Telecoms group Vodafone (LON:VOD) raised its FY profit and free cash flow guidance after a ‘strong start’ to trading. CEO Margherita della Valle said the firm now expects FCF (free cash flow) to increase by more than 20% over the previous year.
Strong start to FY27
For H1 to September, Vodafone reported an 11.4% increase in total revenue to €21.9 billion. Growth was driven by strong service revenue and the consolidation of Safaricom, VodafoneThree and Telekom Romania.
Service revenue increased 12.8% to €18.4 billion, with growth across all sectors and 5.8% underlying growth. Organic growth was led by Africa, up 13.4%, while mature markets like the UK and Germany saw just 0.9% and 0.4% growth.
Adjusted EBITDA after leases increased 12.6% to €6.5 billion and 6.4% on an underlying basis helped by improved operating leverage. However, the group posted an H1 loss of €3.6 billion due to non-cash charges for impairments.
Vodafone H1 results (all € millions)
| H1 2027 | H1 2026 | Change | |
| Revenue | 21,853 | 19,609 | +11.4% |
| Service revenue | 18,409 | 16,327 | +12.8% |
| Adjusted EBITDA | 6,451 | 5,728 | +12.6% |
| Net profit | -3,597 | 1,052 |
Source: Company accounts
Increased FY guidance
In July, the group raised its FY27 outlook to include the consolidation of Safaricom. Its new targets included adjusted EBITDA after leases of €13.0 billion to €13.3 billion and FCF of €2.6 billion to €2.9 billion.
Today, it raised its guidance for EBITDA to €13.2 billion to €13.4 billion and for FCF of €2.8 billion to €3.0 billion. Restructuring and integration costs are expected to peak at €0.7 billion in FY27, including €0.4 billion for the VodafoneThree merger.
Annual cost savings from the merger are now expected to be €1 billion by FY32 against €0.8 billion previously. Also, ROCE (return on capital employed) is expected to exceed the cost of capital by FY32 and ‘materially’ exceed its cost by FY34.
Vodafone has been a ‘stealth’ stock, more than doubling over the past 18 months against a backdrop of turbulent markets. It’s hardly a growth company, though, given earnings have been negative for the last two years and are likely to be negative again this year.
The main issue appears to be Germany, where Margarita della Valle admits it needs to simplify operations and improve customer service. Provisions for restructuring include another 2,300 job losses in Germany on top of broader European cost cutting.
We can’t really get excited about telecoms, or Vodafone, and the market seems to agree by giving the results a slight thumbs down. Historically, investors would have looked to the shares for income, but these days even that is nothing to shout about with just a 3.4% yield.
