Barclays has reduced its stance on Vodafone Group Plc to Equal Weight from Overweight and lowered its target price to 110 pence from 120 pence, citing persistent headwinds in Germany despite group-level results largely tracking expectations.
Germany remains the main concern
Service revenue in Germany rose only 1.3% year-on-year in the fourth quarter of fiscal 2026, a modest outperformance of Barclays' 0.9% estimate by 0.4 percentage points, but the underlying metrics point to a deteriorating picture. Contract mobile average revenue per user (ARPU) declined to 8.48 in the fourth quarter from 8.08 a year earlier, and the market recorded a net loss of 103,000 contract customers over fiscal 2026, including a sharp quarterly fall of 77,000 in the fourth quarter alone.
Fixed broadband trends were also weak: Vodafone reported negative net additions throughout the year, amounting to a total loss of 202,000 customers for fiscal 2026. Contract churn increased to 13.3% in the fourth quarter from 12% in the prior year, based on company disclosures referenced by Barclays Research.
Management expects German EBITDA to decline by low single digits in fiscal 2027, prompting Barclays to reduce its German EBITDA forecast. Barclays' estimates place full-year fiscal 2026 German EBITDA at .24 billion, down from .38 billion in fiscal 2025 and 5.02 billion in fiscal 2024, according to Barclays Research. "With management suggesting that FY27e will see German EBITDA reporting low single-digit declines, this puts Vodafone firmly in the 'shrinking core' camp, vs growth in other markets," the analysts wrote.
Group-level results and guidance
At the group level, revenue for the second half of fiscal 2026 reached 0.85 billion, roughly 1.5% ahead of Barclays' 0.55 billion projection. However, group adjusted EBITDA came in at 5.62 billion, missing both Barclays' estimate of 5.74 billion and company consensus at 5.75 billion by about 2%, with foreign exchange effects cited as a key driver of the shortfall.
For full-year fiscal 2027, Vodafone guided to adjusted EBITDA in a range of 1.9 billion to 2.2 billion; Barclays' model sits at the lower end of that band at 1.9 billion. Adjusted free cash flow guidance was set between .6 billion and .9 billion, versus Barclays' estimate of .65 billion.
Safaricom consolidation timing pushed back
Barclays moved back its assumed Safaricom consolidation date to September 2026 from April 2026. That delay reduced Barclays' fiscal 2027 revenue and EBITDA estimates by 1.6% and 4.8% respectively compared with prior projections.
UK shows relative strength
The company's UK business showed more positive dynamics. Fixed broadband added 222,000 net customers in fiscal 2026, and second-half UK EBITDA rose 3.6% to 997 million, in line with Barclays' estimate.
Valuation and peer comparison
On valuation metrics, Barclays estimates Vodafone is trading at a 7.5% fiscal 2027 equity free cash flow yield, above a sector average of 6.4%. On an enterprise value to EBITDA basis, Vodafone sits at 5.9 times for fiscal 2027, compared with a sector multiple of 7.2 times. Barclays commented that given the ongoing decline in Germany, a valuation discount is justified: "With Germany still declining, we believe a discount is warranted," the analysts said.
Related company note - Vodacom
Barclays also adjusted its view on Vodacom, nudging its price target up to ZAR 147 from ZAR 145 while keeping an Equal Weight rating unchanged. This followed the Safaricom consolidation being moved into the third quarter of fiscal 2027 for Barclays' assumptions, a shift that reduced its fiscal 2027 revenue and EBITDA estimates for Vodacom by 12.9% and 15.9% respectively.
Promotional and analytical services mentioned
The original report included a note referencing an AI-driven screening tool that evaluates Vodafone among other companies across multiple metrics and strategies. That material presented the tool as a way to compare Vodafone's risk-reward profile to peer opportunities using a wide set of financial indicators.
Overall, Barclays' downgrade and target cut reflect a concentrated concern about the trajectory of Vodafone's German operations, offset by pockets of resilience elsewhere in the group and adjustments to anticipated consolidation timing for Safaricom-related assets.