ii view: Q1 results propel Vodafone shares to two-year high

First-quarter trading update to 30 June 

• Organic service revenues up 5.5% to €7.86 billion (£6.8 billion)
• Adjusted profit (EBITDA) up 4.9% to €2.7 billion (£2.3 billion)

Guidance:

• Continues to expect full-year adjusted profit of between €11.3 billion and €11.6 billion

Chief executive Margherita Della Valle said:   

"We have had a good start to the year with strong revenue and EBITDAaL growth. Germany has started its improvement trajectory and our emerging markets are delivering strong broad-based growth. In the UK, we have completed the merger with Three and are moving quickly to combine our networks to benefit customers. 

“Today, we reiterate our full year guidance of growth in profit and cash flow. After two years of transformation and change, Vodafone is now well positioned for multi-year growth across both Europe and Africa."

• Our Services: SIPP Account | Stocks & Shares ISA | See all Investment Accounts

ii round-up:

Vodafone Group (LSE:VOD) today flagged a ‘good start’ to the year as it looked to build on the foundation of a completed reshaping of the business under the current chief executive. 

First-quarter adjusted or service revenues rose 5.5% to €7.86 billion (£6.8 billion), driven by a reduced decline at its biggest business Germany to a decline of 3.2% from the prior quarter’s retreat of 6%. The City had expected overall service revenue growth of 4.9%.

Shares in the FTSE 100 company rose 4% in UK trading having come into this latest news up just over a fifth so far in 2025. The FTSE 100 index is up close to 11%. UK rival BT Group (LSE:BT.A) has gained 38% during that time. 

Vodafone operates both mobile phone and fixed broadband networks, providing services to over 340 million customers in 15 countries and partnering with mobile networks in over 40 more.

Revenues on the same basis for its important UK business rose 0.9%, down from growth of 3.4% in the previous quarter and hindered by the merger disruption. Revenues for the African business rose 13.8%.

A 0.2% improvement in the adjusted profit margin to 29.3% helped adjusted profits (EBITDA) climb 4.9% year-over-year to €2.7 billion.

Vodafone continues to expect adjusted profits of between €11.3 billion and €11.6 billion in 2026, a potential gain from €10.9 billion in 2025.

First-half results are scheduled for 11 November. 

ii view:

Vodafone provides one of the largest 5G mobile phone networks in Europe with fast data services available in over 340 cities. The group’s fast broadband network passes more than 50 million European homes with fast data provision, making it Europe’s second-largest TV platform with around 17 million such customers. In Africa, its M-PESA payment platform enables around 88 million users to make safe financial transactions using their mobile phones. 

For investors, Vodafone’s biggest market Germany, generating 35% of revenues, remains pressured, hindered by previous changes to TV laws and subsequent lost broadband connections. The sale of Italian and Spanish businesses now leaves it less geographically diverse. The dividend payment was again previously reduced and effectively halved, while a forecast price/earnings (PE) ratio above the three-year average may suggest the shares are not obviously cheap. 

• Here’s where professional investors are piling in
• Should you invest when markets are at all-time highs?
• Investing in themes: what investors need to know

More favourably, service revenues away from Germany are growing. Cost savings from the now completed merger of Three UK are expected to eventually total around £700 million a year. Group net debt, aided by business sale proceeds, has significantly reduced, while the holding of a sizeable stake by UAE telecommunications company e& should continue to apply pressure on management to improve performance. 

On balance, and with a reshaping completed, Germany forecast by management to return to growth, and the shares sat on a forecast dividend yield of close to 5%, this major telecoms play will likely remain of interest to investors. 

Positives

• Reduced net debt
• Targeting growth in the dividend payment

Negatives

• Intense competition
• Reduced geographical diversification

The average rating of stock market analysts:

Hold