Vodafone stock surges 7% after FY25 results highlight strategic turnaround, buyback program, and UK-Africa growth engine

Vodafone Group Plc (LSE: VOD) shares rallied 7.26% on 20 May 2025 to close at 77.72 GBX, their highest level since January, after the telecom giant released its full-year FY25 results showcasing solid organic growth in service revenue, a strong cash position following major divestments, and a renewed €2.0 billion share buyback programme. The stock’s sharp move comes amid a broader revaluation in European telecom equities, as investors begin to reward capital discipline and regional repositioning strategies.

This marks a significant shift in sentiment for Vodafone, whose performance over the past five years has been weighed down by sluggish European operations, regulatory headwinds, and shareholder concerns over capital returns. Under the leadership of Group CEO Margherita Della Valle, the company has completed a sweeping transformation that is beginning to yield visible results.

What Did Vodafone Report in Its FY25 Results?

For the year ended 31 March 2025, Vodafone posted total revenue of €37.4 billion, a 2% year-on-year increase, supported by robust service revenue growth which rose 5.1% organically to €30.8 billion. Adjusted EBITDAaL (earnings before interest, tax, depreciation, amortisation, and leases) came in at €10.9 billion, up 2.5% organically, in line with previously issued guidance.

Despite this operational progress, Vodafone reported a statutory operating loss of €411 million compared to a profit of €3.7 billion the previous year. This reversal was driven by non-cash impairment charges totaling €4.5 billion, primarily related to its German and Romanian businesses.

Basic loss per share from continuing operations stood at -15.86 eurocents versus earnings of 4.45 eurocents in FY24. However, adjusted earnings per share improved to 7.87 eurocents, up from 7.47 eurocents in the prior year, driven by a reduction in net financing costs and a lower share count resulting from the ongoing buyback programme.

Why Did Vodafone’s Stock Price Rise?

Investor enthusiasm was largely fuelled by Vodafone’s clear delivery on its FY25 guidance, a sharply reduced net debt position, and capital return commitments. The telecom operator achieved €2.5 billion in adjusted free cash flow and met its EBITDAaL target of €11 billion on a guidance basis, reaffirming operational discipline even amid foreign exchange volatility and macroeconomic uncertainty.

Of equal importance to the market was Vodafone’s balance sheet repair and simplification of its portfolio. The company closed the sale of Vodafone Spain and Vodafone Italy for a combined €12 billion, and also monetised a 10% stake in Oak Holdings, the parent of its tower business Vantage Towers, for €1.3 billion.

These asset sales enabled Vodafone to return €3.7 billion to shareholders in FY25, including €1.9 billion in share repurchases and €1.8 billion in dividends. A new €2.0 billion share buyback, beginning with a €500 million tranche, was launched alongside the results announcement, helping reinforce bullish sentiment around the stock.

How Is Vodafone’s Geographic Performance Shaping Its Future?

Germany: Rebuilding From a Regulatory Setback

Germany remains Vodafone’s largest market but also its most challenging. Organic service revenue declined 5.0%, and EBITDAaL dropped 12.6% in FY25, mainly due to the multi-dwelling unit (MDU) TV law change that ended bulk billing contracts. This alone knocked 7.5 percentage points off earnings growth in Germany. Fixed line service revenue fell 8.1%, with broadband customer losses and competitive mobile pricing weighing further on the segment.

However, Vodafone noted that its broadband churn had stabilised in H2 FY25, and wholesale revenues were rising. The company retained 4.2 million MDU households post-law change, in line with its forecast, and saw continued demand for its gigabit broadband footprint, now accessible to 75% of German households.

United Kingdom: Operational Excellence Driving Upside

The UK market, representing 19% of Group service revenue, saw a 1.9% organic service revenue rise and a 7.9% increase in organic EBITDAaL, reflecting customer loyalty gains and broadband expansion. Notably, Vodafone now leads the UK market in Net Promoter Score (NPS), and broadband customers grew by 227,000 in FY25, supported by improved switching mechanisms.

The anticipated merger with Three UK is expected to close in H1 FY26, with estimated synergies of £700 million annually and the creation of the UK’s third-largest mobile network operator. Vodafone expects an incremental EBITDAaL boost of €0.4 billion from this integration in the next fiscal year.

Africa and Türkiye: Growth Anchors for the Group

Africa contributed 20% of Vodafone’s Group service revenue and posted 11.3% organic growth, underpinned by strong demand in Egypt, South Africa, and Vodacom’s international markets. Digital financial services like M-Pesa and Vodafone Cash were key contributors, with the M-Pesa user base reaching 25.2 million and accounting for over a quarter of service revenue in Vodacom’s non-SA markets.

Türkiye delivered one of the most impressive performances, with organic service revenue soaring 83.4% and EBITDAaL surging 110.5% in local terms. The region’s contribution to Vodafone’s growth narrative is becoming increasingly critical, especially as the company benefits from price increases, subscriber growth, and digitisation in a high-inflation environment.

How Strong Is Vodafone’s Balance Sheet and Liquidity?

Vodafone ended FY25 with net debt of €22.4 billion, down from €33.2 billion a year earlier, mainly due to the divestments in Spain, Italy, and Oak Holdings. Cash and short-term investments totalled €16.3 billion at year-end, providing ample liquidity flexibility. Gross debt stood at €40.0 billion, including €36.4 billion in bonds and €10.8 billion in lease liabilities.

The telecom giant maintained its capital intensity and invested €6.9 billion during the year, including a €300 million core network software licence. The company’s revised leverage policy now targets a Net Debt to EBITDAaL ratio between 2.25x and 2.75x, with Vodafone currently operating in the lower half of that band, preserving its investment-grade profile.

How Are Analysts and Institutions Responding?

Early reactions from analysts indicate a constructive shift in Vodafone’s investment narrative. Institutions welcomed the execution on free cash flow targets, which supports sustainable capital returns even with a reduced dividend of 4.5 eurocents. The group’s alignment toward high-growth regions and divestment of underperforming assets also adds credibility to its transformation story.

Institutional flows suggest renewed buying interest, especially from European and UK-based funds previously underweight on telecoms. The post-earnings rally is also being viewed as technical confirmation of a breakout from multi-month consolidation.

What Are the Key Risks and Forward-Looking Themes?

Despite the encouraging trends, Vodafone faces persistent risks. Regulatory overhangs in Europe, forex volatility, and integration challenges from the Three UK merger remain focal concerns. Additionally, Germany’s recovery trajectory is not guaranteed and depends on execution in broadband pricing, service differentiation, and retention.

Yet, the company’s outlook for FY26 remains optimistic. Vodafone expects adjusted EBITDAaL of €11.0–11.3 billion and free cash flow of €2.6–2.8 billion. If achieved, this would mark the start of a multi-year expansion phase as outlined by CEO Margherita Della Valle.

Analysts anticipate Vodafone will continue simplifying its portfolio and may pursue further monetisation of tower assets or joint ventures like VodafoneZiggo. There’s also increasing speculation about a larger listing of its African assets or a spin-out of its financial services division.