Vodafone's Guidance Raise Is Real, but Germany Still Decides Whether the Turnaround Holds

Vodafone has earned a better hearing than its share price suggests. The company reported that group service revenue growth accelerated to 6.4% in the second quarter, the fastest pace in three years, and it raised its FY 2027 outlook to about 7% organic adjusted EBITDA growth and 20% to 21% organic adjusted free cash flow growth at the midpoint. Vodafone Business posted its best-ever growth at 6.6%, and digital services now generate more than 2 billion euros in revenue. Those are concrete results, not just management language.

The stock still slipped 1.27% in premarket trading, to $15.49 from $15.69. That reaction is a fair signal of investor caution, and the reason is visible in the report. Germany, Vodafone's largest European market, remains a drag, with first-half EBITDA down 3.2%, partly because of an ECJ ruling provision and higher discount rates. Consumer broadband and business-to-business sales improved, but the EBITDA line did not. A company can show momentum elsewhere and still have a problem where it matters most.

The U.K. and Africa explain much of the optimism. Management credited the VodafoneThree combination and synergy gains for U.K. strength, and said Africa and Türkiye posted double-digit organic growth. The cost program, with 200 million euros of gross savings delivered in the first half and more than 200 million euros of net savings expected for the year, adds credibility to the guidance. Yet the savings also come with 3,000 German roles cut in the first half and 2,300 more announced. Investors should ask how much of Germany's margin pressure is being offset by headcount reduction rather than by sustainable growth.

My view is that the guidance raise deserves credit, but the market is right to demand proof in Germany before rewarding the story fully. Vodafone should report German EBITDA separately with clear targets and a timeline for stabilization, rather than letting strong group numbers mask the weakest large market. The report also lacks reported EPS or revenue actuals, so no earnings surprise can be measured, which makes the Germany disclosure even more important.

The next test is whether German EBITDA turns positive in the second half. If it does, the 2027 outlook looks conservative. If it does not, the rest of the portfolio will have to carry more of the load than the current cash-flow targets appear to allow.