The stock price experienced its biggest decline in a year! Revenue growth + full-year outlook remains optimistic, Vodafone(VOD.US), but stumbled in the German market.

Although Vodafone (VOD.US) achieved revenue growth in the third quarter of fiscal 2026 and expects full-year profit and cash flow to reach the upper end of guidance, its stock price once fell by the largest margin in a year on Thursday due to slower-than-expected growth in its largest market, Germany.

According to the earnings report, the company’s total revenue in Q3 reached €10.5 billion, up 6.5% year-over-year. This growth was mainly driven by increased service revenue and contributions from the merger of Three UK and Telekom Romania assets. Group service revenue rose 7.3% year-over-year to €8.5 billion, with organic growth of 5.4%, slightly lower than the previous quarter, with strong performances in Turkey and African markets offsetting adverse currency fluctuations.

Africa remains the group’s core growth engine, with service revenue achieving 13.5% organic growth for the second consecutive quarter, with all segments expanding, and the pace of development in financial services continuing to accelerate.

In the UK market, service revenue declined organically by 0.5%, mainly due to a one-time item disclosed last year; however, Vodafone’s integration with Three UK remains on track.

Business in other European regions returned to growth, with organic service revenue increasing by 1.2%. Despite increased competition in Portugal and Romania, most markets in the region showed improved performance. In euro terms, service revenue in Turkey grew 3.7% year-over-year.

Vodafone stated that the enterprise business segment’s service revenue grew organically by 3%, driven mainly by sustained demand for digital services and strong performances in Turkey and Africa. However, the high baseline in the UK somewhat offset some of the growth achievements.

Key Market Germany Revenue Growth Falls Short of Expectations

However, Vodafone disclosed on Thursday that its largest market, Germany, saw only a modest 0.7% year-over-year increase in service revenue to €2.7 billion, failing to meet market expectations of a strong rebound—previously, Vodafone had introduced 1&1 AG as a wholesale customer, which had raised hopes for recovery. Analysts had expected this growth rate to reach 1.02%.

As a result, Vodafone’s stock in London dropped as much as 6.8%, marking its largest decline in a year.

A Vodafone spokesperson said that in the previous quarter, wholesale revenue was boosted by cooperation with smaller operator 1&1 AG, helping Germany’s market revenue return to growth. However, this quarter, the growth benefit was offset by a one-time impact related to the timing of payments to service providers.

It is understood that Vodafone CEO Margherita Della Valle has been pursuing an ambitious business revitalization plan for over two years, focusing on streamlining operations and divesting assets. During this period, the company divested its Italy and Spain businesses and completed a merger with Three UK in the UK domestic market.

Della Valle’s strategic refocus on a few core markets has been recognized by analysts. In Germany, increased industry competition combined with regulatory policy changes led to the loss of millions of users, dragging down revenue growth. However, the impact of the new regulation banning housing associations from bundling TV packages with rent has largely dissipated.

In this quarter, Vodafone’s adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization, adjusted for leasing) grew organically by 2.3% to €2.8 billion; since fiscal 2026 began, this figure has increased by 5.3% to €8.5 billion, in line with the company’s phased annual performance expectations. Operating profit, however, fell sharply by 52.7% year-over-year to €500 million.

Vodafone reaffirmed its fiscal 2026 outlook, expecting full-year core performance to be at the upper end of the target range, with adjusted EBITDA projected between €11.3 billion and €11.6 billion, and adjusted free cash flow between €2.4 billion and €2.6 billion.

Additionally, Vodafone plans to continue its gradual dividend policy, with a planned 2.5% year-over-year increase in per-share dividends for fiscal 2026. Since May 2024, Vodafone has completed a €3.5 billion share buyback program, and in its latest earnings report, the company announced a new €500 million share repurchase plan.