Vodafone Group shares climbed as much as 4.3% to 119.5 pence on Monday after the telecoms company delivered stronger-than-expected first-quarter results.
The company also said it now expects annual profit and free cash flow to reach the upper end of its full-year guidance ranges.
Vodafone Targets Upper End of Annual Guidance
Vodafone expects adjusted core earnings for the financial year ending in March 2027 to reach between €13 billion and €13.3 billion.
Adjusted free cash flow is forecast to come in between €2.6 billion and €2.9 billion.
Management said the company is currently positioned to deliver results toward the top of both ranges.
Morgan Stanley described the first-quarter performance as stronger than expected.
Safaricom Included in Updated Forecasts
The revised guidance includes nine months of ownership of Safaricom’s operations in Kenya and Ethiopia.
Morgan Stanley estimated that the consolidation will add approximately €1.1 billion to Vodafone’s adjusted core earnings. However, it is not expected to affect adjusted free cash flow.
These earnings had not been included in Vodafone’s previous outlook.
Nevertheless, the analysts said the increase at the top of the guidance range was driven by organic business improvements rather than simply by the addition of Safaricom.
Emerging Markets and Energy Hedges Support Outlook
Several factors contributed to Vodafone’s improved forecast.
Performance across emerging markets was stronger than expected, while economic disruption was less severe than management had previously anticipated.
The company also benefited from energy hedging arrangements, which helped reduce exposure to rising operating costs.
According to Morgan Stanley, the upper end of Vodafone’s core earnings guidance is around 1.1% above market expectations.
The top of the adjusted free cash flow range is also approximately 4.3% higher than the average analyst forecast.
Morgan Stanley Expects Further Share Gains
Morgan Stanley analysts said Vodafone shares could rise by around 3% to 5% following the update.
They highlighted stronger service revenue in Germany and the increase in free cash flow guidance as the main positive developments.
The brokerage currently holds an Equal-weight rating on Vodafone, with a price target of 115 pence.
Vodafone Expands Safaricom Ownership
Vodafone’s 65.1%-owned subsidiary Vodacom completed the purchase of an additional 20% stake in Safaricom on June 30.
The transaction included a 15% stake acquired from the Kenyan government and a further 5% purchased from Vodafone.
Following the deal, Safaricom will be fully consolidated into the financial results of Vodacom and Vodafone Group from July 1, 2026.
First-Quarter Revenue Rises Nearly 10%
Vodafone reported total first-quarter revenue of €10.3 billion for the period ending June 30.
This represented an increase of 9.7% compared with the same period last year.
The company said the improvement was mainly driven by strong service revenue growth, although foreign exchange movements partly offset the gains.
Service revenue rose 9.8% to €8.6 billion. On an organic basis, the increase was 5.2%.
Core Earnings Benefit From Operating Leverage
Adjusted EBITDAaL increased 6.7% to €2.9 billion during the quarter.
On an organic basis, adjusted EBITDAaL rose 6.2%.
Vodafone attributed the improvement to stronger service revenue and better operating leverage across the group.
German Business Delivers Key Positive Surprise
Germany, Vodafone’s largest market, produced stronger results than analysts expected.
German service revenue reached €2.74 billion, around 1.2% above the market consensus.
Morgan Stanley described this performance as the most important positive result in the company’s quarterly update.
Analysts had expected German revenue growth to slow. However, the anticipated decline in momentum did not occur.
Broadband and Digital Services Support Germany
Organic service revenue in Germany increased 1.2%.
Vodafone said the growth was supported by higher average revenue per user in its consumer broadband business.
Digital services also performed well within the company’s business division.
However, Vodafone continues to face strong competitive pressure in the German telecommunications market.
UK and African Markets Also Outperform
Vodafone’s UK service revenue was approximately 70 basis points above consensus expectations.
The improvement was mainly driven by strength in the company’s fixed-line business.
African service revenue growth was also particularly strong. Growth accelerated to 15% in the first quarter, compared with 7% during the previous quarter.
The company recorded double-digit organic service revenue growth across Africa, supported by strong performances in Egypt and Vodacom’s international markets.
Vodafone CEO Highlights Broad-Based Growth
Vodafone Chief Executive Margherita Della Valle said the group had made a positive start to the new financial year.
She highlighted broad-based growth across all business segments and a 5.2% increase in organic service revenue.
The results suggest that Vodafone’s restructuring strategy and focus on improving operating performance are beginning to produce stronger financial outcomes.
Restructuring Costs Expected to Peak
Vodafone expects restructuring and integration expenses to reach approximately €700 million during the current financial year.
Around €400 million of that total will be connected to the VodafoneThree merger.
Although these expenses will weigh on short-term profitability, the company expects the integration to support future efficiency and growth.
Vodafone Outlook Improves After Strong Quarter
Vodafone’s first-quarter results showed stronger revenue growth, better performance in Germany and accelerating momentum in African markets.
The improved free cash flow outlook and expectations for results near the top of annual guidance helped lift investor confidence.
However, the company must still manage restructuring costs, competitive pressure and the integration of major acquisitions.
For now, the latest trading update suggests Vodafone is entering the remainder of the financial year with stronger operational momentum.
