Endava, the technology services provider, has faced a challenging year. Their latest earnings call reveals the ongoing struggle with headwinds in IT spending, particularly in discretionary projects and the payments and banking sectors. Yet, beneath the surface of this apparent stagnation, a fascinating story unfolds. Endava is strategically maneuvering itself, not just to weather the storm, but to emerge as a potential leader in the burgeoning AI revolution.

While most analysts are focused on the immediate impact of the AI "pause" on Endava's revenue, a deeper dive into the transcript reveals a subtle shift in the company's approach. Endava is emphasizing the importance of a service few other digital transformation players offer: core modernization.

The AI revolution, as John Cotterell, Endava's CEO, points out, hinges on the ability to access and utilize data effectively. Newer companies, built on flexible technology stacks, are inherently better equipped to capitalize on AI's potential. However, the vast majority of large enterprises are burdened with legacy systems, creating a barrier to AI adoption. This is where Endava's core modernization expertise becomes a significant differentiator.

Endava has quietly amassed a decade of experience in core modernization, working with over 150 clients, across 1,300 systems, and a staggering 650 million lines of code. This expertise, combined with their patented technology and data-driven approach, provides a unique value proposition for enterprises hesitant to tackle this complex challenge.

The key to Endava's strategy lies in recognizing the interconnected nature of digital transformation and core modernization. As AI gains traction, digital transformation will extend beyond enhancing customer interactions; it will require deep integration with the core systems and data of the enterprise. Endava, by marrying its proven digital transformation capabilities with its core modernization expertise, positions itself as the ideal partner for companies navigating this evolution.

The recent acquisition of GalaxE Solutions further strengthens Endava's position. GalaxE brings a substantial healthcare client base and delivery capabilities in India, adding depth to Endava's US presence and access to the world's largest IT talent pool. While the immediate impact on EPS is expected to be neutral, the long-term potential is immense. GalaxE's strong accelerator-enabled capability for understanding enterprise systems perfectly complements Endava's focus on next-generation technology. Together, they form a potent force for driving deep enterprise transformation, a service in high demand as AI reshapes business landscapes.

Endava's recent five-year partnership with Equiniti, a leading provider of tech-enabled shareholder and retirement services, exemplifies this strategy in action. The £75 million deal, a significant win for Endava's capital markets vertical, wouldn't have been possible without the combined strengths of core modernization and digital transformation. It signals the potential for substantial wins as clients overcome their initial hesitancy and commit to large-scale projects.

The numbers tell a compelling story. While Q3 earnings reflect a continued slowdown in discretionary spending, the pipeline for large deals is burgeoning. Notably, the value of potential deals in the hopper is up 75% compared to November, indicating pent-up demand waiting to break through. The acquisition of GalaxE, adding a £21 million revenue run rate, further underscores this momentum.

Revenue Trends and Pipeline Growth

The following chart illustrates Endava's recent revenue performance and the significant growth in the pipeline for large deals. While revenue has declined due to the current economic climate and client hesitancy, the substantial increase in potential deals suggests a strong rebound is on the horizon.

Endava's current focus on right-sizing their workforce, streamlining their organization, and strategically attracting senior go-to-market leadership all point toward a company preparing for accelerated growth. They are actively building "pods," teams dedicated to thought leadership and rapid prototyping around emerging technologies like AI, cloud, cybersecurity, and quantum computing. This foresight will allow Endava to capitalize on the next wave of digital transformation, driven by the convergence of core modernization and AI.

Endava's story is not one of surviving the current economic storm; it's a story of a silent revolution brewing beneath the surface. As the AI boom gathers momentum, Endava, with its unique combination of capabilities and strategic foresight, is poised to emerge as a dominant force in the industry. While others are treading water, Endava is preparing to ride the wave.

"Fun Fact: Endava's recent internal hackathon saw 80% of the finalist teams incorporating AI into their projects. This demonstrates the widespread adoption of AI expertise within the company and highlights Endava's commitment to staying ahead of the curve in the rapidly evolving field of artificial intelligence."

"Infographic: * **Endava's Core Modernization Expertise:** * 150+ clients served * 1,300+ systems modernized * 650 million+ lines of code processed * **Pipeline Growth:** * 75% increase in potential deal value since November 2023"