Amdocs Q3 2025 Earnings Call Transcript

Quartr
Provided by Quartr
August 6, 2025

Key Takeaways

  • Positive Sentiment: Beat expectations with Q3 revenue of $1.14 billion, up 3.5% YoY in pro forma constant currency, exceeding guidance midpoint and boosting backlog 3% to $4.15 billion.
  • Positive Sentiment: Strong momentum in cloud modernization via key wins at Elisa (Finland), Claro (Brazil) and a leading Eastern European operator, reinforcing cloud as a primary growth engine.
  • Positive Sentiment: Emerging generative AI and data services are converting POCs into multi-year commercial agreements with three customers, including a top US service provider, Consumer Cellular and Etisalat UAE.
  • Positive Sentiment: Record managed services revenue of $771 million (+4.1% YoY) underlines long-term visibility, supported by historically near-100% renewal rates.
  • Neutral Sentiment: Raised full-year revenue growth outlook to ~2.9% in pro forma constant currency but noted ongoing macroeconomic and geopolitical uncertainties could affect spending.
AI Generated. May Contain Errors.
Earnings Conference Call
Amdocs Q3 2025
00:00 / 00:00

Transcript Sections

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Operator

Thank you for standing by, and welcome to the Amdocs Third Quarter twenty twenty five Earnings Conference Call. At this time, all participants are in a listen only mode. After the speakers' presentation, there will be a question and answer session. As a reminder, today's program is being recorded. And now I'd like to introduce your host for today's program, Matt Smith, Head of Investor Relations. Please go ahead, sir.

Matthew Smith
Matthew Smith
Head of Investor Relations at Amdocs

Thanks, operator. Before we begin, I need to call your attention to our disclaimer statement on slide two of the presentation. It notes that some of our comments today may be forward looking statements and are subject to risks and uncertainties, including as described in Amdocs' SEC filings, and that we will discuss certain financial information that is not prepared in accordance with GAAP. For more information regarding our use of non GAAP financial measures, including reconciliations of these measures, we refer you to today's earnings release, which will also be furnished with the SEC on Form six ks. Participating on the call with me today are Shuky Shefer, President and Chief Executive Officer of Amdocs Management Limited and Tamar Rappaport Deghim, Chief Financial and Operating Officer.

Matthew Smith
Matthew Smith
Head of Investor Relations at Amdocs

To support today's earnings call, we are providing a presentation which can be found on the Investor Relations section of our website. And as always, a copy of today's prepared remarks will also be posted immediately following the conclusion of today's call. On today's agenda, Shuky will recap our business and financial achievements for the third quarter and full fiscal year 2025. He'll also update you on our strategic progress, including our continued sales momentum in cloud and recent commercial developments in generative AI and data services. Shuky will finish by discussing our financial outlook for the full fiscal year 2025, after which Tamar will provide additional details on our third quarter financial performance and forward guidance.

Matthew Smith
Matthew Smith
Head of Investor Relations at Amdocs

As we've communicated previously, Shuky and Tamar will compare certain financial metrics on a pro form a basis, which adjust prior fiscal year twenty twenty four revenue by approximately $600,000,000 to reflect the end of certain low margin non core business activities, which were substantially already ceased in the 2025. And with that, I'll turn it over to Shuky.

Shuky Sheffer
Shuky Sheffer
President, CEO & Director at Amdocs

Thank you, Matt, and everyone joining us on the call today. Starting on slide six. Amdocs delivered solid financial results and achieved important business milestone in Q3, as our global team of amazing people continue to support the strategic business imperative of our customers with innovative cloud, digital and AI based solution. Touching on the quarterly financial highlights. Revenue of $1,140,000,000 was up 3.5% from a year ago in a pro form a constant currency, exceeding the midpoint of our guidance, with sequential growth in all regions, and a record quarter in Europe.

Shuky Sheffer
Shuky Sheffer
President, CEO & Director at Amdocs

Profitability improved by 10 basis points sequentially, driven by internal efficiency improvements. Non GAAP diluted earnings per share was $1.72 a penny above the midpoint of our expectation. And we wrapped up the quarter with a healthy transfer backlog of $4,150,000,000 up 3% from year ago pro form a. Jumping to slide seven. Q3 featured several important wins, which showcased Amdoc's market and technology leadership and our proven ability to power the mission critical needs of our telco customers.

Shuky Sheffer
Shuky Sheffer
President, CEO & Director at Amdocs

We have continued to see positive sales momentum in cloud, where we have recently won key modernization and migration deals, which expand our longstanding partnership with Elisa in Finland, Claro Brazil, and a leading Eastern European operator, leveraging our end to end cloud offering and telco vertical expertise. In the emerging domain of generative AI and data services, I'm encouraged to say that our tech leadership and key partner collaboration with NVIDIA and Microsoft are bearing fruit, as we start to convert previously discussed POCs into commercial success. Notably, we recently won strategic GenAI related deal with three customers, including a leading US service provider, Consumer Cellular, and EAD UAE, and I believe provide, and I believe this will provide a foundation to which we demonstrate Amdoc's Gen AI capabilities to further expand our customer activities over time. Turning to PERT project execution. Amdocs is engaging complex mission critical transformation, closely working with our customer as a key partner.

Shuky Sheffer
Shuky Sheffer
President, CEO & Director at Amdocs

During Q3, we delivered a new record number of deployments, achieving key outcome milestones at AT and T, Comcast, Vodafone Italy and Netherlands, PLDT in The Philippines, and other. Among the highlights, Bell Canada and AppDocs has set a new benchmark by moving critical billing system to the cloud, simplifying thousands of daily operation and interfaces in process. We also supported the go live of our B2B platform in Optus in Australia, and completed BSS modernization supporting 25,000,000 subscribers in Telecom South Africa. Rounding out my operational review, Q3 was another record quarter in managed services. Moreover, we have recently strengthened our managed services engagement with several key customers, including a leading provider, service provider in The US, BT in The UK, and Telstra in Australia.

Shuky Sheffer
Shuky Sheffer
President, CEO & Director at Amdocs

Turning to slide eight. I'd like to elaborate of our growth strategy, which is built to address our customer strategic business imperative and investment needed to accelerate the journey to the cloud, simplify and accelerate the adoption of generative AI and data services, digitalize customer experience of consumer B2B, and monetize next generation network investments, and streamline and automate complex network ecosystem. The execution of our growth strategy is enabled by Amdoc's unique tech led business model, which integrates cutting edge technology across platform and solution, project deployment and IP based IT operation support. By continually investing innovation to further extend our tech led offering and capabilities, we are consistently able to bring value to our customers. We see every engagement as an opportunity to showcase our value position, and gradually scale activities within our existing customer, as well as new ones.

Shuky Sheffer
Shuky Sheffer
President, CEO & Director at Amdocs

A great example of our model at work is the way which we help our customer on their journey to the cloud. As we can see on slide nine, more customers are choosing Amdocs as their primary partner for public, private, and hybrid cloud migration, using our comprehensive cloud solution and telescope expertise. We are happy to announce the expansion of our partnership with Elisa in Finland, to modernize their B2B platform using mDocs CS digital suite deployed on Google Cloud GCP. This transformation will enable Elisa to accelerate time to market, streamline the lead to order journey, and deliver a unified experience across mobile and fixed services, all on a single converged digital platform. It marks a significant step forward, enhancing agility, improving customer engagement, and supporting Elisa long term growth in the B2B space.

Shuky Sheffer
Shuky Sheffer
President, CEO & Director at Amdocs

We are pleased, also pleased to announce a new win with one of Eastern European leading service provider, who will be leveraging our cloud based customer experience platform, a solution designed to transform customer experience and operational agility. As part of this engagement, Amdocs will also work with the service provider to migrate newly acquired mobile customers to the platform, driving long term efficiency and innovation. Among other notable awards, Amdocs has finalized an agreement with Clawo Brazil to modernize their enterprise systems. I also want to highlight Amdocs unique suite of SaaS based cloud solution, which are gaining market traction, and contributing to growth. Our suite includes ConnectX, which is helping and telcos to launch strong, powerful brands, create to target specific consumer groups with unique user experiences.

Shuky Sheffer
Shuky Sheffer
President, CEO & Director at Amdocs

ConnectX was recently adopted by Consumer Cellular, and several other new logos, in addition to which we have dependent our, we've deepened our collaboration with AT and T by extending our ConnectX platform agreement to accelerate its next gen market offering. An example of a way in which ConnectX is supporting our customers, Mobiphone, a leading Vietnamese operator, which recently used platform to launch Samee, its new digital brand, specially tailored to meet evolving needs of young, tech savvy Gen Z subscribers. Supported by a strong sales momentum of the last several quarters, we expected to reach our double digit revenue growth target for cloud in fiscal twenty twenty five. Furthermore, we believe cloud will remain a primary growth engine for Amdocs in the foreseeable future, as most of our customers are only just starting, just getting started on their multi year migration journeys. Turning to slide 10.

Shuky Sheffer
Shuky Sheffer
President, CEO & Director at Amdocs

We are intensifying our focus on generative AI and data services as a key growth pillar for Amdocs. Let me take a moment to elaborate. First, a leading US service provider has signed an expanded multi year agreement, which extend managed services to transform its billing, commerce, catalog, and order management through GenAI Power solution. This includes GenAI enabled MAs agent, bill presenter to simplify billing inquiries, and enhance customer experience. Second, Amdas is expanding multi year agreement with Consumer Cellular, as this wireless provider to transition to an AI powered NVMe.

Shuky Sheffer
Shuky Sheffer
President, CEO & Director at Amdocs

Building on our recent deployment of ConnectX, this agreement leveraged Amdoc's AI and data platform, customer experience insight, and the MACE suite to transform telecom data into actionable insight and real time predictive analytics for greater automation intelligence. Third, I'm going to share that we expanded our collaboration with The UAE's largest service provider, EN UE's UAE, through additional new Gen AI use cases. This development built on the successful implementation of our MAS platform, and marks another step in the journey towards fully powering all of EN, UAE's customer facing channels with Gen Overall, I'm encouraged by this recent deal because they reflect MDOC's GenAI data service leadership in the telco industry, and because they provide strategic foundation, which we can demonstrate value and gradually scale our customer activities in this emerging domain over time. Moving on, Q3 includes notable customer development that was our additional key strategic pillars, as shown on slide 11. BT has awarded Amdocs a digital transformation project, starting date to be finalized, that will enhance their consumer customer experience as part of a multi year managed services engagement.

Shuky Sheffer
Shuky Sheffer
President, CEO & Director at Amdocs

Comcast extended the multi year commitment to leverage the Amdocs Build Presenter solution across our services. In network, we have extended an engagement with Australia's Telstra, and we are continuing multi year OS digitization, which will enable Telstra to benefit from our Gen AI and network automation capabilities. Additionally, AT and T renewed its open policy managed services engagement with Amdocs under an expanded long term agreement. Claro Brazil expanded its policy platform agreement with Amdocs to better serve the evolving needs of its prepaid and postpaid customers. And Globe Telecom in Philippines selected Amdocs to deliver end to end RAN optimization services.

Shuky Sheffer
Shuky Sheffer
President, CEO & Director at Amdocs

This is a game that covers the full spectrum of RAN services, including installation, commissioning, integration testing, acceptance optimization of its radio sites. Global service providers are also accelerating their fiber network expansion investment to enable converged value offering, which bundle broadband and mobile together. The trend is creating strong demand for fiber network design, deployment, orchestration, and digital infrastructure management solution, Amdoc is positioned to support with our next gen fiber solution. For instance, we significantly increased our fiber engineering services to support, in support of AT and T's fiber expansion, serving them as their connectivity design partner across the majority of AT and T's markets. To further augment our capabilities and market position in fiber, we recently closed a deal to acquire the telco network engineering business of Movia, a privately owned company, which will expand our fiber offering and fiber custom footprint in Canada.

Shuky Sheffer
Shuky Sheffer
President, CEO & Director at Amdocs

Finally, in next gen network monetization, A1 Group in Europe has selected Amdoc's billing, charging, and product catalog solution to establish a converged cloud ready monetization platform for its Macadonians affiliates. Turning now to the current operating environment on slide 12. We continue to see rich and encouraging pipeline of opportunities across our large cerebral dermal market of nearly $60,000,000,000 Our twelve month backlog position is healthy, and as I mentioned, we are on track to achieve our double digit growth target in cloud this year. That said, we are closely watching any impacts of the uncertain global macroeconomic environment on us and our customers' spending behavior. Bringing it all together on slide 13.

Shuky Sheffer
Shuky Sheffer
President, CEO & Director at Amdocs

We now expect slightly better revenue growth of roughly 2.9% in pro form a constant currency at the midpoint of our fiscal twenty twenty five outlook, equating to an improvement of about 20 basis points compared with our prior guidance. We are also on track to deliver double digit expected total shareholder return for the fifth consecutive year, assuming the midpoint of our non GAAP diluted earnings per share outlook supported by significantly improved profitable and robust earning to cash conversion. With that, let me turn the call to Tamar for her remarks.

Tamar Rapaport-Dagim
Tamar Rapaport-Dagim
Chief Financial & Chief Operating Officer at Amdocs

Thank you, Shuky, and hello everyone. Thank you for joining us. Before I begin in today's comments, I will compare certain financial metrics on a pro form a basis, which adjust prior fiscal year twenty twenty four revenue by approximately $600,000,000 to reflect the phase out of certain low margin non core business activities, which were substantially already seized in the 2025. To further assist your modeling, the regional mix of this revenue was similar to the overall company, and it contributed roughly $150,000,000 per quarter. To begin, I'm pleased with our solid financial performance for the third fiscal quarter as detailed on slide 15.

Tamar Rapaport-Dagim
Tamar Rapaport-Dagim
Chief Financial & Chief Operating Officer at Amdocs

Q3 revenue of approximately $1,140,000,000 was up 3.5% year over year in pro form a constant currency and exceeded the midpoint of our guidance even after adjusting for a positive impact from foreign currency movements of approximately $9,000,000 compared to our assumptions. Reflecting the phase out of certain business activities, reported revenue declined by 8.4% from a year ago. On a regional basis, North America improved by 1% sequentially posting its strongest quarter of the fiscal year. Europe delivered a record quarter with year over year revenue growth of nearly 8%, driven primarily by the ramp up of new deal activities, as well as some contribution from the earlier acquisition of Profinet, which we closed at the end of Q1. Rest of the world was slightly higher on a sequential basis.

Tamar Rapaport-Dagim
Tamar Rapaport-Dagim
Chief Financial & Chief Operating Officer at Amdocs

We continue to see mixed trends, while Southeast Asia growth is partially offset by weakness in Latin America. Shifting down the income statement, non GAAP operating margin of 21.4 improved by two eighty basis points from a year ago, reflecting the announced phase out of the low margin non core business activities, and the benefits of ongoing efficiency gains within our operations. Non GAAP operating margin improved by 10 basis points sequentially. Interest and other expenses amounted to roughly $11,700,000 in the third quarter, and included a one time charge taken in respect to $2,500,000 write off of a small minority investment this quarter. On the bottom line, non GAAP diluted EPS of 1.72 was a penny above the midpoint of guidance and diluted GAAP EPS of 1.39 was slightly above our guidance range in the third quarter.

Tamar Rapaport-Dagim
Tamar Rapaport-Dagim
Chief Financial & Chief Operating Officer at Amdocs

Turning to slide 16, revenue from managed services was a record $771,000,000 in the third fiscal quarter, up 4.1 from a year ago. Accounting for roughly two thirds of total revenue, managed services engagements are a key measure of AMROC's long term visibility and business resiliency underpinned by customer renewal rates which have historically approached 100%. To provide some recent examples of the ways in which we deliver value to our managed services customers over time. We recently signed a significant multi year agreement, which extends and expands our managed services engagement with the leading U. S.

Tamar Rapaport-Dagim
Tamar Rapaport-Dagim
Chief Financial & Chief Operating Officer at Amdocs

Service provider, leveraging our generative AI powered platform. In Australia, Telstra extended its managed services engagement, continuing a multi year OSS digitization, which will enable it to benefit from our Gen AI and network automation capabilities. And BT has awarded Amdocs a digital transformation project, starting dates to be finalized that will enhance the consumer customer experience as a part of a multi year managed services engagement. Moving to the balance sheet and cash flow highlights on slide 17. DSO of seventy six days was down by one day sequentially and up two days year over year, reflecting normal fluctuations in business activity.

Tamar Rapaport-Dagim
Tamar Rapaport-Dagim
Chief Financial & Chief Operating Officer at Amdocs

Unbilled receivables, net of deferred revenue, declined by $71,000,000 sequentially in Q3, aggregating the short term and long term balances. This is the second consecutive quarter of sequential improvement in this metric as billings have been running higher than revenue. As a reminder, the net difference between unbilled receivables and deferred revenue fluctuates from quarter to quarter in line with normal business activities, as well as our progress on multi year transformation programs. With free cash flow before restructuring payments of $230,000,000 in Q3, we are on track to achieve our annual target. Including restructuring payments of $19,000,000 reported free cash flow was $212,000,000 Overall, we ended Q3 with a healthy cash balance of approximately $342,000,000 and an available $500,000,000 revolving credit facility, providing ample liquidity to support our ongoing business needs while retaining the capacity to fund our future strategic growth.

Tamar Rapaport-Dagim
Tamar Rapaport-Dagim
Chief Financial & Chief Operating Officer at Amdocs

Switching to capital allocation on slide 18. This quarter we repurchased $135,000,000 of our shares. Including the new 1,000,000,000 share repurchase authorization approved by our board last quarter, we add up to $1,120,000,000 of remaining repurchase authority as of 06/30/2025. We paid cash dividends of $59,000,000 in the third fiscal quarter. Looking ahead, we are reiterating our annual free cash flow target of between $710,000,000 to $730,000,000 in fiscal twenty twenty five, which is before restructuring payments.

Tamar Rapaport-Dagim
Tamar Rapaport-Dagim
Chief Financial & Chief Operating Officer at Amdocs

Our annual free cash flow outlook equates to a conversion rate of more than 90% relative to expected non GAAP net income and translates to a healthy free cash flow yield of more than 7% relative to our current market capitalization. Regarding our capital allocations in fiscal year twenty twenty five, we expect to return the majority of our free cash flow to shareholders. Moving to slide nineteen, twelve months backlog was $4,150,000,000 at the end of Q3, up 3% from a year ago on a pro form a basis. We expect twelve month backlog to represent roughly 90% of forward looking revenue, further underscoring the importance of this metric as a leading indicator of our business. Now, turning to our revenue outlook on slide 20, we are continuing to closely monitor the prevailing level of macroeconomic, geopolitical, business and operational uncertainty in the current business environment.

Tamar Rapaport-Dagim
Tamar Rapaport-Dagim
Chief Financial & Chief Operating Officer at Amdocs

The fourth quarter and full fiscal year 2025 financial guidance reflects what we consider to be the most likely outcome based on the information we have today, but we cannot predict all possible scenarios. For the full fiscal year 2025, we now expect revenue growth of between 2.43.4% in pro form a constant currency. The 2.9% midpoint of which equates to an improvement of roughly 20 basis points compared with our previous outlook. Our annual guidance incorporates double digit growth in cloud and some contribution from inorganic deal activity. As for the fourth fiscal quarter, we expect revenue between $1,125,000,000 to $1,165,000,000 And for your modeling purposes, revenue from acquisition of Mobia's network engineering business will be immaterial in Q4.

Tamar Rapaport-Dagim
Tamar Rapaport-Dagim
Chief Financial & Chief Operating Officer at Amdocs

Moving down the income statement, we are on track to produce non GAAP operating margins within our guidance range of 21.1% to 21.7% in fiscal year twenty twenty five. The midpoint of our guidance equates to a substantial increase of roughly 300 basis points this fiscal year, roughly two thirty basis points of which is from the previously announced phase out of business activities. Another 60 to 70 basis points of margin expansion is resulting from our continued focus on operational excellence, automation, and the gradual implementation of GenAI. As part of our process of accelerating the internal adoption of Gen AI across everything we do at Amdocs, we are proactively evaluating our strategic investment priorities for fiscal twenty twenty six, having regard to our future workforce allocation and the optimal mix of technology, infrastructure, workspace and other resources. Below the operating line, foreign currency fluctuations and hedging costs are expected to impact non GAAP net interest and other expense by roughly several million dollars on a quarterly basis.

Tamar Rapaport-Dagim
Tamar Rapaport-Dagim
Chief Financial & Chief Operating Officer at Amdocs

We expect our non GAAP effective tax rate for fiscal twenty twenty five to be within an annual target range of 15 to 17% for the full fiscal year 2025, consistent with our initial guidance. Wrapping everything together on slide 22, we now expect non GAAP diluted earnings per share growth within a tighter range of 89% for the full fiscal year 2025. The 8.5 midpoint of which is unchanged as compared with our prior outlook of 6.5 to 10.5 previously. Assuming the 8.5 midpoint, we are on track to achieve double digit expected total shareholders return for a fifth consecutive year in fiscal twenty twenty five, including our dividend yield. With that, back to you, Shuky.

Shuky Sheffer
Shuky Sheffer
President, CEO & Director at Amdocs

Thanks, Tamal. I'm pleased with our solid financial performance and business achievement in the third quarter, including our ongoing momentum in cloud and encouraging signs of commercial progress in Gen AI and data services. With our unique technology led business model, we are on track to meet our national targets for the full fiscal year. With that, we are happy to take your questions.

Operator

Certainly. And our first question for today comes from the line of George Notter Your question please.

George Notter
Managing Director at Wolfe Research LLC

Hi guys. Thanks very much. I guess I wanted to start just by asking about the British Telecom win. Looking back, I don't think you guys did much business there. I guess I'm just wondering how big that opportunity is for you.

George Notter
Managing Director at Wolfe Research LLC

If you could size it, that would be very interesting. Also, if I go back in the last three or six months, you guys talked about some bigger deals kind of working through your pipeline. I assume referencing the BT transaction. And then also, I'm just curious if that BT situation is in backlog at this point or not. Thanks.

Shuky Sheffer
Shuky Sheffer
President, CEO & Director at Amdocs

The second question is not in our backlog because it was signed after June 30. And second, we did have we are doing many years business with what used to be Everything Everywhere, which was acquired by British Telecom. And they are running some of our legacy platform. This deal is actually modernizing all the commerce domain of Everything Everywhere. It's a combination of full modernization project with an extended managed services to support everything there.

Shuky Sheffer
Shuky Sheffer
President, CEO & Director at Amdocs

So it's an incremental activity significant incremental activity to our previous activities with Everything Everywhere, which is now VT.

Tamar Rapaport-Dagim
Tamar Rapaport-Dagim
Chief Financial & Chief Operating Officer at Amdocs

And just to refer to your other point about having significant deals in the pipeline, we mentioned couple of examples that were signed in the quarter. Some of which I would say are important and strategic, not necessarily huge in size, like Telstra, and some of which like The US leading operator, which we cannot mention by name right now is a significant deal, including modernization, including, multi year managed services extension and expansion. So, definitely an example of a deal that is in the other, I would say scale in terms of sizing. We see both George and yes, we continue to sign deals as we speak. Life is cut in a way by a cutter's point on June 30.

Tamar Rapaport-Dagim
Tamar Rapaport-Dagim
Chief Financial & Chief Operating Officer at Amdocs

But in reality, it continues obviously in the weeks since.

George Notter
Managing Director at Wolfe Research LLC

Got it. That's great. And then I guess I'd also just ask you about AI. I know you guys, I think, had around a dozen POCs going on with the Amaze product, I think mainly in call center types of applications. I was just curious about what kind of progress you're making there.

George Notter
Managing Director at Wolfe Research LLC

Have you had customers convert from trial to production rollouts? Anything you can say there would be interesting, too. Thanks a lot.

Shuky Sheffer
Shuky Sheffer
President, CEO & Director at Amdocs

Thanks, Joe. So we converted actually four different customers from POCs to actual deals this quarter. This, in one of them, in The UAE, is the expansion of the previous deal that we've signed, and actually, are, they will continue and expanding, build agents on top of the infrastructure that we have built. In the other three customers that we mentioned, we are installing our MACE platform, and we are building, starting to build use cases on top of it. We are helping also the customer to arrange the data to support it.

Shuky Sheffer
Shuky Sheffer
President, CEO & Director at Amdocs

It's a combination of care related, billing care, or care related use cases, and also commerce and upsell use cases.

George Notter
Managing Director at Wolfe Research LLC

Okay. Thank you very much.

Tamar Rapaport-Dagim
Tamar Rapaport-Dagim
Chief Financial & Chief Operating Officer at Amdocs

Thanks, George.

Operator

Thank you. And our next question comes from the line of Slomo Rosenbaum from Stifel. Your question, please.

Shlomo Rosenbaum
Shlomo Rosenbaum
Managing Director at Stifel Financial Corp

Hi. Thank you very much. It's good to hear about all the deals. And I just want to follow on a comment that you made, Tamar, about the June 30 being kind of just a cut up point in time. It's the first time in many years that we've seen a sequential tick down, even albeit small in backlog, it's down 20,000,000 Can you talk a little bit about that and what's contributing to that?

Shlomo Rosenbaum
Shlomo Rosenbaum
Managing Director at Stifel Financial Corp

And then afterwards, I just want to ask a little bit more following up on the AI deals, if you could just help kind of dimensionalize them? And do you think that that's going to at what point in time will we help see that be incremental to revenue growth? So, kind of lifting up the expectation for revenue growth on a year over year basis, even just a little bit.

Tamar Rapaport-Dagim
Tamar Rapaport-Dagim
Chief Financial & Chief Operating Officer at Amdocs

Thanks, Lomo. So, we look on backlog and as I always say, it's a good leading indicator as we look on the next twelve months backlog. And we continue to see nice year over year growth, 3% this quarter. You're right sequentially, it was down 20. I'm less focused on that since eventually signing of deals can happen on August 1 and August 2.

Tamar Rapaport-Dagim
Tamar Rapaport-Dagim
Chief Financial & Chief Operating Officer at Amdocs

And you're right that it's unusual, but at the same time, we've seen deals being signed like the BT one that is significant one and others. So we are focused on looking forward and continue to see the back of giving us great visibility. We talk about roughly 90. I never take it as an accurate mathematical formula, but it is giving us a good coverage as we look forward, both in terms of understanding the revenue picture, as well as ability to plan, which is really important in terms of resources and how we are thinking about executing the deals and being prepared to do so. And regarding we do see contribution already, but it's starting in small increments.

Tamar Rapaport-Dagim
Tamar Rapaport-Dagim
Chief Financial & Chief Operating Officer at Amdocs

And I think the importance like the E and UAE example, which we've been talking about them adopting our MACE platform. And since then, every quarter we see adoption of additional use cases. So the idea is we get the customer excited about what they see and we grow from there and we bring the value. And hopefully we can grow even farther. And another layer I would mention is that the data related services preparing for the use cases is another important part and actually comes first typically in the cycle in terms of getting the data ready and the services that are associated with that, as well as DataONE platform in order to help customers do so.

Tamar Rapaport-Dagim
Tamar Rapaport-Dagim
Chief Financial & Chief Operating Officer at Amdocs

So, this is the two, I would say, vectors that we are seeing from pure revenue point of view. The data related activities are bigger right now. And the use cases are the ones we have, as we said, converting now from to commercial deals. And we like this conversion rate and we expect to see more as we move forward.

Shlomo Rosenbaum
Shlomo Rosenbaum
Managing Director at Stifel Financial Corp

Thank you.

Tamar Rapaport-Dagim
Tamar Rapaport-Dagim
Chief Financial & Chief Operating Officer at Amdocs

Thanks, Omar.

Operator

Thank you. And our next question comes from the line of Timothy Herren from Oppenheimer. Your question please.

Timothy Horan
MD, Senior Analyst at Oppenheimer & Co. Inc.

Thanks guys. The North American win, is that a relatively smaller customer that's gonna become larger? Or can you give us some sense of how meaningful a material that is? And then can you It's

Shuky Sheffer
Shuky Sheffer
President, CEO & Director at Amdocs

a bigger customer or it'll become bigger.

Timothy Horan
MD, Senior Analyst at Oppenheimer & Co. Inc.

Got it. On SaaS products, can you tell us how meaningful that is to overall revenue or maybe just incremental, you know, revenue growth at this point? And I know you talk a lot about ConnectX. Are there other SaaS products that are doing well?

Shuky Sheffer
Shuky Sheffer
President, CEO & Director at Amdocs

I will start to describe the SaaS product in the market. It's going double digit. I mean, it's a growth engine for us. We have several SaaS products. There is obviously the ConnectX MarketOne, which is our monetization platform.

Shuky Sheffer
Shuky Sheffer
President, CEO & Director at Amdocs

Is also SaaS. And our eSIM platform is also a SaaS platform. So we have a, we think that we developed quite nice. And I think in eSIM, we have more than 40 customers worldwide. And so we see more and more traction.

Shuky Sheffer
Shuky Sheffer
President, CEO & Director at Amdocs

I think the, obviously, ConnectX getting a lot of attention lately, because this is really, really we achieved the, I don't know, tens of customers early.

Tamar Rapaport-Dagim
Tamar Rapaport-Dagim
Chief Financial & Chief Operating Officer at Amdocs

And it's the newest one and one that we launched to the market several quarters ago. And we see very nice traction since addressing both the MVNO opportunity as well as the digital brands of the larger players. And people are really excited about we mentioned, for example, consumer cellular. It's a new win of last quarter. This quarter already we've seen expansion of the business with them.

Tamar Rapaport-Dagim
Tamar Rapaport-Dagim
Chief Financial & Chief Operating Officer at Amdocs

So, the momentum is being built. Now, aggregating all of the revenue we see in the SaaS business. It's not in the hundreds of millions. Don't get me wrong. But the fact that it's growing very nicely and it is obviously generating as it scales up nice margin is giving us the appetite, I would say, to invest more into these kinds of offerings.

Timothy Horan
MD, Senior Analyst at Oppenheimer & Co. Inc.

And do you have a sense of where we are in the cloud migration by your customers? Maybe what percentage or what inning we're in? And do they recognize that they have to migrate to the cloud to really, you know, use Gen AI? And, you know, are they thinking that Gen AI is going to really help them move the needle fundamentally?

Shuky Sheffer
Shuky Sheffer
President, CEO & Director at Amdocs

I think it's two different things. I think that, although obviously we are using GenAI tools, but many customers of Amdocs started the journey to move to the cloud. The journey includes, obviously, some type of consulting, and then you need to have all the activity of taking the platform to the cloud, then you have migration. So it's not a simple necessarily. Definitely, it's not a short project.

Shuky Sheffer
Shuky Sheffer
President, CEO & Director at Amdocs

So we have many, many customers that are starting to the immigration, or the midst of the immigration, but I would say less than handful of Amdocs customer completed it. But we really, we did start the journey with many customers. So there is a lot of a lot of activities ahead of us in this specific domain.

Timothy Horan
MD, Senior Analyst at Oppenheimer & Co. Inc.

And last, the margin expansion you saw this year, sixty, seventy basis points, do you think that's sustainable or repeatable? Thanks.

Tamar Rapaport-Dagim
Tamar Rapaport-Dagim
Chief Financial & Chief Operating Officer at Amdocs

We're not committing now to next year, the margin expansion. But the trajectory, I would say, of the ability to take technology and automation and definitely now is an accelerated opportunity. It is definitely there and it's in everything we do. At the same time, there's always a balancing act between how much we see productivity gains and how much we are investing into the business and the growth. So, this is why I'm being careful to get ahead of ourselves and talk now explicitly about what's the margin number for 2026.

Tamar Rapaport-Dagim
Tamar Rapaport-Dagim
Chief Financial & Chief Operating Officer at Amdocs

But we continue to see the productivity gains. We continue to see the ability to take different capabilities that we have that are tech led and build that into the way we do things internally.

Timothy Horan
MD, Senior Analyst at Oppenheimer & Co. Inc.

Thank you.

Operator

Thank you. And our next question comes from the line of Tal from Bank of America. Your question please.

Kevin Niederpruem
Kevin Niederpruem
Equity Research Analyst at Bank of America Merrill Lynch

Hi guys, this is Kevin DePrum on for Tal Liani of Bank of America. I have two questions for you. The first one is about Gen AI and I know we already had some questions about Gen AI. But wanted I to ask you in a little bit of a different sense in the terms of what are you guys thinking about the potential for Gen AI to contribute meaningfully to revenue over time, whether it's a standalone opportunity or an accelerator of the existing service lines? Directionally speaking, is it crazy to think that in a year from now, that Gen AI is a meaningful contributor to revenues, or is this still a few years out?

Tamar Rapaport-Dagim
Tamar Rapaport-Dagim
Chief Financial & Chief Operating Officer at Amdocs

I think what we see in 2025, as we said, it's the year of exploration. As we expected during the year, we had several, I would say quite a lot of proof of concept engagement with customers that are evaluating the capabilities, how to take it into supporting the business either to create a better customer experience or reduce cost and create efficiencies. We are starting to see conversion again, as expected of this proof of concept into commercial deals now. The pace is hard to predict. Another thing that we are seeing, as I noted before, is that a lot of the investment needs to go into the data layer.

Tamar Rapaport-Dagim
Tamar Rapaport-Dagim
Chief Financial & Chief Operating Officer at Amdocs

Meaning in order to be ready to leverage the opportunity of Gen AI, needs to, Shugi likes to call it the plumbing. The plumbing behind the scenes of the data domains. So, we do see the revenue picking up on that aspect already. We are not a crystal baller, I would say, to say exactly what's going to be the revenue contribution and the pace of maturity. But I'm optimistic as we are seeing it.

Tamar Rapaport-Dagim
Tamar Rapaport-Dagim
Chief Financial & Chief Operating Officer at Amdocs

I mean, we're seeing the value. We're seeing the dialogues with customers. They stop definitely to experiment and move to commercial deployment. We are seeing it's not just when we say proof of concept, just to be clear, it's not in a lab. It's taking real production environment, real customer data and showing concrete KPIs improvement relative to the comparison.

Tamar Rapaport-Dagim
Tamar Rapaport-Dagim
Chief Financial & Chief Operating Officer at Amdocs

So, I would say the elements are there. The pace of impact of revenue yet to be seen.

Kevin Niederpruem
Kevin Niederpruem
Equity Research Analyst at Bank of America Merrill Lynch

Got it. Thank you. And then, again, I'm not asking for any number, but just, again, directionally, as we get towards the end of the year and into fiscal year twenty six, can you maybe speak to some of the broader demand trends you're seeing across your service lines? Is there anything structural or secular drivers or anything that's really sticking out that would make you believe that the current fiscal year growth rate of fiscal year 'twenty five growth rate could differ up or down in fiscal year twenty six? Or are we seeing kind of more consistent trends?

Shuky Sheffer
Shuky Sheffer
President, CEO & Director at Amdocs

I think that's why from a spending behavior, we see the same. Still the same uncertainty that we discussed before. And, you know, because of different reason, be it, you know, macroeconomic tariff, geopolitical and others. So we see the same interest rate cuts, etcetera. So we see the same pressure on spending, but it's the same.

Shuky Sheffer
Shuky Sheffer
President, CEO & Director at Amdocs

We don't see any change, I think, from this quarter to previous quarter. We don't see any erosion, but at the same time, we don't see necessarily that these things is changing. But we believe we are, so far, we are navigating pretty much the same environment that we have in the prior quarters.

Kevin Niederpruem
Kevin Niederpruem
Equity Research Analyst at Bank of America Merrill Lynch

Got it. Thank you, guys.

Tamar Rapaport-Dagim
Tamar Rapaport-Dagim
Chief Financial & Chief Operating Officer at Amdocs

Thank you.

Shuky Sheffer
Shuky Sheffer
President, CEO & Director at Amdocs

Thank you.

Operator

Thank you. This does conclude the question and answer session of today's program. I'd like to hand the program back to Matt Smith for any further remarks.

Matthew Smith
Matthew Smith
Head of Investor Relations at Amdocs

Thanks, operator, and thanks, everyone, for joining the call. If you have any additional questions, please give us a call here in the IR department. And with that, have a great night. Thanks.

Operator

Thank you, ladies and gentlemen, your participation in today's conference. This does conclude the program. You may now disconnect. Good day.

Executives
    • Matthew Smith
      Matthew Smith
      Head of Investor Relations
    • Shuky Sheffer
      Shuky Sheffer
      President, CEO & Director
    • Tamar Rapaport-Dagim
      Tamar Rapaport-Dagim
      Chief Financial & Chief Operating Officer
Analysts
    • George Notter
      Managing Director at Wolfe Research LLC
    • Shlomo Rosenbaum
      Managing Director at Stifel Financial Corp
    • Timothy Horan
      MD, Senior Analyst at Oppenheimer & Co. Inc.
    • Kevin Niederpruem
      Equity Research Analyst at Bank of America Merrill Lynch
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