Amdocs takes $106 million restructuring hit as AI overhaul gathers pace
The software company maintained its full-year outlook despite the restructuring charge, while unveiling a flagship 10-year AI partnership that it says validates its new strategy.
Amdocs reported quarterly results that largely met expectations, but the numbers underscored the cost of the sweeping transformation underway under new CEO Shimie Hortig.
The telecom software company generated revenue of $1.175 billion in its fiscal third quarter, up 2.7% from a year earlier and in line with the midpoint of its guidance. The company also reaffirmed its fiscal 2026 outlook, projecting reported revenue growth of 3.2% to 4.0%, while maintaining its constant-currency forecast of 2.6% to 3.4%.
The headline figures, however, were overshadowed by a $106 million restructuring charge tied to the company's ongoing overhaul, which significantly reduced reported profitability. GAAP operating income fell to $105 million, with operating margin dropping to 8.9%, compared with 17.7% a year earlier. Diluted GAAP earnings per share fell to $0.59, although the company said earnings would have exceeded its guidance range absent the restructuring costs.
On an adjusted basis, profitability remained stable. Non-GAAP operating income reached $253 million, while operating margin improved slightly to 21.6%. Adjusted diluted earnings per share came in at $1.84, matching the midpoint of the company's guidance.
The restructuring follows a broader redesign of Amdocs' operating model that began shortly after Hortig became CEO at the end of March. Eight weeks ago, employees across several Israeli divisions began receiving summonses for pre-layoff hearings as part of a global workforce reduction expected to eliminate between 7% and 10% of the company's roughly 29,000 positions worldwide. Industry estimates suggested that between 300 and 400 of Amdocs' approximately 4,000 employees in Israel could ultimately be affected.
The latest cuts follow several years of workforce reductions. Amdocs eliminated approximately 2,700 positions in 2023, followed by more than 1,500 additional layoffs in 2024 and several hundred more during 2025, reflecting mounting pressure on large enterprise software providers to adapt to artificial intelligence, automation and changing customer spending patterns.
Despite the restructuring, the company's core managed services business continued to expand. Revenue from managed services reached a record $791 million during the quarter, accounting for roughly 67% of total revenue.
Cash generation also remained strong. Free cash flow totaled $172 million during the quarter, excluding restructuring payments, and the company reiterated its full-year free cash flow outlook of $710 million to $730 million. Amdocs also repurchased $143 million of its shares during the quarter.
Alongside the earnings report, management sought to demonstrate that its AI strategy is beginning to translate into commercial wins.
The company announced a new 10-year strategic partnership with Liberty Latin America under which Amdocs will manage and transform the telecommunications group's entire IT environment using its new agentic AI platform, known as aOS. The agreement represents what management described as the first major validation of its long-term AI strategy and significantly expands Amdocs' presence in Latin America and the Caribbean.
Hortig said the company is reorganizing around four strategic growth pillars centered on agentic AI. The first is aOS, its new agentic operating system designed to modernize telecom operators' IT environments. The remaining pillars focus on expanding into new industries, developing AI-driven growth opportunities and transforming Amdocs' own internal operations into what it describes as an "agentic-first organization."
"We signed a new, large-scale 10-year partnership with Liberty Latin America encompassing their entire end-to-end IT ecosystem," Hortig said. "This is a true flagship engagement."
The company ended the quarter with a 12-month backlog of $4.26 billion, up 2.7% from a year earlier, providing management with continued visibility as it executes one of the largest strategic shifts in its history.
The results arrive with Amdocs trading at a market capitalization of just under $6 billion, close to the multi-year low the stock reached in June, highlighting investor caution as the company attempts to balance restructuring costs with renewed growth through artificial intelligence.
