Investing.com -- Shares of Vodafone (LON:VOD) fell more than 7% on Tuesday following the company’s latest earnings report, which highlighted ongoing struggles in its key German market.
Despite overall service revenue growth of 5.2% for the third quarter of fiscal 2025, Vodafone’s performance in Germany remained a critical drag, with service revenue in the country declining by 6.4%.
Germany has been Vodafone’s largest market, and the persistent revenue weakness there underscores broader structural challenges.
While there were signs of improvement in operational key performance indicators—such as a slowdown in broadband subscriber losses—these gains have not yet translated into financial recovery.
Vodafone Germany lost 7,000 broadband subscribers in the quarter, an improvement from the 33,000 lost in the previous period.
However, the company’s mobile consumer contract segment saw net additions fall to 23,000, down from 39,000 in the previous quarter, further contributing to the underwhelming revenue performance.
The telecom company remains cautious about its EBITDA for the second half of fiscal 2025, signaling that the financial strain from Germany could intensify.
Barclay’s forecast for Vodafone’s EBITDA in the latter half of the year is lower than the first half, with the consensus estimate from Barclays (LON:BARC) and Bloomberg at €2.26 billion to €2.29 billion.
Despite Germany’s drag, Vodafone saw stronger performances in other markets, with the UK service revenue growing 3.3% in the quarter, up from 1.2% in the previous quarter.
The UK fixed broadband segment also added 72,000 new subscribers, significantly outperforming expectations and posing competitive pressure on BT Group (LON:BT).
Vodafone’s Turkey and Africa divisions also posted solid gains, with Turkey’s service revenue surging by 83.4% year-over-year, though currency fluctuations continue to pose risks.
Vodafone reiterated its full-year outlook, but with Germany’s revenue decline exceeding both Barclays’ and Bloomberg’s consensus estimates, investor sentiment remains weak.
The drop in share price reflects concerns over the company’s ability to stabilize its core European markets, particularly as competitive pressures and regulatory challenges persist.
Barclays maintains a neutral stance on Vodafone, rating the stock as “equal weight” with a price target of 85 GBp, compared to its current trading price of 70 GBp.
Analysts believe the stock’s trajectory will largely hinge on Vodafone’s ability to navigate its German market challenges and stabilize its earnings outlook for the coming quarters.