Amdocs Limited 2026 Q3 Earnings Call

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, uncertainties, and other important factors, 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 6-K. Participating on the call with me today are Shimi Hortig, President and Chief Executive Officer of Amdocs Management Limited, and Tal Rozenfeld, Chief Financial Officer. To support today's earnings call, we are providing a presentation which can be found on the investor relations section of our website.

As always, a copy of today's prepared remarks will also be posted immediately following the conclusion of this call. On today's agenda, Shimi will recap our financial achievements for the third fiscal quarter 2026 and full year outlook, after which he'll present the future strategy for Amdocs in the Agentic era. Tal will then provide additional details on our third quarter financial performance and guidance for the full fiscal year 2026. With that, I'll turn it over to Shimi.

Thank you, Matt. Good afternoon to everyone joining Amdocs fiscal third quarter 2026 earnings call. I'm pleased to join you today from Amdocs New Jersey offices and provide an update on the significant progress we've made on our strategy, as well as the meaningful commercial wins from the past few months. Today, I would like to focus most of my remarks on Amdocs strategy and provide you with more color and insight on our long-term direction. Before that, let me briefly review our solid financial and operating performance for the third fiscal quarter. As shown on slide seven, Q3 revenue of $1.175 billion and non-GAAP diluted earnings per share of $1.84 were consistent with the midpoint of guidance. Non-GAAP operating margin improved by 20 basis points from a year ago, as we balance our growth investment with intentional strategic efforts to reshape our cost structure and drive efficiency.

Managed services delivered a record quarter, accounting for 67% of total revenue. We closed the quarter with 12 months backlog of $4.26 billion, up 2.7% from a year ago. With these results, I'm happy to say that we are reiterating the midpoint of a full fiscal 2026 financial outlook, including revenue growth of 3% in constant currency and non-GAAP diluted EPS growth of 6%. Additionally, we are on track to generate free cash flow of roughly $720 million before restructuring payment in fiscal 2026, consistent with the midpoint of our target range. Building on our strong financial performance, I'm proud to share an important moment in our agentic journey. We signed a new large-scale multi-year partnership with Liberty Latin America to manage and transform their entire end-to-end IT ecosystem.

This is a true flagship engagement and a major proof point of our agentic transformation strategy, which I will cover in more detail shortly. We continue to see good sales momentum across our core products and services with wins at many of the world's leading providers, including Lumen, Telus in Canada, Three Scandinavia, Telefônica Vivo in Brazil, PLDT, and Opteck in Japan. We remain focused on delivering consistent operational execution in Q3, successfully achieving a high number of milestones in support of project activities for customers such as AT&T-Mobile, Optimum, Telus, Bell, A1 Austria, Globe Telecom, and Telkom South Africa. To elaborate on few of them, at T-Mobile, we've made significant progress with the large UScellular integration project, and we are on schedule to complete it. For A1 Austria, we completed a billing, charging, and catalog transformation deployment, following a multi-year transformation.

At Globe in the Philippines, we completed a major modernization of the network policy to support cloud-native 5G. Let me provide an update on Amdocs' strategy. Over the last few months, we have continued to advance our strategy. I would like to share more details about the plans to lead Amdocs forward. Last quarter, I shared my excitement about the agentic era and the long-term opportunity this presents to help our industry and customers fundamentally transform their IT and network domains. Our vision is to be the primary partner of choice to accelerate this agentic transformation and unlock its value for our customers. I want to introduce our new four-pillar growth strategy, as shown on slide 12. Pillar one, the core of our strategy, is aOS, the Agentic Operating System for telco, designed to fundamentally transform the way our customers operate their business.

Pillar two is new vertical expansion, where we plan to leverage our deep engineering pedigree, combined with our transformational expertise, to accelerate agentic modernization in another industry. Pillar three is emerging growth horizons, where we intend to capture and solve emerging needs driven by the GenAI revolution in our customer base and beyond. Pillar four relates to the internal transformation of Amdocs to become an agentic-first organization as a key enabler to support our future growth. Let me take some time to discuss each of these pillars in more detail. Starting with pillar one, aOS, the Amdocs agentic operating system. In this pillar, our mission is to accelerate the transformation of each and every one of our customers to the agentic era in a risk-mitigated and cost-conscious manner.

In doing so, we will enable our customers to unlock the value of the agentic era by simplifying complexity, reimagining end-to-end workflows, accelerating the launch of new offers from months to hours, and significantly reducing their cost structures. To that end, we are bringing to market aOS, Amdocs Agentic Telco Operating System, which we have designed to be the leading technological framework for enabling our customers to be successful in their agentic journey. This framework includes all the components and capabilities needed for our customers to agentify their business and IT operations. We plan to continuously enhance this framework and its capabilities to lead our customers to a fully agentic and autonomous future. We firmly believe that now is the time for our customers to embark on this journey.

We also understand that each customer has a different starting point. Our role as the market leader is to design a tailored roadmap for each one of them. Along these lines, let me share more details about the significant large-scale engagement that we signed with Liberty Latin America. In this 10-year strategic engagement, Liberty Latin America is trusting Amdocs to manage and transform its entire end-to-end IT ecosystem, leveraging aOS, Amdocs Agentic Telco Operating System. This engagement moves beyond traditional IT operation into an AI-driven model designed to accelerate time to market, increase product innovation, enhance customer and employee experience, and deliver significant cost savings.

This deal is also a meaningful expansion of Amdocs' footprint in CALA region. It's a major demonstration of our ability to handle high complex, mission-critical operations across multiple markets. Beyond this flagship agreement with Liberty Latin America, aOS is gaining encouraging market traction. As highlighted last quarter, AT&T Cricket, Lumen, EchoStar, Bell, and PLDT were among the first to adopt aOS, which is already in production and delivering value for several of them. More recently, Verizon, Telus, Sunrise Switzerland, Three Scandinavia, and a tier 1 provider in Asia Pacific have signed initial aOS deals. To provide some color, Telus in Canada has seen encouraging early results of a customer digital twin engagement, demonstrating the power of aOS to deliver personalized experiences across customer service and sales interactions.

As another example, Amdocs is partnering with Verizon on an agentic AI initiative to automate RF design workflows with the program in active development. This reflects the broader industry shift towards AI-driven network operation and showcases Verizon's continued investment in AI and network quality. We believe that these initial engagements are a great indication of the aOS capabilities we are bringing to market. We expect that we evolve into a larger and more meaningful journeys on which Amdocs will become the primary partner of our customers for their agentic transformation. Turning to pillar 2, we believe that our proven track record of successfully executing major core system transformation, coupled with our agentic offering, are especially relevant in other high-volume, mission-critical, and strictly regulated industries, where complexity presents a major challenge for core system transformation.

We are therefore evaluating the potential to expand our addressable market by targeting additional vertical, positioning ourselves as a new market entrant with a disruptive agentic approach. Moving to pillar three of our strategy, the emerging growth horizons. As we work closely with our telco customer, it is apparent that the GenAI revolution is creating a clear demand to solve technological gaps and needs that did not exist before. We therefore see the potential to be the first to market with disruptive technologies designed to address these issues and expand our offering. As we scan through these potential opportunities, we plan to incubate and scale the ones with the greatest potential to become future new growth drivers for Amdocs. Finishing up with pillar four, we are accelerating our internal transformation to make Amdocs an agentic-first company with the right foundation to support our future growth.

To that end, we are implementing agentic capabilities across software development, service delivery, and operations. We already see they're maturing with high levels of employee adoption. What makes our story unique is that we are transforming internally with the same technology we deliver to our customers. We are our own customer zero and believe that running our operation on agentic AI while delivering it commercially at scale, will provide the essential foundation to being an agentic-first organization. To bring it all together, the agentic revolution presents an exciting opportunity for Amdocs, and I believe we have the right strategy to seize the moment with our Agentic Operating System, aOS. Our flagship deal with Liberty Latin America is an important proof point to show that we can tailor specific agentic journeys for telco customers, lead large-scale agentic transformation, and expand our addressable market.