contracted work grew by a mid-single-digit percentage from a year ago, and management expects the rest of the business to grow at a mid-single-digit pace in fiscal 2027.
What to watch: whether Amdocs discloses actual dollar revenue from aOS contracts on upcoming calls. Until management sizes these wins, investors cannot tell how much new spending they add versus merely renewing existing managed-services work.
International Sales Jump and Offset North America
While North America shrank 3.7% from a year ago to $733.9 million in the fourth quarter, overseas customers picked up the slack. Sales in the Rest of the World region rose 28.5% to $267.3 million, and European revenue grew 7.1% to $192.6 million.
The company won new modernization and managed-services contracts with Airtel in India, Integratel in Peru, Millicom in Chile and Magyar Telecom in Europe. That international demand kept fourth-quarter constant-currency revenue growth at 4.0% despite the slowdown at US phone carriers.
What to watch: quarterly revenue in Europe and Rest of the World during fiscal 2027. Continued double-digit gains outside North America would confirm that new 10-year contracts in Latin America and Eurasia are converting into billed sales.
🐻 Bear Case
T-Mobile Legal Fight Cuts Backlog and Outlook
Slowing spending at T-Mobile was already a concern, but the relationship broke down into a legal fight this quarter. ”Looking into fiscal 2027, our guidance reflects major headwinds from T-Mobile due to a recent dispute, the completion of the integration project of the USCellular customers and reduction in T-Mobile’s discretionary spending.”
Both companies sent formal breach notices that ”threaten to terminate the agreement(s) and/or pursue monetary and other relief, including in arbitration”. Amdocs built its fiscal 2027 plan ”including in case of termination of our agreements with T-Mobile by either party”.
- Twelve-month backlog: $3.50 billion, down 9.6% from a year ago and down $370 million from last quarter on a comparable basis
- Implied T-Mobile backlog drop: more than $500 million by our math, given mid-single-digit backlog growth across the rest of the business
- Fiscal 2027 underlying constant-currency revenue outlook: down 7% to 11%
Because twelve-month backlog covers about 90% of next year's revenue, losing T-Mobile turns a steady business into a shrinking one for fiscal 2027. Even if the rest of the customer base grows around 5%, the company's profit per share excluding one-offs will fall 26% to 30%.
What to watch: arbitration filings or a settlement announcement with T-Mobile, along with sequential backlog changes in the first quarter. A stable backlog at $3.50 billion would show the worst of the T-Mobile removal is already in the numbers.
Customer Loss and AI Spending Cut Margin
Management has argued that automating its own software delivery with artificial intelligence and shedding low-margin hardware work will lift profitability. In the fourth quarter, GAAP operating margin rose 4.3 percentage points from a year ago to 15.8% because restructuring charges dropped by 4.3 points of revenue, while cost of revenue — the direct cost of delivering software and services — rose 0.6 points to 63.2% of sales.
For fiscal 2027, however, finance chief Tal Rozenfeld plans for operating margin excluding one-offs to drop to 19.2%–19.8%, down from 21.6% in fiscal 2026. Meanwhile, fourth-quarter revenue from managed services — multi-year contracts to run carrier IT systems — fell 2.7% from a year ago to $728 million.
That 2.1-percentage-point margin drop contradicts the promise of immediate efficiency gains because fixed overhead cannot shrink as fast as T-Mobile revenue disappears, and because Amdocs must spend heavily on research and sales for aOS and insurance. Internal AI savings are not large enough to offset top-line pressure and new investment.
What to watch: first-quarter operating margin excluding one-offs, which Rozenfeld warned will start well below the 19.5% full-year midpoint. It will show how deeply the T-Mobile dispute and new AI spending cut into baseline profitability.
Amdocs Borrows for Insurance as Cash Shrinks
To find growth outside telecommunications, Hortig announced the purchase of EIS, an insurance software provider offering ”a modern, cloud-native and agentic multi-line platform spanning policy administration, billing, claims and customer engagement”. Amdocs is paying about $340 million in cash, plus potential performance payouts later, for a business with roughly 700 employees.
- Cash vs total debt at September 30: $197 million of cash against $947 million of short- and long-term debt, increasing net debt by $428 million over the past year by our math
- New borrowing in October 2026: $500 million across two new term loans
- Fiscal 2027 free cash flow outlook before restructuring: $440–500 million, down 36% from $729 million in fiscal 2026 by our math
Buying into a new industry with borrowed money raises risk just as cash generation drops by more than a third and the company still plans to return the majority of free cash flow to shareholders.
What to watch: the revenue and profit contribution from EIS once the deal closes. Investors need to see whether a $340 million outlay adds enough profit to cover the new interest cost.
Restructuring Charges Keep Draining Reported Cash Flow
Amdocs excludes restructuring charges from its headline profit and cash flow targets, treating them as one-offs. Yet the company booked a restructuring charge in every quarter of fiscal 2026, ending with $25.3 million ($0.22 per share) in the fourth quarter and $153.5 million ($1.30 per share) for the full year.
Those charges caused GAAP profit per share to miss the company's own fourth-quarter target by 11% ($1.35 vs $1.48–1.56). In cash terms, restructuring payments took $167 million out of full-year operating cash flow — including $80 million in the fourth quarter alone by our math — leaving actual free cash flow at $562 million rather than the $729 million headline figure. Management's fiscal 2027 cash flow and GAAP earnings plans once again exclude future restructuring.
What to watch: cash restructuring payments in the first quarter of fiscal 2027. A drop toward zero would show the internal reorganization is winding down rather than acting as a permanent cash expense.
👓 Other Themes
Exiting Hardware and Media Removes $360M
To focus on AI software, Amdocs completed an ”exit of non-strategic business activities relating to the resale of hardware activities, and the divestiture of the media business”, selling its Vubiquity media unit to Premiere Digital. Those exits largely occurred in the first quarter of fiscal 2027 and strip about $360 million from the fiscal 2026 revenue base (7.7% of sales) and $320 million from the prior-year backlog.
💲 Other KPIs
Receivables — money billed or earned on contracts that customers have not yet paid — rose 16.6% from a year ago, far outpacing the 3.8% rise in revenue. Days sales outstanding (the average number of days it takes to collect payment) rose by 5 days from last quarter and 9 days from a year ago to 83 days, as unbilled work on multi-year projects built up.
The diluted share count fell 5.8% from a year ago because the company spent $511 million buying back its own stock during fiscal 2026. However, fourth-quarter buybacks slowed to $83 million from an average of $142 million over the first three quarters, and the first-quarter outlook assumes the share count holds steady at 103.6 million.
🔮 Guidance
New. The first-quarter plan calls for revenue to drop 15.7% from a year ago and 18.3% from the fourth quarter at the middle of the range, by our math. That sudden drop reflects ceasing hardware resale and media operations in the first quarter as well as lost T-Mobile work.
New. The outlook has GAAP profit per share falling 41.4% from a year ago at the middle of the range, by our math. The range excludes any future restructuring charges, the EIS insurance acquisition and the Vubiquity media sale.
New. Profit per share excluding one-offs will fall 28.2% from a year ago at the $1.30 middle of the range, by our math. That is in line with the full-year earnings drop as operating margin starts the year below the full-year average.
New. Full-year reported revenue will fall 16.1% at the middle of the range, to about $3.94 billion by our math. With the first quarter down 15.7%, the plan leaves revenue down 16.3% from a year ago across the remaining three quarters by our math. It includes a 0.1% currency drag and some contribution from acquiring EIS.
New. Stripping about $360 million of exited hardware and media sales out of fiscal 2026, underlying revenue in constant currency will shrink 9.0% at the middle of the range. Management noted that excluding T-Mobile, this underlying measure would grow by a mid-single-digit percentage, and it initiated a fiscal 2028 expectation for mid-single-digit revenue growth.
New. The plan calls for GAAP profit per share to fall 21.0% at the middle of the range, to about $3.70 by our math. After a 41.4% drop in the first quarter, that leaves GAAP profit per share down 11.9% over the rest of the year by our math, before any new restructuring or deal charges.
New. Profit per share excluding one-offs will fall 28.0% at the middle of the range, to about $5.34 by our math. With the first quarter down 28.2%, the outlook leaves earnings down 27.9% across the rest of the year by our math. For fiscal 2028, management expects a return to high-single-digit earnings growth.
New. Operating margin excluding one-offs will step down by 2.1 percentage points at the 19.5% middle of the range, from 21.6% in fiscal 2026. Rozenfeld said the margin will start well below 19.5% in the first quarter and climb toward the top of the range by the fourth quarter.
New. The tax rate target excluding one-offs is 16.0% to 19.0%, identical to the range Amdocs set and met in fiscal 2026.
New. Free cash flow before restructuring payments will fall 35.5% at the $470 million middle of the range, compared with $729 million in fiscal 2026 by our math. Actual cash generation will be lower by whatever amount Amdocs pays out for restructuring during the year.
❓ Key Questions
How much revenue and backlog came from T-Mobile?
Both parties threatened to terminate their contracts, and the full-year outlook assumes a potential termination. Knowing the exact dollar revenue at risk in fiscal 2027 vs fiscal 2026 would clarify whether the outlook already prices in a complete loss of the customer.
What are EIS's annual revenue and operating margin?
Amdocs is paying about $340 million in cash and took out $500 million in term loans to enter the insurance software market, yet it did not disclose EIS's revenue, growth rate or profitability.
Do the new aOS contracts increase annual customer spending?
Management announced an eight-year aOS deal with AT&T and three international deals, plus a 10-year Liberty Latin America contract last quarter, without sizing any of them. Investors need to know whether aOS raises annual billing or just renews existing work at lower AI-driven prices.
How much cash will restructuring consume in fiscal 2027?
Restructuring charges cut $153 million from GAAP operating income and $167 million from free cash flow in fiscal 2026. The fiscal 2027 free cash flow target of $440–500 million once again excludes these cash payouts.