Amdocs prefers to chat about its passion for things like digital transformation, the cloud and, of course, agentic AI when it engages with equity analysts for its financial updates. But one awkward company name dominated the call it held to discuss final-quarter results this week – T-Mobile.
The big US operator shouldn’t by rights be awkward. T-Mobile is an important customer for Amdocs (founded in Israel, headquartered in the US and, er, registered in the UK tax haven of Guernsey), using various of its business and operational support systems, the back-office IT of the telco world. Yet a legal dispute between the two companies has generated “major headwinds” for Amdocs, acknowledged Shimie Hortig, the company’s CEO.
He has blamed that for a massive decline in the sales and profitability outlook this fiscal year, which ends in September 2027. Revenues are now expected to fall by 14.3% to 17.9%, partly reflecting plans to exit some business activities. Even without that, however, sales are forecast to drop by 7% to 11%. Hortig also told analysts to anticipate a drop of between 26% and 30% for earnings per share.
To say all this came as a surprise to investors would be a gross understatement. By mid-morning UK time on November 4, the Amdocs share price had halved on the Frankfurt exchange and was trading at its lowest level since 2014, back when conversational AI was confined to the pages of fiction.
What a start as CEO
The subject of the dispute with T-Mobile remained unclear at the time of publication, with Hortig saying its “confidential nature” prevented him from disclosing more details. Amdocs is, nevertheless, “prepared to fiercely defend our positions, including in arbitration,” he told analysts.
What Hortig would say concerning T-Mobile is that the dispute centers on a recently signed agreement and that it escalated into a legal bust-up last quarter. In the meantime, Amdocs has also seen a reduction in what it describes as “discretionary spending” by the US telco. It also now appears to have finished work on an integration project following T-Mobile’s acquisition of USCellular last year. Work for T-Mobile seems to be evaporating.
Hortig’s key message to the market, unsurprisingly, was that T-Mobile is just an isolated case and not a harbinger of a wider customer backlash against Amdocs. Business results for the recently ended fiscal year showed a 3.6% increase in sales, to nearly $4.7 billion, and 1% growth in net profit, to $791.7 million. The rest of the business will grow at a mid-single-digit rate this year, said Hortig.
But certain analysts were not so easily mollified after watching the Amdocs share price in apparent free fall earlier today. “Shimie, what a way to start the career as a CEO,” said Tal Liani, an analyst with Bank of America Securities (Hortig succeeded Shuky Sheffer in the top job as recently as March). Noting that he, as an equity analyst, would be under pressure from investors to outline the risks, Liani then added considerable intrigue to the story by suggesting T-Mobile had “decided to do things in a different way” and that other customers might follow.
“There are fundamental issues behind T-Mobile,” he said. “So, I’ll ask you the question in a simple way: What is the risk that another customer – a big customer, you have six big customers overall – but what’s the risk that some other customers will go through the same process and terminate the relationship also with Amdocs?”
T-Mobile is thought to account for about a fifth of Amdocs’ sales, according to estimates from Omdia, a Light Reading sister company, based on Amdocs’ own guidance. The contribution appears to have fallen by almost three percentage points for the last fiscal year, said James Crawshaw, a practice leader at Omdia. It could sink far more dramatically after the latest warning.
But T-Mobile has not actually terminated its agreement, insisted Hortig in response to Liani’s question. Nor does Amdocs face similar problems with other big customers, he said, going on to name several. “Just think about the AT&T agreement that we signed this quarter, a major partnership to accelerate the implementation of aOS and the AT&T tools.”
That aOS refers to the agentic operating system designed to coordinate agent activities in telecom networks and, as Light Readingpreviously described it, prevent any “machine-led mayhem in the back office.” Liberty Latin America, Globe in the Philippines and the UK’s VodafoneThree are examples of other telcos committed to Amdocs, said Hortig. “Again, I cannot go into the details of this case, but I can tell you that it’s an isolated case,” he said. “And the rest of the business is growing very nicely.”
Existential threat
“We don’t comment on confidential business relationships with our vendors,” said T-Mobile’s press office by email when approached for comment. But shareholders must hope Hortig’s assessment of the state of other business is accurate, and that no other disputes materialize. The possibility it could lose T-Mobile as a customer has sent its share price off a cliff. Similar developments involving another big customer would be catastrophic.
The deepest fear for investors is that AI poses some kind of existential threat to Amdocs and other big software companies. Generative AI tools now available outside Amdocs are viewed by some industry commentators as a challenge to its business model. Historically, it has also looked heavily dependent on consulting activities for its revenues.
“More than 80% of its revenue depends on services-driven delivery, not standalone software licenses,” said Danielle Rios, the CEO of Totogi, a small software rival, back in February. “When software replaces the discovery, configuration and integration work humans used to do, consulting-heavy economics stop making sense,” she wrote ina blog. “And once that happens, pricing power erodes with it.” If this week’s developments had anything to do with all that, Amdocs could be in serious trouble.
