Amdocs Limited Aktie

Thank you for standing by and welcome to the Amdocs Second Quarter 2026 Earnings Conference Call. [Operator Instructions] As a reminder, today's program is being recorded.

And now I'd like to introduce your host for today's program, Matt Smith, Head of Investor Relations. Please go ahead, sir.

Thank you, John. Before we begin, I need to call your attention to our disclaimer statement on Slide 2 of the presentation. It notes that some of our comments today may be forward-looking statements and are subject to risks, uncertainties and other important factors, including as described in Amdocs' SEC filings and that we will discuss certain financial information that is not prepared in accordance with GAAP. For more information regarding our use of non-GAAP financial measures, including reconciliations of these measures, we refer you to today's earnings release, which will also be furnished with the SEC on Form 6-K.

Participating on the call with me today are Shimie Hortig, President and Chief Executive Officer of Amdocs Management Limited; and Tamar Rapaport-Dagim, Chief Financial and Operating Officer. To support today's earnings call, we are providing a presentation, which can be found on the Investor Relations section of our website. And as always, a copy of today's prepared remarks will also be posted immediately following the conclusion of this call. On today's agenda, Shimie will recap our business and financial achievements for the second fiscal quarter 2026 and he'll also present his vision as Amdocs' new CEO for the agentic era. Shimie will finish by addressing our financial and business outlook, after which Tamar will provide additional details on our second quarter financial performance and guidance for the full fiscal year 2026.

So with that, I'll turn it over to Shimie.

Thank you, Matt and good afternoon to everyone joining us today for Amdocs Fiscal Second Quarter 2026 Earnings Call.

I'm pleased to join you today live from our Amdocs' New Jersey offices. When I spoke to you in February, I talked about my excitement to lead Amdocs in its next chapter. Several weeks into the CEO role and after spending more time with our customers, partners and global teams, I'm even more excited and convinced about the opportunity ahead of us. As laid out on Slide 6, today, I will divide my comments into 2 parts. First, I will begin by laying out some initial thoughts on the future vision for Amdocs where we plan to become the primary partner of choice to our customers in their agentic journey, leveraging our unique domain expertise and deep industry knowledge.

From there, I will highlight the company's solid second quarter performance, including new deals we have won and the operational milestones achieved for our customers that reflect the strength and discipline of our global teams. To begin on Slide 8, I want to spend a few minutes sharing my initial view on how I'm thinking about Amdocs in the agentic era. What is changing in our industry? What I believe Amdocs is uniquely positioned to do and my vision on how we plan to turn this opportunity into meaningful outcomes for our customers. The agentic era is an exciting opportunity for our industry and for our customers. For communication service providers globally, the agentic revolution is a unique moment in time to fundamentally transform their IT and network ecosystems in a nonlinear fashion, simplifying complexity, rethinking critical workflows end-to-end and unlocking the ability to accelerate the launch of new offerings.

I strongly believe that Amdocs is in the best position to lead our customers and turn this agentic opportunity into reality. Let me break down the reasons why. First, we have in Amdocs decades of deep industry knowledge and domain expertise. We have an industry context based on our telco taxonomy, ontology and the core business workflows that will power the Argentic era. This is our native language. Second, Amdocs has strong engineering pedigree, a commitment to innovation and a long history of leading our customers through major technological shifts. Third, we understand what it takes to design, build, deliver and operate mission-critical systems. And we are, therefore, best placed to lead our customers through the complex agentic transformation. Fourth, we have always been and will continue to be an outcome-based company. Amdocs has long supported customers under long-term engagement committed to predefined KPIs and this remains highly relevant as our customers look for measurable GenAI-driven outcomes.

To support this vision, our focus will be on the following areas highlighted on Slide 9. We will evolve our product portfolio to be agentic and automated. Our portfolio is already moving in this direction with Amdocs aOS, our agentic operating system for telco. We will partner with each customer to design a tailored agentic road map. We recognize that every service provider has a unique baseline and we will guide each to a fully agentic operation that unlocks meaningful value. We will also continue to work closely with leading AI and cloud partners to accelerate this vision, taking a strategic ecosystems approach in support of our customers' agentic journey. And we will accelerate our internal transformation to become a GenAI-native organization. We are leading by example and deploying agentic technologies and capabilities across our own engineering, delivery and operations. We will adjust our way of working and become a more agile organization.

This vision sets the foundation for a stronger future at Amdocs in the agentic era, one defined by a sharper technology focus and greater agility. It positions Amdocs to expand our addressable market in telco. It also presents a potential opportunity to extend our reach into a new industry. With that said, we are still in the process of refining our strategy and we'll continue to update you as things progress over the next couple of quarters. I also realize that this is going to be a journey. But in this context, I'm glad to report that we have already made initial progress. I will explain more on Slide 10. At Mobile World Congress last quarter, we officially launched aOS, Amdocs agentic operating system purpose-built for telco. So far, we have received excellent feedback from the market and I'm happy to share that we already have several initial commercial agreements with customers to launch and to implement aOS.

This includes the following customers: Cricket, Lumen, Bell Canada, EchoStar and PLDT. In PLDT, we can already report early signs of business success where more than 90% of customer requests are now resolved through the aOS platform, enabling faster handling times and higher productivity in the retail stores.

Now let me turn to Part 2 and address the key financial highlights, significant deals and operational milestones we achieved for the second fiscal quarter. Starting with Slide 12. Our second quarter results were solid with revenue of $1.17 billion and non-GAAP diluted earnings per share of $1.78, both above the midpoint of our guidance. Our results included year-over-year revenue growth in North America as well as record revenue in Europe and a strong revenue performance in rest of the world. Non-GAAP operating margin improved by 20 basis points from a year ago as we continue to balance our investments for growth with a focus on operational excellence. Overall, we closed the quarter with 12 months backlog of $4.28 billion, up $30 million sequentially and 2.6% from a year ago. Beyond the already mentioned aOS wins this quarter, we secured several significant deals, which demonstrate wide-ranging demand for our products and services and the confidence customers have in Amdocs.

Slide 13 highlights many of these deal wins but here are a few examples. In AT&T Cricket Wireless, we signed an expanded multiyear extension of our managed services agreement, including dealer onboarding modernization to enhance partner experience and drive faster market expansion. In Vodafone Spain, we secured a 5-year agreement covering CRM and OSS modernization alongside long-term support and enhancement services. And in South Korea, KT has extended its multiyear agreement with Amdocs to upgrade, modernize and operate its charging system, empowering faster service rollout and advanced 5G monetization. Our cloud-based platform solution also generated significant customers momentum in Q2. ConnectX added multiple new names, including Vanta Wireless, which will launched a unique mobile service with AT&T using AI-driven connectivity. Que tal Movil, a U.S.-based MVNO servicing Hispanic communities; and in Singapore, a leading operator went live with the platform to accelerate digital modernization.

Additionally, Amdocs eSIM was chosen by Cielo in Brazil to support payment terminal connectivity and by Mobifone in Vietnam for seamless zero-touch customer activation. Amdocs project execution was another highlight for the company in Q2. We achieved a high number of project milestones across different programs for flagship customers such as AT&T, Optimum, Vodafone Germany, Elisa and PLDT. To highlight a few of them. In AT&T, Amdocs is now servicing significant part of AT&T's 5G SA subscribers in our next-gen charging platform and we played a key role in the recent launch of AT&T new OneConnect plan. In Vodafone Germany, we marked a pivotal milestone in our journey as we reached commercial launch. At Elisa in Finland, we delivered a key milestone in support of its mainframe to Google Cloud migration. I'm also pleased to share that Brightspeed, a U.S.-based fiber broadband and telecommunication provider has gone live with Amdocs Resource Manager. This smooth deployment enables Brightspeed to strengthen its network inventory management and streamline operational processes.

Now moving back to the outlook on Slide 15. We are reiterating the midpoint of our revenue growth guidance of 3% in constant currency for the full year fiscal 2026, which is within tightened range of 2% to 4%. Likewise, we are reiterating the midpoint of our guidance for non-GAAP diluted earnings per share growth of roughly 6% in fiscal 2026. which is within a tightened range of 5% to 7%. That said, we are, of course, closely monitoring customer demand and spending behavior within the current global macroeconomic climate. To wrap it up, we believe Amdocs is best positioned to turn agentic vision into reality for our customers. We are shaping our strategy direction based on the vision and direction I discussed with you today and we will continue to share more over the next couple of quarters.

We know this is going to be a journey for us and for our customers. But in this context, we already have initial commercial engagement on aOS. We are building our strategy on strong business foundations, demonstrated by our solid Q2 results and we are on track to hit our full financial targets while monitoring our customer spending behavior within the current macroeconomic climate.

Before we move to the financial overview, I would like to spend a few minutes talking about the CFO transition. First and foremost, I would like to thank Tamar for her remarkable contribution to Amdocs over the last 19 years as CFO, including the past 8 years serving as both CFO and COO and 22 years overall with the company. I have known her for a long time and I can say that she has been an exceptional business partner and a personal friend. Tamar played an instrumental role in the evolution of Amdocs and I know she will be missed by the entire Amdocs family. On behalf of all of us, Tamar, please accept our sincere appreciation for your endless dedication and service to Amdocs through the years and we wish you nothing but the best on your well-deserved retirement.

I'm excited to introduce to you to Tal Rosenfeld and welcome him as Amdocs next CFO. Tal has played a major part of Amdocs finance organization over his impressive 20 years career with us, during which he has acquired extensive experience across senior and management roles in accounting and finance. Tal is also a proven business performer. He has served as a division business leader for APAC and is currently General Manager, Head of Finance, where he has responsibility for managing the entire finance organization, reporting directly to Tamar. I have known Tal for his entire career in Amdocs and having worked closely with him on many occasions, I'm well aware of his great leadership qualities. I strongly believe he is the best fit for this role. Congratulations, Tal and welcome to my leadership team. I look forward to working together to take Amdocs to the next chapter.

Tal will say a few words in a moment but first, let me hand the floor to Tamar.

Thank you, Shimie, for your kind words and hello to everybody on the call today. Amdocs indeed has been a family to me but as Shimie said, I've decided to retire and finally take some time for myself.

As you can appreciate, making this decision was neither quick nor easy. But after almost 20 years as CFO, I felt that now was the appropriate time for me to retire. My decision was made easier by how seamlessly Shimie has transitioned into the CEO position over the past few months and by the strong team he has built around him. This includes Tal, of whom I could not be prouder. I personally recruited Tal to Amdocs finance 20 years ago and I've been preparing him for CFO as part of an internal succession plan for some time. I believe he's undoubtedly the best person for this role. Congratulations on your appointment, Tal.

Shimie and Tamar, thank you both for your kind words. Tamar, I want to thank you personally for your mentorship, guidance and partnership over the years. Your leadership and friendship have meant a great deal to me and I wish you only the best. Shimie, I'm very excited by the opportunity to step into the CFO role. I'm looking forward to building on Amdocs' strong foundation and supporting you and the leadership team as we lead the company forward.

Thank you, Tal. Now let's get back to business. Tamar, would you like to take us through the quarterly financial summary, please?

Yes, of course. Thanks, Shimie. Q2 revenue of approximately $1.172 billion was up 3.9% year-over-year as reported. Revenue was above the midpoint of our guidance, including a positive impact from foreign currency movements of approximately $2 million compared to our guidance assumptions. In constant currency, our revenue was up 2.2% from 1 year ago. On a regional basis, North America revenue of $754 million was up more than 2% from 1 year ago but was slightly lower on a sequential basis due to normal fluctuations in customer activity. Outside North America, our international growth continued. Europe delivered record quarter revenue of $192 million, up more than 6% year-over-year on a mix of organic growth and the impact of MATRIXX acquisition. Rest of the World revenue grew by 8% year-over-year to $226 million, the highest since fiscal Q3 2024. Rest of the World remains on track to grow in fiscal 2026, driven by the strong sales momentum of recent quarters.

As a reminder, quarterly trends in both Europe and Rest of the World may fluctuate given project orientation of our customer activities in these regions. Shifting down the income statement. Non-GAAP operating margin of 21.5% was up by 20 basis points from 1 year ago, reflecting internal cost and efficiency gains resulting from focus on operational excellence, automation and the deployment of AI-based tools, balanced against long-term growth investments, including the development and go-to-market costs of our next-generation aOS platform. On a sequential basis, non-GAAP operating margin declined by 10 basis points. As a reminder, our non-GAAP operating margin may fluctuate slightly on a quarter-to-quarter basis. Interest and other expenses amounted to roughly $14 million in Q2, which included a few million dollars for the accounting of net losses of equity-related investment activities in the quarter.

On the bottom line, non-GAAP diluted EPS of $1.78 was $0.02 above the guidance midpoint, primarily due to items below the operating line and a lower share count. Diluted GAAP EPS of $1.28 exceeded the guidance midpoint, also due to items below operating line and lower share count. Diluted GAAP EPS included a restructuring charge of nearly $0.10 per share, which was not included in our guidance for the quarter and the positive impact of realized and unrealized gains from equity investments, among other. Turning to Slide 20. Managed services revenue of $759 million was up 1.6% from the prior year in the second fiscal quarter. As a share of total revenue, managed services accounted for roughly 65%, consistent with the last several quarters. Renewal rates remained typically high during Q2, underpinning our business resiliency as we signed expanded multiyear engagements with multiple customers.

In North America, for instance, we expanded and extended our managed services contract with Cricket Wireless for BSS and OSS services, including aOS capabilities, driving faster time to market and improved customer experience. Moving to the balance sheet and cash flow highlights on Slide 21. DSO of 73 days decreased by 4 days from 1 year ago and 3 days sequentially. Unbilled receivables, net of deferred revenue decreased by $42 million versus 1 year ago and by $2 million sequentially in Q2, aggregating the short- and the long-term balances. As a reminder, the net difference between unbilled receivables and deferred revenue fluctuates from quarter-to-quarter in line with normal business activities as well as our progress on multiyear engagements.

Free cash flow before restructuring payments was $97 million in Q2. This includes the seasonal timing of bonus payments for the prior fiscal year, which typically occurs in the second fiscal quarter. Highlighting strong free cash flow for the year so far, we've already achieved nearly 50% of our fiscal 2026 target. Including the restructuring payments of $17 million, reported free cash flow was $80 million in the quarter. As a further update, in fiscal Q2, we established a U.S. commercial paper program of up to $800 million to further enhance our financial flexibility and optimize Amdocs short-term funding mix. Proceeds from issuance under the program will be used for general corporate purposes.

We also upsized our revolving credit facility from $500 million to $800 million, which supports the commercial paper program and further enhances our overall funding flexibility. Overall, we ended Q2 with a healthy cash balance of approximately $214 million and aggregate borrowings of roughly $900 million, including our $650 million senior notes maturing in June 2030 and short-term financing arrangements of $250 million. As of March 31, 2026, there was no outstanding borrowing amount under the commercial paper program and $630 million remains available on the revolving credit facility. Overall, we have ample liquidity to support our ongoing business needs while retaining the capacity to fund our future strategic growth.

Switching to capital allocation on Slide 22. This quarter, we repurchased $138 million of our shares, leaving us with up to $702 million of remaining repurchase authority as of March 31, 2026. We paid cash dividends of $57 million in the second fiscal quarter. In the last week of fiscal Q2, we acquired the business of Connect44, a European-based provider of end-to-end network planning, building and management solutions for approximately $21 million net in cash at closing plus future potential contingent consideration. Looking to fiscal 2026, we are on track to generate free cash flow of between $710 million to $730 million, not including payments we expect to make under our current restructuring program. Our free cash flow outlook equates to conversion rate of roughly 90% relative to expected non-GAAP net income and translates to a healthy free cash flow yield of roughly 10% relative to Amdocs' current market capitalization. Regarding our capital allocations for the coming year, we expect to return the majority of our free cash flow to shareholders.

Moving to Slide 23. 12-month backlog was $4.28 billion at the end of Q2, up $30 million sequentially and 2.6% from 1 year ago. We believe 12-month backlog remains a good leading indicator of our business and forward visibility. Now turning to our revenue outlook on Slide 24. We are continuing to closely monitor the prevailing level of macroeconomic, geopolitical, business and operational uncertainty, including our customer spending behavior in the current business environment. The third quarter and full fiscal year 2026 financial guidance reflects what we consider to be the most likely outcomes based on the information we have today but we cannot predict all possible scenarios. For the full fiscal year 2026, we have tightened our revenue growth outlook to between 2.6% and 4.6% as reported, the midpoint of which is 10 basis points better than our prior outlook of 1.5% to 5.5%, due to foreign currency tailwinds, which are now expected to benefit by roughly 0.6% this year as compared to 0.5% previously.

Consistent with our prior guidance, we expect that roughly half of the expected growth in fiscal 2026 will be inorganic in nature. On a consistent currency basis, we are reiterating the 3% midpoint of our revenue growth outlook, which we have tightened to a new range of between 2% to 4% for the full fiscal year as compared to prior outlook of 1% to 5%. As for the third fiscal quarter, we expect revenue of between $1.155 billion to $1.195 billion. Moving down the income statement. As we anticipated in the beginning of the fiscal year, we are now on track to deliver non-GAAP operating margins within our target range of 21.3% to 21.9% in the fiscal 2026, the midpoint of which is roughly 20 basis points higher than prior fiscal year of 21.4%.

Our profitability outlook reflects an intentional decision to accelerate our investment in GenAI and our next-generation agentic operating system, including R&D, sales and marketing, while balancing this with our focus on operational excellence and initiatives to drive efficiencies. Below the operating line, we expect non-GAAP net interest and other expenses to be impacted by higher financing costs this year, resulting from a reduced cash balance and short-term borrowing to fund working capital. As anticipated in the beginning of the year, we expect our non-GAAP effective tax rate to be within an annual target range of 16% to 19% for the full fiscal year 2026. As summarized on Slide 26, we are reiterating the midpoint of our guidance for non-GAAP diluted earnings per share growth of roughly 6% in fiscal 2026 which is within a tightened range of 5% to 7% as compared to 4% to 8% previously.

With that, back to you, Shimie.

Thank you, Tamar. Thank you for everything. And again, best of luck in your future retirement. With that, we are happy to take your questions. Operator?

And our first question for today comes from the line of Tal Liani from Bank of America.

I want to ask you a few things. First, when I collectively look at your space without the details of where you're playing and et cetera but collectively look at our -- at your space, there is tremendous investment in data centers and companies are even buying -- customers are even buying more now because they're buying ahead of demand because of supply constraints. So Cisco just reported 19% order growth outside of AI. And the environment is not that good. Some of it has to be some forward ordering. And the question is, when I look at your revenues, I see some acceleration of growth, a little bit of acceleration of growth. But the question is, do you have a way to participate in this massive growth we're seeing, whether it's through neo clouds or cloud or whether it's through service providers, your traditional customers, who are also taking some of this traffic and they also have to build data centers. So can you talk about your ability to play and benefit from the current cycle?

Maybe we'll start with that. I have another question but I'll take it one by one.

All right. It's Shimie and thank you for the question. Maybe to try to explain what I was trying to paint in the vision that I described at the beginning of the call, we see the agentic revolution that is happening right now as an amazing opportunity for Amdocs. We believe that we are the right partner for our customers to help them transform from where they are today to the future agentic and leveraging all the great capabilities that this technology can bring. And as you know, as of today, there's a major gap between the technology and the potential and the actual adoption that we see among our customers in general, in enterprise software and customers around the world. So we believe that Amdocs with our deep knowledge on this industry, with our capability to transform organization to move through technological shift, position us as the best partner that can take them to this future. So definitely a major opportunity for us going forward.

Got it. So what changes -- Shimie, what changes are you bringing to the company? You've been there less than 100 days. How do you -- what are your focus areas in terms of growth acceleration and addressing new opportunities and things, how long do you think also it will take you to show an impact on growth?

Yes. So -- and again, as I mentioned, I think we are trying to accelerate everything that we do in the company in order to help our customers transform in this amazing technological transformation that is happening right now all over the world. So the thing that I want to focus is the following. First, we want to evolve, as I mentioned, our portfolio to be agentic and automated. This is an effort that we started already and we'll continue to focus on that as we provide our customers with the right solutions. The other thing is engagement with customers. We want to tailor to each one of them with specific road map, how we take them from where they are today to this future agentic end state where they can enjoy all the benefits of this technology.

The third thing that we want to do is to partner strategically with the ecosystem, leading AI and cloud partners that will help us and our customers to transform in this industry. And last but not least, I mentioned the internal transformation. We want to accelerate the internal transformation and to make sure that Amdocs is a GenAI-native organization, which means we are changing the way we operate, we implement agentic SDLC within the company. We changed the structure of the teams and we want to become a much more agile organization and to lead by example, this journey.

Got it. Last question. Tamar is leaving the CFO position for some company, I think, pretty well. The CFO position is extremely important just because of timing of recognition of revenues, timing of recognition of expenses, managing operating margins, et cetera. Can you give us a little bit of details on the succession plan? I know you've nominated someone with a great first name to be the successor of Tamar. So can you give us some -- you have a good taste, I have to say.

[indiscernible] the first name being Tal, which is a great name. So first of all, I fully agree with you. And I think that the fact Tal experience is very deep in terms of not only the professional, he is a CPA, was an expert in revenue recognition in his early days in the career in Amdocs. He did the SEC filing. Like he got all the core basic things you would expect from a strong finance professional. He's also done different roles that included field support, the business support and including several years in my management team, leading all of the finance of the business, being the very strong bridge between, let's call it, the professional finance domain and driving the business of the company and structuring the deals in the right way, recognizing the revenue in the right way, et cetera.

Plus as a leader and someone who has definitely built strong teams around him and have been able to build not just, it's not -- as a leader, it's not about you, it's about how you really bring the right talent, develop the right talent, create a sense of purpose, like I've seen him again and again doing that in an amazing way. And in some years that, I call it, I loaned Tal to the business side to lead the APAC division, I mean I've been talking about the APAC growth for some time now. Now you know who is the person behind it. Tal did an amazing job of leading the business there. And then when he came back to finance to lead finance under me, definitely, that's been a big part of the succession planning. So I feel -- while I'm sorry, Tal, that I need to say goodbye as I'm retiring and of course, we can stay in touch beyond the Amdocs capacity, I feel very comfortable that we have the best person for the job and it has been a very thorough succession process overall. You're in good hands.

And our next question comes from the line of Timothy Horan from Oppenheimer.

Would like to focus on the agentic business a little bit more. Can you give us any color on the deals and what the pipeline is looking like? Also, maybe where is kind of the low-hanging fruit for customers to adopt aOS? And when do you think it starts to move the needle on revenue growth?

Yes. Look, as we started to see, we're quite happy with the initial reaction from the market on our aOS launch. We just launched it in Mobile World Congress. And since then, we have quite a lot of engagement with customers. Some of them already translate into concrete opportunities or concrete deals that we are actually implementing right now with our customer base. Those opportunities are starting small but we know that over time, they will grow. So if you ask if we embedded anything right now in this fiscal year, not yet. It's not so meaningful right now but it's definitely going to grow over time.

And as I mentioned before, we are starting to have detailed discussion with each and every one of our customers on their journey, how we take them from where they are today into the future. And here, we're evolving with a lot of interesting discussions based on aOS++. Now some of our customers would like to collaborate with us and to do things together and to implement our tools. Some of them are even discussing with us broader responsibility to move to Amdocs and to help them to transform the organization and to deliver the business benefits and the savings that they are looking for -- forward. So I hope that in the next few quarters, we can share more about those discussions but we are having some meaningful discussions with customers these days.

I mean, so the U.S. telcos seem to be -- or at least they're talking about adopting AI much, much more rapidly than what you're describing. And I think they're talking about slashing expenses, improving services. Are they doing this in-house? Are they using other AI companies? Are they using other competitors of yours? Or are they using you? But the commentary that they're laying out is that they're adopting AI now and they're slashing expenses as a result of it.

Yes. It is true that they are implementing AI. I think in our domain, in the area that you need to deal with mission-critical systems and to transform them into the future to become agentic and autonomous and everything that we want to achieve together with them, we are the best partner to do them. They're not using it with competitors. They're having those discussions with us. Our claim for fame was always to help our customer to transform them. In the past, it was the cloud that we moved them and we're still moving them from on-prem to cloud. Now obviously, the opportunity around agentic is front and center. But they understand that in order to do it in mission-critical systems and the complexity of what we do for them, they want to partner with us. And these are exactly the discussions that we are having right now.

[Operator Instructions] our next question comes from the line of George Notter from Wolfe Research.

This is Taran Katta on for George Notter. Congrats Tamar on the retirement. I just wanted to ask if you could talk a little more about how you expect to progress on implementing AI internally to get efficiencies going forward. Are there any incremental new areas where you're finding use cases? And then as a follow-up, can you give more detail in terms of how customer conversations are progressing as you drive those gains internally?

Yes. So internally, again, it's a process. We've been in this process for quite some time. My goal right now and the team is mainly to accelerate. We are accelerating everything. We are done with the pilot, experimenting, trying it here and there. I'm moving to full-blown implementation across the entire company. It includes, as I mentioned, changing the way we operate, implementing agentic SDLC, changing the way we operate our systems, leveraging the agentic tools. And we're going all the way to try to accelerate this internal transformation and become a more agile organization going forward. Now the discussions that we are having with the customers are exactly along the same lines of how we can help them do the same for their organization in our domain. And some of the discussions, everyone understands that we -- the best way to help them is if we look at the flows end-to-end.

So if you look at the end-to-end business flows around these areas from the business requirements all the way down to the provisioning, the best way to get the best outcome of implementing those agentic is when you have an end-to-end workflow. So they're engaging us right now in discussions in which we are basically expanding the footprint of what we do today, going into areas that are not done today by Amdocs but everyone realized right now that in order to get those benefits, it's better that we'll get involved and help them in the end-to-end processes. So those discussions along with this end-to-end responsibility to transform things for our customers are evolving. And as I mentioned before, I hope we can share some more updates over the next couple of quarters.

Just want to add on that, to remind you, we've been a company pushing for an outcome-based business model forever. Likely, that was a way of showing confidence to our customers that we believe that we can bring them the right innovative engineering solutions as well as a commitment to deliver on certain KPIs and outcomes. So we want to take conceptually the same idea and build based on what Shimie mentioned, this end-to-end ability to take business processes and push it forward with the customers to show accountability, to bring the results that they need to see. practically, what is it that they consider success and how do we design it into the deals we are going to sign.

This does conclude the question-and-answer session of today's program. I'd like to hand the program back to Matt Smith for any further remarks.

All right, John, thanks very much and thanks, everyone, for joining the call tonight. If you do have any other questions, please give us a call here in the IR group. And with that, have a great evening.

Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.

Hi, everybody, and thank you all for joining. I'm Matt Smith, Head of IR for Amdocs, and welcome to today's webinar. So today's plan is to take you on a deep dive to show you just how Amdocs is working to help Telcos accelerate their adoption of generative AI using Amdocs aOS, which is the new Agentic Operating System that we've just launched at Mobile World Congress that's purpose-built for the telco industry.

The main part of today's session will include a formal presentation, including some interactive demos to help things bring to life a little bit. After that, the lines will be open for a Q&A session with our sell-side analysts. And for the broader audience, if you'd like to ask a question, you can do so via with the chat feature in your browser.

Before we get going, please note that today's session is designed to be educational and insightful. We won't be focusing on the financials or the guidance. That said, some of our comments today may be forward-looking and could include certain estimates and assumptions, which are subject to risks and uncertainties as described in our filings with the SEC.

And if you need more information on that, you can find it on the Amdocs Investor Relations website. So to kick things off, let me introduce a familiar face for many of you, Anthony Goonetilleke, Group President, Technology and Head of Strategy for Amdocs.

Thank you, Matt. Great to have everyone online. I just wanted to introduce the group over here. We have Pilar sitting right next to me here, who heads our Global Consulting, who will be sharing her insight around our services space and how generative AI really impacts it.

And on the other side, we have Liliana, who heads all of our strategic partnerships for me. And she will share how we work with our different partners to really drive the outcomes that really help our customers accelerate.

So with that, let me begin. As Matt mentioned, we will take you on a little bit of a journey through aOS. I think I've probably spoken to many of you over the last couple of months. We did have a major launch at Mobile World Congress in Barcelona that was taken really well by all of our customers with many, many follow-ups scheduled after it.

We'll talk a little bit about our outcomes because at the end of the day, this is something we're very focused on. Amdocs historically has really been an outcome-driven company. If you think about what we do, it's been about production milestones. It's been about business outcomes, and it's really been about delivering the end business result as opposed to just another technology project. And so we'll share a little bit about the business results that we're starting to see trickle through some of these projects, and it's very exciting.

And when it comes to me and kind of my purview, I always tell our teams like at the end of the day, this is really what we should be focused on because really, this is what will move the needle. Then as I mentioned, we'll talk about our strategic partners.

Now Amdocs as a company has many partners. We partner with all over the ecosystem. These are companies we use internally within our software companies we partner with to provide different parts of the system. But there are several partners that really double down strategically. So these are partners we work with all the way from thought leadership and thinking through initial strategic ideas with their R&D teams, all the way to go-to-market to all the way to actually launching out.

And we had several of these partners at Mobile World Congress. We even presented at some of their booths at Mobile World Congress. So there's really a good synergy between these strategic partners and us in terms of driving results. And finally, Matt and I will kind of host a Q&A. So keep all your questions for us, and we will set some time at the end of it to take any questions you have.

Sounds good, Matt.

Sounds very good.

All right. So this -- for anyone that's new to the company, I'd just like to highlight this is just Amdocs by the numbers. We're a $4.5 billion company with a very, very strong backlog and recurring revenue. As you can see, we have a very, very high renewal rate on our managed services contracts. This really gets down to the point of our commitment to our customers.

At the end of the day, this industry is not one that has 10,000 or 50,000 customers. And so we are very, very loyal to our customers. And at the end of the day, that loyalty is returned. And so we're very focused on this. And we have a very, very high success rate in terms of customer transformations.

If you look at kind of what we do on a day-to-day basis, this is also very critical. A reminder to all of thousands of people that are developing software all around the world for Amdocs within my teams. And I always remind them, at the end of the day, we are a company that is responsible for developing, creating mission-critical strategic software.

If we fail, basically, I don't want to kind of sound glorious, but if we fail at the end of the day, society fails, right? So if your phone doesn't work or you cannot -- data cannot be transferred and you cannot access an application or your enterprise cannot access an application, and this is a fundamental failure. And so this is not taken lightly.

And if I look at some of the statistics here in terms of what we're delivering, we are touching around just under 2 billion customer journeys daily from an Amdocs perspective around the globe. If you look at our events that we're processing through our operations and managed services teams, this is over 450 billion monthly usage events. And not to mention around monetization. This is, by the way, the 170 billion are daily rating events. So these are data charging, rating, billing that go through the Amdocs systems. And these are not going away, right?

So if these -- if you look at these events, if anything, they are only getting larger and more complex. I think I've mentioned to several of you, if you go back 10, 15 years and you look at my relationship with the service provider, I had one phone, and this is how I connected, one phone, one eSIM and I connected. Today, I have an Apple Watch, I have a phone, I have an iPad, I have a laptop that's connected. And now I have a little travel router that goes with me with a 5G eSIM. And so now suddenly, you have 5 -- essentially 5 eSIMs connected to my service provider.

So these events and these usage events and these billing events and customer journeys, we only see this trajectory go up. There is no sign of any of these coming down. And we feel that our job in Amdocs at the end of the day, many people go, okay, so what is your 30-second pitch about what Amdocs does? And we believe our job is really to take the friction out and to make sure that the customer experience we deliver to our customers is frictionless and seamless.

And we know there's a lot of complexity in the back end. There's a lot of hybrid networks. There are a lot of systems. There are a bunch of legacy systems that need to integrate. There are so many integration points. But our customers at the end of the day, don't care about this. So our job is really to abstract all of this.

So with that, let's jump straight into it. When we think of the Gen AI opportunity around the globe, I think I'm not sharing anything that would be new to you. This is mandatory. We are at a fundamental place. I've been in technology for a couple of decades now. And I think -- I always try to compare like what were the 2 biggest events that really tectonically shifted technology.

And I would think the introduction of the Internet and IP and really being embraced or generative AI. And I would say, if I look at generative AI, the pace of adoption far outweighs the pace of the adoption of the Internet, right? If you look at the launch of the Internet and how browsers like Netscape came in and e-commerce came in, you're talking about 10 or 15 years before it became a household name.

When it comes to generative AI, we are talking about a matter of a couple of years, and there isn't a person on the planet really that doesn't have access and using it. So I think the enterprise adoption is mandatory. I don't think this is any surprise to anyone. I would say that the major shift really that we're seeing is a focus in terms of outcomes and ROI in terms of what's being invested. So you cannot continue to invest very highly in infrastructure, knowing that you have to do this, but you have to start showing outcomes. And a lot of our customers are shifting their mindset into focusing on very clear outcomes to be delivered to the business.

Another thing that's very important to our C-level technology suite is really having the right architecture. Now this doesn't mean that you will not use several different companies and large language models and ecosystem vendors and things like that. But it's very, very important to know what your North Star is and know how you govern this. And last but not least, one of the most important things is really around governance and organizational readiness.

We are seeing now that technology is no longer the long pole in the tent anymore. Organizational readiness privacy, when it comes to data and governance are becoming really, really critical milestones. And Pilar is sitting next to me. And although we are not talking about it today, I know you guys are spending a lot of work helping our customers kind of drive this organizational readiness and especially around data privacy and preparing the data. And maybe that might be another session we need to talk about one of these days, Matt.

So on to the next slide. And so as we kind of think of this evolution, this is not like Amdocs woke up one day and said, "Oh, we're going to be a Gen AI native company." This has really been an evolution. We have been very much focused on data and automation. And if you look at our strategic pillars at Amdocs, this kind of predates the Gen AI era. And we even partnered with several companies back in 2016, '17 when we saw these models, these language models evolving and really thought about how we incorporate it in our systems.

So this is really, I would say, a step function for us, but it's an evolvement in terms of where we're focused on because we were very much focused on the data. Today, you will hear a very common word that 5 years ago, people didn't know what the definition was. But today, people kind of drop it every 30 seconds. It's called ontology in the generative AI space.

And Amdocs introduced something called the Amdocs Logical Data model, which was really one of the first frameworks of telecommunications ontology before anyone else did it, really connected all of the database entities, all of the business entities, your pricing, your policy, your customer entities to really give you a logical business view of how your business operates.

And we've taken this and really evolved it to superpower, I would say, what we now call aOS. And so just to kind of finish off on the history a little bit, we launched amAIz back in, I think, the middle of '23. And this is really an evolution to that as we kind of formed our -- internally, we restructured ourselves as an organization because one of the things we realized was it's not just about meddling with things around the edges. You really had to reimagine what your organization looks like.

So we kind of took everything we knew and we said, okay, like let's start with the blank sheet of paper and completely restructured the company, form an organization that really focused on this, and it's a combination of product and services team that have been brought together. And here's where we kind of ended up launching in March of this year, which was our aOS footprint.

Now this was kind of received very well from a market perspective. Our customers kind of like what we've introduced and kind of one of my favorite pictures is down the bottom left-hand side there, you see Satya and Jensen on stage. Talking about some companies that are doing some stuff.

And then the bottom right-hand corner is the logo of Amdocs. So this is a very humble but proud moment, I think, for many of our employees to kind of see our logo on stage with these 2 great visionaries of our industry. And even as you look at aOS and you look at what some of our analysts are saying, they are saying some kind of amazing things.

If we just kind of jump to the next slide, Mike, Gartner kind of, I would say, summarized it in a very clear way in terms of what we were trying to do. We were really not trying to fiddle around with it at the edges. We decided in the same way that when we built CES around 2016, 2017, we said we need to draw a line in the sand and build a cloud-native suite that is ready for the cloud on day 1. This is really what we're doing in the generative AI space. So launching aOS is our first step in going towards a Gen AI native suite that can deliver those outcomes.

And I think I've kind of covered most of these, I think. So let's jump to the next slide here. So I want to spend a little bit of time talking about the framework of aOS and what it really encompasses. So at the bottom, you kind of have our BSS and our OSS suite. These are still really our systems of record. These hold most of our customers' data around the world. These hold the relationship, the policies, the procedures, the customer journeys, the business flows, how you do business. And every one of our customers around the world, believe it or not, does business differently, right?

They may use our same systems, but they operate and go to market very, very differently. And I'll come to the middle layer because this is kind of at the heart of it in a second. But at the top is really an opportunity that we didn't play in, but we believe that when it comes to the way the business operates and where the business functions, there is really an opportunity to use Agentic capabilities in terms of our business and networkflows.

And also, we will talk about our Agentic services, which is on the right-hand side here. This is, at the end of the day, really how we superpower our services to be delivered under the Agentic Services banner to really give you outcomes faster.

The last part that I want to talk a little bit about here before we jump to the next slide is one of the things we allow our customers to do is, look, we are not coming to the market or not coming to the customers and telling our customers, you know, dear ma'am or sir, you need to take everything from us. It's a one-stop shop.

We understand at the end of the day that this is going to be an Agentic mesh framework. And there are going to be different companies, different large language models that our customers are going to work with. And so we are allowing our customers to build on top of our ecosystem to really use our components to supercharge and superpower what they're doing. So think about a car being put together. They don't have to reinvent the wheel. They don't have to go and reinvent the engine, right? They can take these key components and put it together.

One of my favorite analogies that you guys know is I always talk about the LEGO store, right, where you go into the LEGO store and you pick a bunch of blocks. And at the end of the day, no one's asking a kid to go and build a LEGO block. We are the people delivering those LEGO blocks. But the imagination of our customers and the ingenuity of our customers are putting to these together in the different shapes and forms.

So let's kind of double-click on a couple of these layers now. So the cognitive core, which really is at the heart of everything we do, this is the new layer that we've introduced. And this starts from a few different things. So it brings all of the telco context. So you think of Amdocs, think of it as we go from 0 to 100 in terms of super verticalized telco context.

It's 40 years of delivering to customers, understanding the context, not just from -- we're not a company that just does a customer management system or just does a workflow. We're a company that takes an order, captures the order, handles the order, puts it in your billing system, sends it out to the warehouse so it can be provisioned. And oh, by the way, provision it on the network and don't forget to bill and charge and rate for it, and you may have to also go through a collections process.

So in terms of when you come to the verticalized knowledge of what we do, we have this deep understanding and that is now all taken in and put into our cognitive core. So when we're asking it a task, it understands all of this.

I like sharing a small example just to highlight some of these. You take something like proration, for example, which sounds like a very simple thing, right? You need to prorate a customer's charge. But you take proration within a complex ecosystem, there are over 250 different database entities that has an impact on proration. And if you don't know this, you are highly likely to provide information that's not accurate.

And so this is really key part of the differentiation. I spoke a little bit ago about the -- let's stay on that slide for a second, Mike. I spoke a little bit about the telco ontology. This is really where I think Amdocs shines. We have been working on the ontology before it was called ontology before people threw it around like hot cakes.

And this is really the Amdocs logical data model. This is really how we know how a business operates to all the technical bits and bites on the hundreds -- there are some companies, where we integrate to over 250 systems to provision an order and interfaces to provision an order. And you need to understand this. You need to know how it connects in order to provide accurate results.

There are some people going, "Oh, like what is the problem? Like let's just take a bill and feed it into a large language model, and we can get it to explain it." But not what we do. We take context engineering to the next level. So we take all of this information and the information we provide into kind of the nondeterministic angles of the system is next level.

And so we believe the level of accuracy we get, the level of low latency we can provide because remember, at the end of the day, we are still working with telecommunications companies. So latency is a super, super critical element that maybe can be tolerated in other industries that cannot be tolerated in our industry. So these are super important things.

And then we took all of kind of the eTOM models and we looked at what are all the roles across the entire telecommunications space, and we broke it into agents and subagents and tasks. So we went right down to the granular atomic level to be able to make sure that whatever comes out tomorrow, we will have the components to be able to deliver it.

And then as I go up the stack, we communicate in very different ways, right? And by the way, this is also evolving. So whether it's MCP today or agent-to-agent capabilities or whether it's more traditional SDK API connectivity, we are also all over this, meaning we do it today and we provide today as the market evolves. But as we look at open core capabilities and some of our customers looking at how to use this, we integrate these back in.

So you have these native connectors that we will be able to connect to our cognitive core. And this is really where I feel like we accelerate and differentiate because we're just not trying to like put a finger and stop the water from leaking. We are kind of reimagining what the telco experience could look like. And this is really why we thought aOS is the right name for it because we're really imagining how our customers could operate in the new world.

So I spoke about this. So aOS is really just the next version, I would say, of evolution of the amAIz, whereas amAIz really focused on specific customer care agents, things like that. aOS is really reimagining natively what your experience should be.

So now with all of that talking, I'm going to take a break and show you a demo here of how we operate. And I'll step in here just to interrupt and highlight some things. But what we are going to see is really a demonstration of what that end consumer experience could look like. And so what you will see is a customer coming in and having a question or query, I would say, about their bill, and you will see how the agent responds.

Now I will tell you that if you -- we had this discussion 12 months ago, many of our customers were looking at having a human in the middle in terms of interacting with this output coming in. But our customers are getting very comfortable of providing this input directly from an agent to the consumer. We are getting a very, very high level of 90-plus percent accuracy, which most of our customers are very happy with. So with that, let's kind of kick off the demonstration, and I'll step in here and explain a few things.

[Presentation]

So what you see on the left-hand side is really an extract of what is happening behind the scenes...

[Presentation]

You can just pause it there for a second. So if you notice what happened here, you have an incoming call of a customer that's probably a little bit high rate, got a bill shock and we give a very succinct, clear empathetic response in terms of what occurred. But we also use that opportunity for a potential upsell.

Now we are able to do this at the speed of light because we're also looking at its entire history, its entire customer journey. We understand that the person is traveling. We understand that this could be a -- it's the right, I would say, the magic moment to interact with the customer journey.

[Presentation]

If I can just explain for a few minutes. So here, a few very interesting things happen in the back end. You are looking at the company's policies and procedures. You're looking at a digital twin, and we're just zooming into the back-end systems here. You're looking at a digital twin persona of the customer to look at the propensity of the likelihood for them to accept something or not accept something and you're basically offering them a discount or a voucher based on the policies and procedures of the company, of the mobile plan and of the customer.

[Presentation]

So this is the automatic orchestration of it.

[Presentation]

And so none of this is guesswork, right? All of this is going down to the system of records, going down to your SOP, Standard Operating Procedures, looking at it, there's a governance structure in place and the cognitive core provides all of these capabilities essentially back to the user. So I think you kind of get the flow and how that works. And maybe let's go back in the essence of time, go back to the presentation.

And so I think summarizing this, if you look at the time to value and you look at how quickly this can be done, this would generally be just to get the first response from someone you're speaking to on the phone, it's essentially a 12- to 14-minute call calling a call center. We can deliver these results within 45 seconds. It's very specific. It's a context of one to the customer. And our customers can integrate to the cognitive core at any level that they want, for example.

So I've spoken about CES. We continue, obviously, to invest in CES because this is super important in terms of delivering -- running your business at the end of the day, right? This is the engine that continues to run your business. So that is not going away. Now the lines may change in terms of what is deterministic, what is nondeterministic. But in terms of making sure that you have a catalog with your offerings, making sure that your sales process runs the way it's meant to run, making sure that your customer care journeys are defined. Monetization, and you can probably just go to the next slide, Mike.

Making sure that these key fundamental functions are delivered, delivered within the policies and parameters and making sure that your business can launch new offers and new products and taking the friction out and how that's delivered is still a core part of CES. So still, this becomes a cornerstone of what your generative AI capabilities are going to deliver at the end of the day.

So now we're going to jump -- actually, one more before we jump into services. The Agentic business and network flows is an interesting area for us. This is not an area we've traditionally played in. So this is really an opportunity for us, and we can just go to the next slide, Mike. So these are areas that our customers have where they run operations. And there's a huge labor kind of arbitrage there, right? There are a lot of companies that there's tens of thousands of people that do these functions.

We believe that the technology available and some of our Agentic capabilities that we essentially provide directly to consumers can really apply in expediting this, accelerating the outcomes and even providing better outcomes in areas such as order to activation, billing operations. So this is really, I would say, a new opportunity for the company.

And in the same vein, if we do one more click and look at kind of some of these network workflows, many of our customers are talking about how do you go towards a dark knock. So we are very focused on -- although we're not talking a lot about it today, we'll show you a demo at the end of some of this. But think about service assurance. Think about having a closed-loop system, where a fault is being found, it's being addressed automatically and a customer is being notified.

This is really the future of tomorrow that generative AI can deliver. And again, really taking a lot of this labor arbitrage out of the equation. And so next, we are going -- I'm going to hand it over to Pilar to talk about our Agentic services and really how this is being superpowered by aOS.

Thank you, Anthony. So I'll take some time to ground us in what we mean by Agentic services. And basically, there are service domains that span across IT operations, data and AI, cloud, experience design and quality engineering. And these are activities that are transformed into intelligent, automated and orchestrated workflows that go down to the very, very level of the system of record, which is the unique thing, I think, here.

Each domain represents a concrete set of capabilities that we -- where we move from traditional manually effort-driven work towards government enterprise-grade workflows. And what we can see, and if we can move to the next one, I'll take you to how they operate in practice.

So here, first off, this is a significant paradigm change for the industry. This is an evolution of what we have done. Amdocs has always been very outcome-based, and we've seen that. This is us taking the services that we have done all along, and we are codifying that in a services and software paradigm, which is IP-based and defensible. We look at these domains and basically, we see how the core components of the complex services. And we do a lot of that. We make it seem simple.

Like do you expect infrastructure to work, do you expect your phone to work? And when it's not there, it's disappointing, you don't want to see the complexity. This is taking it to the next level. So what was one's implicit expertise that lives in people's heads with 20, 40 years of experience serving our customers are now being codified in the agents and become orchestrated intelligence.

Now that unlocks real value for the customers. Why? Because if you talk to almost every enterprise customer nowadays, legacy modernization is a key thing. They know they are keen to take advantage of Gen AI, but they know in order to get there, legacy modernization is part of what needs to happen. And that's why I think Agentic Services are so exciting because they live in the lane where velocity happens with Agentic adoption.

We have structured processes. We have structured data. We know that is where you get ROI. And this is, for us, part of where our differentiation lies. We get to strategic outcomes faster because we have invested over the years, even before AI in building the lanes that will get us there. And we're very committed to doing that in a way that's delivered at the pace of our customer readiness.

Anthony mentioned customers are increasingly comfortable putting agent, care agents talking directly to customers without human in the loop. That's not necessarily the case in some of the other services, and we are committed to doing this at the pace of their readiness. Ultimately, what we have seen with Gen AI is that as people get their organizations ready for it, they need to do it at a pace that makes sense for them. And that will be varied according to different customers, different appetites, different regimes.

We're a global company. There will be very different data regimes, very different regulatory regimes. And we want to make sure that customers understand that we are there to basically give them as much or as little human in the loop as they need based on their current situation and their confidence and trust in the technology, and they will start putting workloads that they feel comfortable with and move on with that.

So if we go to the next slide, you'll see exactly how this works in the demo. But given how important legacy modernization is, I thought I would take you to intelligent app modernization as an example. And these slides basically takes you through the 6 phases that every customer going through intelligent app modernization would go to.

What you see, I think, and what we have seen over the years in this type of services, they're heavily constrained by the number of things. Typically and especially in some areas like mainframe, heavily constrained by the talent pool. So very often, as a program leader when I was doing...

And an aging workforce.

Yes. And an agent work for -- aging workforce, and that's aging. And that's been the case, I think, since I've been in technology. So like we had COBOL developers in our back list many years ago. I know, and I'm not the only program director that has done this, I have shaped mainframe modernizations based or migrations based on the available talent.

That was my key constraint. And now this is changing, and it's changing in very exciting ways because it's opening up it's opening up opportunities that we didn't have before. So what I'm going to take you through is, I think if we go through the journey, what you're going to see in the next slide, please, is how the collaboration between humans and agents can happen.

So what we show here, and I'm going to use the example of workload discovery because I think it's the best one. We have systems of agents. This is unique in 2 senses. The first one is that these are not generic bots. They are not accelerators that are put forward by a platform. They are agents that benefit from both our collaboration in R&D with our partners, which is very deep, and the expertise, the human expertise that has all of that implicit knowledge and all of that explicit data knowledge and structure at the system of record level. And that's all baked in and encoded into our agents, which actually operate as a system and in an integrated fashion, going from task to subagent to agent in a coordinated way.

What this allows us to do? Is do what I think is the ideal situation, the best of both worlds. Agents are able to do volume at industrial scale. They can do that consistently, like no human can read like lines of code the way agents can do, and they can do that in parallel. Humans are able to do what we do really well, which is understand the changing context, the parameters of the organization, the risk appetite. We live in very interesting geopolitical times.

So your modernization planning might make sense based on the readings of the past, but that's where the human comes in and goes, well, actually, this has just happened. Therefore, we need to refactor the modernization recommendation and that allows you to spend time doing scenario planning, for instance, which was costly and expensive to do before.

I always tell people that workload discovery is where migrations slow down. You start and very quickly, you find that you're not going to go to the level of depth that you would like to do if you do it manually. This is actually derisking that for our clients, and it will allow us to focus on where the energy is. So I'll take you to the demo quickly. I'm going to save myself some words.

I'll take Anthony's example. What I want you to focus on here is 3 things, I think, that are super important for the Agentic services. The first one is that -- and I'm taking you to the example of intelligent app modernization because I want you to see the depth and the thoroughness of the agents.

We're going to focus on 3 areas here. The first one is the business outcomes part of it. This is preconfigurable. And for this type of services, it matters a lot because each of our customers is different. If your app modernization target is to do a data center exit, that's time, time is going to be more important to you than maybe other considerations.

In this example, it's going to be time to market, but it could be any of the business considerations that our customers have, and that's how intent gets transformed into outcomes, and it's very important for us to track. Then I'm going to call attention to the left-hand side, where you have the level of depth of the agents and how they navigate all the way down to the system of record, which is very important.

And finally, this is the difference from what Anthony showed you before. Anthony was showing us the outcome as it as the end consumer sees that. This is very different. This is the end user experience is the enterprise user view. So that pain there is where humans and agents collaborate, where you will have -- or you can see how we will get you get reports, you get artifacts from the agent. but then the human will evaluate, stress, assess and then decide, okay, yes, go for it.

Let's have a look at it.

[Presentation]

Okay. So let's stop here because this is the important moment. This is the human in the loop moment and that's where the appetite of clients is going to vary. You would spend time here interrogating the output that you get and having the organizational conversation. And I expect that there's going to be a range of how much or how little our clients need there, and we're seeing that already in engagement, and we're happy to accommodate their pace and their comfort because ultimately, outcomes are built on trust. And in this type of work, trust is built with the human. So if we can move on, I think you're going to see...

[Presentation]

Mike, if we can stop there because I think we have seen the gist of it. What I find is incredibly exciting is how tightly integrated all of the different agents are and that they are very specific to the industry. They really understand situations.

If you're doing a migration when a user is trying to buy an iPhone, well, revise that. And this ties back to the policy code. We were talking about earlier, which I think really matters to get to outcomes fast in the industry. And I'll give that back to you.

Okay. Thank you very much. It's exciting. So we're going to very quickly -- we're going to rush through some of these slides just given the timing, but we want to talk a little bit about the outcome here.

Let's go to the next slide, Mike. So we always -- everyone knows about the traditional bots, then we had kind of the, I would say, the AI-enhanced era. And now we are really at the Agentic era where really it's a context of one, where you're having a digital twin that knows the propensity that someone will take an offer or not take an offer or how they will react.

You intuitively look at the internation on how they communicate and you react your response or change your response based on that. And that is really where the area that we're in. And with that, I want to share some of the outcomes in terms of what we're seeing.

So you see things like this is one of our customers that deployed it via WhatsApp channel, 135% NPS improvement. The CSAT increase, something we didn't think faster payments. Why faster payments? Because they understand the issue better. They don't have any complaints, so they pay it and move on with their life, right? 40% reduced waste times. And these are really some of the outcome metrics that we love to look at and love to track.

If we jump to the next slide, this is one of our Tier 1 North American providers. When you look at call centers, at the end of the day, there are 3 primary metrics everyone always measures, AHT, SCR, NNPS, average handling time, first call resolution and was the customer happy.

And to see all of these 3 things increase with the customer is being in the industry for so long, this is something that's pretty cool. But I also don't want to forget that last point at the end here. From the time we started to the time we end, we ended up with 60% less tokens as we tune it. We understand that it can't just be cost rising just to get a good result. We also have to work on the overall cost structure of what we're delivering.

Let's jump to the next slide. And so we've spoken to many of you guys about different POCs, but we have many customers now using our data and kind of AI capabilities in different shapes or forms. And we think we're delivering something that either our customers are looking at or already trying to build or needing to build desperately.

So really, it's a place where we feel that we're meeting them. So now I want to introduce Liliana here to talk about our strategic partners, which really is a core part of our strategy because we believe these 4 partners really accelerate everything we're doing, and we work with them very deeply. So Liliana.

So thank you, Anthony. So I'm very excited to be here to talk about those 4 strategic partners. Amdocs has a wide variety, as Anthony mentioned earlier, of ecosystem of partners. But right now, we're going to focus on those big 4, AWS, Microsoft, Google and NVIDIA.

So what is so special about this partnership, the strategic partnership that Amdocs is having with them? First, we are sharing vision. So combining Amdocs deep telco expertise and offering that actually we are managing it for, what, 4 decades right now, combine it with the fastest technology that those amazing companies provide us -- we want to lead the telecom industry into -- together into the Agentic era by offering the different unique cross-domain solutions that were presented throughout aOS and the different components of aOS.

And why those strategic importance are coming to us with those partners. So as we said, it's the deep knowledge, but our partnership is very intimate and very multidimensional. So with those 4 partners, we're going deep as R&D to R&D. We're developing engineering to engineering solutions. We have a shared go-to-market. We have a shared sales campaign, share offering. And that actually opens up the market share that we have together.

We co-innovate more and better together with all the different amazing things that Anthony presented here today as well as we are using them internally. So even Amdocs is transforming and becoming more agenting using some of those AI transformation with our products and our services. And which are the domains we're focusing.

So obviously, those companies are broad. And we are trying to focus on domains that might be relevant for the telecommunication industry. So when we're looking at the different domains that when this 1 plus 1, 1 plus 4 here becomes 11 is how we are extending this aOS suite into more Agentic power customer experience into Agentic like we discussed right now, the services, right?

We are running together into modernization, different levels of modernization, second and so on and so forth. So now let's see how we're translating those partnerships into live examples of where they're embedded within aOS value proposition. So I'll just share a few examples.

So one of them, and we've seen a demo just before, is how we're embedding our cognitive core within the telco contact center that right now, we see a lot of dominant solutions such as Gemini Enterprise for CX for customer experience as well as AWS, the contact center. It's all integrating with Amdocs telco-specific knowledge that provides, as Anthony described before, way more accurate and trustful results, right, using the amazing tools that we are providing with our partners.

If we're looking into another example, maybe it's a flagship of an example that shows how deep we are going in our partnership. And this one goes with what we call customer engagement platform. It's a product-to-product integration between Microsoft Dynamics 365 that has Agentic solution for the entire customer experience from marketing to sales to customer care, to CRM, to case management, all of that is actually pre-integrated with Amdocs BSS suite, mainly around the care and commerce as well as CPQ.

And those solutions provide end-to-end new customer experience with the agent, and Agentic solution inside to provide new customer experience through B2B and B2C offerings. If I -- we talked a lot about the Agentic services. Maybe just to point out, obviously, what we have heard today is strongly embedded within additional tools that we use, like, for example, the Amazon Transform, right, we use it and embedded when we are actually creating our own tools. Same goes with Microsoft with Fabric IQ and so many more of the latest tools embedding within our different services.

I'll touch quickly on 2 more examples of that, and then we can actually see this demo later on around autonomous network, right? As Anthony mentioned, we are partnering here with NVIDIA doing digital twin of the network. We're actually mapping that through the RAN network and trying to predict some faults and actually to prevent them. We can simulate that. We can test that -- we can deploy it ahead of time before it goes into production.

So all this preventive care and service assurance and network assurance can be done with our partners here. And the last point here on the shared offering is around Sovereign AI. We are partnering obviously with AWS. They have a very robust Sovereign AI. We are the service arm and sometimes the monetization arm for them as well.

As well as AI factory, we see that as one of the most important use cases right now is how we are actually servicing our telco customers with their potential enterprise customer, who wants to use the AI infrastructure. So that's where we are bringing all the stories together.

Now I'll finish this one by one sentence here. Amdocs is doing it internally as well. So we are transforming -- Amdocs itself is transforming to become more a frontier firm. And we're doing that hand-in-hand with a very strong collaboration with Microsoft. So Microsoft has this vision of very advanced companies that can transform themselves through the Agentic phases and Amdocs going through this phase with Microsoft, and we are looking and embedding more AI and automation through copilots, through different tools we have out there through our different business units within Amdocs, like sales, like finance, IT and so on and so forth.

So now I'll just give a glance of a few real examples coming from our customers. So one case study we see here is Vodafone. So Anthony mentioned how deeply we understand the data and data structure this in the telecommunication industry. So combining Vodafone request to actually migrate a very complex enterprise data warehouse into Google Cloud, Amdocs is the one who actually performed this work and moved everything into the Google BigQuery and that resulted in much faster time to see insight.

It allows them to have AI native data foundation that can drive way more use cases. And obviously, it reduced some of the cost of running those data platforms. I'll give another example, and it's similar to some of the examples Anthony shared before, and it's an APAC Tier 1 customer that we implemented with CP that I presented before. It's the customer engagement platform that, as I said, it's Dynamics 365 of Microsoft and Amdocs Commerce and Care combined together.

Here in this case, we modernized the customer service and unified all the customer channels into one platform. And it's amazing to see like what we've seen with Anthony presenting some results with another customer and this customer we are improving drastically one of the, I think, a highly ROI outcome is the customer experience. And here, in this case, the case management was improved as well as the NPS that we've seen with the other customers and first call resolution.

And overall, those agents, over 4,000 agents could provide services to their large customer base. And then there is another example. Anthony, you want to share with us?

Yes, sure. I think we're actually going to show a demonstration here in terms of -- and Matt, we might actually not show the entire demonstration. I might actually just talk about it given the time because I want to leave it.

Absolutely. We can put this on the website as well, so.

But the demonstration we were going to show was actually our partnership with NVIDIA and Omniverse and how we basically created an entire digital twin of the network and allow autonomous healing, problem detection by using a digital twin.

And in the same way, we think this capability is relevant not just to create a digital twin of a customer, but to create a digital twin of towers, to create a digital twin of the network. And really, it's very pervasive in terms of how we can use it. But with that, Matt, maybe we'll just kind of pause for a second and open it up for any questions that people have.

Absolutely. Jill, do you have any analysts on the line?

[Operator Instructions] Our first question comes from Tal Liani with Bank of America.

You actually have Tomer Zilberman on for Tal. Anthony, maybe 2 for you. I wanted to ask, first, you talked about amAIz to amAIz platform earlier. Is this aOS, is it an extension of the amAIz platform? Or is it a replacement of the amAIz platform?

And the follow-up to that is, can you give us any commentary around what the traction was or is for amAIz and how aOS changes the adoption rate in terms of Agentic because you had some earlier commentary around customer readiness for Agentic. So does that change the migration path? Does that speed things up? Does that slow it down given where your customers are in terms of being ready for Agentic?

Yes, that's a great question. So think of amAIz as kind of our version 1 entree into this. And what it provided was really Agentic capabilities. Think of aOS and the cognitive core as a complete reimagination. Yes, it incorporated every single thing we learned from amAIz into it. But it basically allows us -- to the second part of your question, it allows us to meet our customers wherever they are at.

So if amAIz kind of provided a certain functionality to a certain set of customers, aOS now allows us to help our customers build out their Agentic fabric to help accelerate their transformation, to help in a mainframe modernization. So it gives us, as a company, a lot of different, I would say, handshake points or insertion points with our customers to be able to provide solutions at different places. This is one element.

The second element is really just bringing it all together rather than having bits and pieces, so our customers can pick and choose how they integrate with us. So we feel that we've been thinking about it, obviously, for probably, I would say, the last 18 months or so. And aOS was a framework to allow our customers to run faster to integrate at wherever they are in terms of their customer journey and their build-out of generative AI architecture.

And the third thing was really to focus on business outcomes. I mean we doubled down on this like we probably never had before as a company and said, you're not building something unless you're going to really deliver a business outcome at the end of the day.

Got it. Maybe as a follow-up, just to that last point, are you thinking about any changes in your pricing model for amAIz versus AOS?

Yes, it's a great question. Look, we are testing the waters. We're thinking about it. As you can imagine, I don't think anyone in the industry has reached any level of equilibrium in terms of what monetization looks like.

I think everyone is going, well, how do we charge for it? Is it tokenized? Is it not? But I'll tell you one part about it, some of the savings that these things can be delivered are pretty big. So definitely, we're thinking about what are the different monetization models that can be out there that can basically help us. But we're in the middle of that process at the moment.

[Operator Instructions] Our next question comes from Timothy Horan with Oppenheimer.

So Anthony, obviously, the AI adoption by the carriers can massively improve productivity and quality. Where do you think -- and I would assume they're under a lot of pressure to do so or will be competitively. When do you think adoption really starts to accelerate? And what's kind of the main barrier to adoption?

Yes. Tim, it's a great question. Look, I think in terms of adoption as a technology, everyone is there, right? Like I don't think -- I've met hundreds of customers at Mobile World Congress from around the globe. I don't think there is one customer that isn't doing anything with it or trying to accelerate their customer journey.

I think where we are right now is really saying, okay, so we've got this in place. How do we focus on the outcome that can be delivered. That's really, I would say, where the focus is right now. And the second part, I would say, is trying to figure out what that blueprint looks like because you need some resemblance of a blueprint. If not, it just becomes a Wild, Wild West, right?

Because everyone is like, yes, I'm doing AI, I'm doing AI. And so you can't add 1,000 different vendors doing 7,000 different things into the equation. So it's about determining who your domain partners are that you want to partner and ones that would really commit to delivering an outcome on this, I would say.

You want to add anything on that...

No.

And just on the digital twin, I think you're implying that we're going to have digital twins for every piece of their business, not just the network, which would seem to be a game changer to have a digital twin for the network, but also for the entire IT stack and maybe even customer databases and on and on. I mean, so where are you with implementing digital twins and where are the first places which you see it?

Yes. So I'm a huge fan of the NVIDIA, Omniverse framework and architecture because I think really that unlocks so many different things. We are focusing on a few different spaces where we are starting to get a lot of traction with customers. So definitely in the network space on specific segments.

So when it comes to network rollout, when it comes to service assurance in terms of problem solving, where you can kind of do spectrum optimization, where you can do rerouting of networks. I think digital twins can play a very, very big part there. In terms of problem resolution. The second part, which I think like probably got more interest than I thought it would have gotten was when we presented our view of the digital twin persona of a customer.

So we trained -- basically, we take all of this customer information and data and propensity to do XYZ and put it into a certain persona. So when you're dealing with a customer, you don't have to guess. You're already going into it going, hey, like I have this marketing offer. There's a 75% propensity that a customer with this persona will actually lead to a conversion in a sale, right?

So that part is very, very interesting. And as you can imagine our telcos sit on a lot of proprietary data, and they can use it internally, however they want to sell their own products, right? So there's no privacy issue or anything there. But I think building those personas and using those personas, I think, is a little bit of a game changer versus, "hey, here's a technology, let me hope that this technology delivers the business outcome that I want." So we're pretty excited about this, and we're really starting to incorporate it in many areas of the business.

Our next question comes from Shlomo Rosenbaum with Stifel.

Would you say that the aOS is geared more towards small and midsized clients, larger clients, who is most likely to be adopting this? Would it be the ones that need more help getting usage and implementing Gen AI? Or is it going to be the larger customers that are already more sophisticated over there?

Thank you, Shlomo. I love the question because that's something I forgot to mention. So one of the fundamental principles of aOS is that we have different customers at different stages. So if you take our Tier 0 or Tier 1 customers, they are already way down the journey, right? So they have an ecosystem, either they're building it internally or not.

And so with aOS, like we had a meeting this morning with a very -- one of our large strategic customers, and I was in the meeting. And one of the discussion points we had was where they can integrate. So they wanted to integrate at a couple of levels down to compare to what maybe a Tier 3 or Tier 4 customer would discuss with us, right?

So we had some smaller customers going, "Hey, that's fantastic. Let's take your entire agent, put the entire aOS infrastructure in and run with it, whereas some of the bigger ones may want to integrate at different points. But at the end of the day, we want to like kind of like that no customer left behind comment, right? Like we want to make sure that aOS can integrate at different places. And that's why by design, we also made it very open.

So if you think of the different layers that it comes with, it comes with the fully fledged agents. It goes to the super agents. It goes to the subagents, it goes to the tasks, it goes to MCP integration, agent-to-agent integration. And all of these are very, very different integration points that different tiers of customers will come in, and they are, by the way, we see it even right now.

By the way, one of the challenges that we try to overcome with this is that no 2 customers have the same journey or the same experience or even the same destination that they want to get with, with generative AI. So it's not like there's a cookie-cutter shape, and this is really what aOS is also trying to address. So thank you for the question, by the way.

And then so do you envision this pulling along modernization ahead of clients going ahead and implementing aOS? In other words, when I think about the impact on the company, are you going to go ahead and say, "Hey, we've dangled this in front of you, and therefore, we have to do XYZ amount of work for the next 2 years, and therefore, you're going to have this?" Or is this something where you're going to start out earlier on with the clients? Just maybe give us a little bit of color on that.

Yes, sure. So at a macro level, you can think of software really broken into 2 parts, right? So Part A is what we call nondeterministic. This is essentially 100% the generative AI space, right? And there's the deterministics, which are the system of record, which is the standard operating procedures, the catalogs, the policies, the pricing, the billing, things like that.

That -- the deterministic part, no matter what anyone says, is not going away tomorrow. Now the lines may change, the lines may be blurred. But at the end of the day, you still need to collect an order, deliver an order, provision an order, operate, bill, collections, do all of those fundamental core mission-critical pieces, while delivering on all of these nondeterministic promises.

So yes, we believe that some components will be pulled in, right? So I'll give you an example with one of our customers where they're taking AOS and they're like, well, in order to get the maximum out of generative AI, we also need a modern enterprise catalog, right? So they will go down the journey of modernizing the enterprise catalog because what they have now, for example, it's an older version of a catalog, which takes 3 days to update a product, right?

And so you can't really do some of the capabilities like digital twins and propensity to buy, sell, which are all real-time events. You cannot necessarily do that with legacy systems. So you have this ongoing argument, right? I mean, when we look at a macro perspective, do enterprise systems stay? Do they get replaced, things like that. And we believe that there is a world where, yes, there will be deterministic components and nondeterministic. And in our world, we have to balance these 2. And yes, I believe one will also pull the other.

I just had one last question, and I'll hand it off to someone else. Just in terms of the example that was brought with the customer service that was being shown earlier, the Bill Explainer came out a while ago. And maybe you could talk about the adoption on that and whether that would be a good indication as to the adoption on aOS? Or is that not something that I should be looking at in terms of how one is indicative of clients' propensity to adopt?

Yes. So the Bill Explainer and the customer care was really the, I would say, the cornerstone use case that came out of amAIz, right? Now obviously, that's expanded, and we are now cross-selling and upselling and doing all sorts of things.

But you're right. I mean that's essentially where it started from. And we've gotten very, very good kind of customer traction and adoption and where customers even want to integrate at different levels of the tasks or subagents to help them.

So for example, they might say -- actually, we do have a care Gen AI agent, but we really like the level of accuracy you guys give in A, B, C, D domain, can you incorporate it and integrate it. So that is happening at the moment. When we look at aOS, that then expands it to, #1, different domains; #2, different insertion points and integration points. And #3, kind of what you mentioned before, it kind of pulls in some of the capabilities of the underlying system.

So it also creates an opportunity for modernization on some of those components. Like billing, right? I mean, think of monetization -- we have some launches that happened lately about very, very different monetization mechanisms, even as kind of 5G stand-alone and 5G advanced starts to evolve, people are looking at very, very different ways to monetize it.

Now these capabilities still need to be built into the enterprise systems in order to be exposed. So yes, that's kind of, I would say, the evolution from amAIz to aOS. aOS just kind of expands that and gives you more depth.

I'm not showing any further questions on the phone line.

Okay. I think we're well over time. This has been a fascinating discussion. I want to thank our presenters for today, did a wonderful job, Anthony, Pilar and Liliana. Awesome. And if you have any questions for us, and we didn't get a chance to address your question on today's call, by all means call out to us here in the Investor Relations department. We'll be pleased to get back to you.

And with that, thank you for your time and your interest, and we'll wrap it up.

Thank you very much.

Thank you.

Thank you.

Ladies and gentlemen, this does conclude today's presentation. We thank you for your participation. You may now disconnect, and have a wonderful day.

Thank you for standing by, and welcome to the Amdocs First Quarter 2026 Earnings Conference Call. [Operator Instructions] As a reminder, today's program is being recorded. And now I'd like to introduce your host for today's program, Matt Smith, Head of Investor Relations. Please go ahead, sir.

Yes. Thank you, operator. Before we begin, I need to call your attention to our disclaimer statement on Slide 2 of the presentation. I note that some of our comments today may be forward-looking statements and are subject to risks and uncertainties, including as described in Amdocs's SEC filings and that we will discuss certain financial information that is not prepared in accordance with GAAP.

For more information regarding our use of non-GAAP financial measures, including reconciliations of these measures, we refer you to today's earnings release, which will also be furnished with the SEC on Form 6-K.

Participating on the call with me today are Shuky Sheffer, President and Chief Executive Officer of Amdocs Management Limited; and Tamar Rapaport-Dagim, Chief Financial and Operating Officer. To support today's earnings call, we are providing a presentation, which can be found on the Investor Relations section of our website. And as always, a copy of today's prepared remarks will also be posted immediately following the conclusion of this call.

On today's agenda, Shuky will recap our business and financial achievements for the first fiscal quarter 2026, including our strategic progress in generative AI and data services. Shuky will finish by addressing our financial and business outlook, after which Tamar will provide additional details on our first quarter financial performance and guidance for the full fiscal year '26. And with that, I'll turn it over to Shuky.

Thank you, Matt, and everyone joining us on the call today. Beginning on Slide 6, I am pleased to report a solid start to fiscal 2026 as we continue to focus on our primary goal of accelerating Amdoc's long-term growth and position of ourselves as a market leader for the GenAI era. First quarter financial results were consistent with our expectations. Revenue of $1.16 billion was slightly above the midpoint of guidance, rising 4.1% from a year ago and 3.5% in constant currency. .

Profitability improved by 40 basis points from a year ago and was unchanged on a sequential basis, reflecting our commitment to balance internal efficiency gains with accelerated investments to support long-term growth. Non-GAAP diluted earnings per share was $1.81 above the guidance range, primarily due to a lower-than-expected tax rate for the quarter. And we finished Q1 with 12-month backlog of $4.25 billion, up $60 million sequentially and 2.7% from a year ago.

Turning to Slide 7. I'd like to thank our people around the world for their part in delivering best-in-class mission-critical operations support over the holiday period, and for achieving a high number of milestone deliveries under the many outcome-based projects and managed service engagements we are supporting for our customers. Q1 included several important developments which strengthened our underlying basis business, accelerated our global growth potential and advance our generative AI strategy.

First, I am proud to announce that we signed a new multiyear agreement with T-Mobile that includes managed services, software development and AI innovation. Under the new agreement, T-Mobile and Amdocs will collaborate to support T-Mobile growth strategy and business objectives. Amdocs will continue to support T-Mobile's consumer business domain, including implementation of GenAI technology where applicable.

As part of this agreement, Amdocs will also support integration activities related to common systems. Additionally, we are supporting T-Mobile in the integration of USCellular. As a reminder, integration activities by nature are nonrecurring and are ramping down by design once the integration is completed. Overall, this important agreement extends our long-standing strategic collaboration with T-Mobile.

Having said that, as mentioned last quarter, we expect a revenue decline with this customer in fiscal 2026 due to a lower level of spending. Second, we expanded Amdocs global customer footprint and progressed our international diversification strategy this quarter through a combination of organic and inorganic moves. We signed an expanded multiyear engagement at Vodafone Germany, the largest of Vodafone operating companies and won significant transformation awards with 2 new logos in Western Europe.

Additionally, I'm excited to report as we close the acquisition of Matrixx Software for $197 million cash at the end of Q1. Based in California, Matrixx is a strategic consolidation move, which complements and extends our leading market position around the [ controlling heel ] of billing, monetization and charging solutions. As such, we believe there is an amazing potential to bring our full suite of product and managed services in support of Matrixx impressive customer base. These customers include major Tier 1 service providers such as Verizon, TELUS, Telefonica, Swisscom, Three, Virgin Media O2 and Telstra as well as a growing list of many smaller peers operators and MVNOs.

Third, I'm encouraged by the highly positive recognition Amdocs is receiving as a market leader in data and generative AI from customers and industry analysts like Gartner. In my opinion, such recognition directly reflects Amdocs very deep domain expertise which is unmatched in the telco vertical. During Q1, our commercial momentum continued with additional GenAI GI-related wins at TELUS and other customers. Our next generation AI platform development is also progressing to plan with today announcement of aOS, an agenting operation system purpose built for telecommunication, which we plan to showcase at Mobile World Congress in early March.

Now turning to Slide 8. I'd like to provide some additional color with respect to our growth strategy, which is designed to deliver the tech-led products and services our customer needs to maximize the value of generative AI data across our customer footprint, accelerate the journey to the cloud, digitalize customer experience in consumer and B2B, monetize next-generation network investments and streamline and automate complex network ecosystems.

Starting with data and generative AI on Slide 9. We are busy executing the recent Gene related commercial awards as we won with Optimum, Consumer cellular, e&, Telefonica Germany and other first-mover adopters of Amdocs amAIz, our generative AI platform that leverage NVIDIA's AI capabilities. These early awards provide proof point as to the important role of generative AI in telecom industry and transformation. As witnessed by the consistent pipeline expansion and growing commercial progress we are seeing. As an example, TELUS, Amdocs and NVIDIA recently teamed up to deliver advanced AI clouds quality engineering solution on the TELUS sovereign AI factory.

Specifically designed to meet Canadian data residency and compliance mandates, this strategic integration will enable secure autonomous testing, automation and validation for Canadian enterprises and government agencies, helping them to adopt generative AI securely and to roll out digital services faster. As to our long-term generative AI strategy, last quarter, we shared that we are accelerating our investment to fast track development of cognitive core. A next-generation AI platform built on the foundation of Amdocs amAIz which integrates prebuild telco-specific agent libraries and actionable insights.

I'm pleased to say that our development road map is progressing as planned with today exciting announcements of aOS, the world's first agentic operating system purpose-built for tele communication, which we plan to showcase at Mobile World Congress in Barcelona a few weeks from now. Designed to help service providers accelerate generative AI strategies and innovate at scale, aOS operates on top of any BSS/OSS stack. Embedded connective core and [ integrates ] into telecom operation to elevate customer and employee experiences, unlock new growth opportunities and drive measurable operational efficiency by executing complex end-to-end workflows across BSS OSS environment.

Overall, we are excited by the announcement of which aOS which believe can emerge as a long-term growth engine for Amdocs as telco realize the potential to simplify and accelerate their AI transformation journey.

Switching to cloud on Slide 11. Amdocs remains uniquely positioned as the preferred partner to lead the telco industry journey to the cloud, reflecting our proven ability to accelerate public, private and hybrid cloud migrations. We are continuing to grow our cloud migration collaboration with AT&T, supporting them as they move another key infrastructure stack to the cloud. This represents an important next phase in AT&T's cloud modernization journey.

By applying Amdocs AI-driven migration capabilities and deep telecom domain expertise, we are helping AT&T modernize core infrastructure faster, reduce transformation risk and improve operational efficiency while creating the foundation for future innovation. As discussed last quarter, our SaaS-based platform, including Amdocs ConnectX, Amdocs Market One and Amdocs eSIM are also contributing to growth with riding with rising customer of adoption. This quarter, Amdocs Market One, was selected by V, formerly VIDAA, a leading smart TV platform, powering over 50 million connected TVs globally.

Market One will drive V's the global OTT subscription and streaming bundles [indiscernible] equipped with smart TVs. Streamlined OTT partner onboarding, enabling innovation subscription bundling, and digital services expansion across the international footprint. Looking forward, cloud will remain primarily focus for Amdocs as we continue to support our global telco customer base, many of which are just getting started on their multiyear cloud journeys.

Turning to Slide 12. I'd like to spotlight some additional deals win across Amdocs other strategic domain this quarter. First, I'm delighted to announce that Vodafone Germany has extended its multiyear digital transformation engagement with Amdocs. As part of which, it will decommission multiple legacy technology stacks to simplify its IT infrastructure across its fragmented cable portfolio. The program will complete with a gradual migration following proven agile delivery running fully in public cloud and utilizing AI tools to increase delivery efficiency.

In Western Europe, we won significant digital transformation award with 2 new logos that further expand our strategic relationship with a large global telco service providers. In Italy, Swisscom subsidiary Fastweb will broaden its use of the OMS Amdocs platform as the unified orchestration layer to manage end-to-end order management across both wireline and wireless consumer domain in the new core resulting for the post-merger integration with Vodafone Italy. Within the BSS and OSS sphere, Swiss service provider Sunrise has extended the collaboration with Amdocs to support AI evolution in CRM, signing the foundation for further increase its Net Promoter Score and to offer customers the best service at any time.

We also signed a new 4-year agreement with Telefonica Germany to renew our Actix mobile network platform. Actix plays an important role in optimizing radio network performance. helping Telefonica Germany enhance coverage and network quality at scale. [indiscernible] reflects the ongoing value we deliver in mission-critical network operation and further strengthen our long-term standing collaboration with the customer.

Finally, we recently signed a proof of concept with leading operator in Japan, deploying Amdocs RevenueONE with billing capabilities to run real operation scenarios. This engagement reinforced the strength of our revenue management portfolio in supporting complex strategic customer environment and create a path for potential expansion.

Now to the current operating environment. We believe many growth opportunities exist across our several addressable market of roughly $60 billion by tapping new domains at our largest long-standing customers, capturing additional wallet share at existing customers and new logos, diversifying in new geographies such as Japan, Africa and Middle East, and bringing innovation in emerging strategic domain such as generative AI, fiber rollout, cloud migration and the rapidly evolving MNO segment.

With our deep telco domain expertise and unique tech-led customer-based business model, we will -- we are well positioned in the market and laser-focused to monetize the rich deal pipeline we see in front of us. That said, we are, of course, closely monitoring our customer demand and spending behavior within the prevailing global macroeconomic environment.

Bringing everything together on Slide 14. With our solid first quarter performance and our visibility for the remainder of the year, we are reiterating our guidance for revenue growth of between 1% and 5% in constant currency for fiscal 2026. Similarly, we are on track for non-GAAP diluted earnings per share growth of between 4% to 8% in fiscal 2026. The midpoint of which equates to an expected total shareholder return in the high single digits, including our dividend yield.

On a personal note, after many years serving Amdocs in a range of leadership roles, including more than 7 years as President and Chief Executive Officer, I've decided to retire from my role as President and Chief Executive Officer. It has been the greatest privilege of my professional life to lead this incredible organization and [indiscernible] people for the past 7 years. I'm immensely proud of what we've accomplished together. We didn't just navigate and achieved the cloud and the rise to GenAI, we transformed Amdocs into a truly catalyst for the digital age. I am pleased to announce Shimie Hortig, a longtime colleague and trusted partner who is here with me today, will succeed me as the President and Chief Executive Officer effective March 31, 2026, following a planned transition period.

I take this step with a deep confidence in Amdocs position, long-term strategy and leadership team. Having worked closely with Shimie over many years, I've seen his ability to lead the company superior to significant industry and technological change while maintaining a strong focus on customer and execution. This planned succession reflects the depth of strength of Amdocs management team and ensure continuity in our strategic direction.

I am confident of Shimie supported by an experienced and highly capable executive team on Amdoc's strong foundation and lead the company to new highs. I'm delighted to say that Shimie here with me in the room today. So let me hand things over to him to say a few words before moving to Tamar.

Thank you, Shuky, for the kind words and for our partnership over the years. I'm excited to lead the Amdocs to the next chapter. During my career at Amdocs across different leadership roles, I've come to appreciate what makes Amdocs a leader, our people and culture, our customer trust and our technology and innovation. As we look ahead, Amdocs is well positioned to combine emerging technologies with deep domain expertise to drive value to customers and shareholders. I'm looking forward to building on everything we have accomplished and taking Amdocs to the next level.

Thank you, Shimie. And with that, let me turn the call over to Tamar for her remarks.

Thank you, Shuky, and hello, everyone. Thank you for joining us and Shimie best of success. .

Thank you.

To begin, I'm pleased with our solid financial performance for the first fiscal quarter as summarized on Slide 17. We Q1 revenue of approximately $1.156 billion was up 3.5% year-over-year in constant currency. Revenue was slightly above the midpoint of our guidance even after unfavorable foreign currency movements of roughly $3 million compared to our guidance assumptions.

On a reported basis, revenue was up 4.1% from a year ago. Revenue from acquisition of Matrixx Software was immaterial in Q1 since the deal closed in the last week of the quarter. On a regional basis, North America was up nearly 4% from a year ago and was higher on a sequential basis for the fourth consecutive quarter.

Europe was up by 17% year-over-year and increased by 1% sequentially driven by organic growth initiatives and the December 2024 acquisition of Profinit, which made little contribution to the year ago quarter. Rest of the World was down from a year ago, but improved slightly as compared to the prior quarter. Consistent with our prior guidance, our strong sales momentum provides clear visibility to continued growth in Rest of the World this year, but we remind you that quarterly trends may fluctuate given the project orientation of our customer activities in this region.

Shifting down the income statement, non-GAAP operating margin of 21.6% improved by 40 basis points from a year ago and was stable on a sequential basis as we continue to balance the benefits of internal cost and efficiency initiatives to the investments designed to accelerate our long-term growth, including the development of our next-generation AI platform. Interest and other expenses amounted to roughly $10 million in Q1 with. On the bottom line, non-GAAP diluted EPS of $1.81 was above the guidance range, primarily due to a lower-than-expected non-GAAP effective tax rate in the quarter. Similarly, diluted GAAP EPS of $1.45 exceeded the guidance range, which was also primarily due to a lower-than-expected GAAP effective tax rate in the quarter.

Additionally, diluted GAAP EPS included a restructuring charge of roughly $0.09 per share which was not included in our guidance for the quarter. Turning to Slide 18. Managed Services revenue of $746 million was up 2.3% from the prior year in the first fiscal quarter. As a share of total revenue, managed services accounted for roughly 65%, consistently the last several quarters.

During Q1, we maintained a very high managed services renewal rates signing expanded multiyear engagements, which together strengthen our business resiliency. In addition to the new agreement with T-Mobile and the new agreement with Vodafone Germany, we signed an agreement with Telefonica Argentina, covering product maintenance services, application managed services in our software factory.

Moving to the balance sheet and cash flow highlights on Slide 19. DSO of 76 days decreased by 5 days from a year ago and was up by 2 days sequentially. And billed receivables net of deferred revenue was down by $32 million sequentially and by $66 million versus a year ago in Q1, aggregating the short-term and long-term balances.

As a reminder, the net difference between unbilled receivables and deferred revenue fluctuates from quarter to quarter, in line with normal business activities as well as our progress on multiyear engagements. Free cash flow before restructuring payments was $237 million in Q1, driven by a strong earnings to cash conversion to begin the year. In fact, Q1 free cash flow already equates to roughly 33% of our full year target, which is higher than usual after just 1 quarter, including restructuring payments of $49 million, reported free cash flow was $188 million in the quarter.

We ended Q1 with a healthy cash balance of approximately $248 million and aggregate borrowings of roughly $780 million, including a drawdown of $130 million on our $500 million revolving credit facility to fund the acquisition of Matrixx software and our $650 million senior notes, which mature in June 2030. Overall, we have ample liquidity to support our ongoing business needs while retaining the capacity to fund our future strategic growth.

Switching to capital allocation on Slide 20. This quarter, we repurchased $146 million of our shares. We had up to $840 million of remaining repurchase authority as of December 31, 2025. We paid cash dividends of $57 million in the first fiscal quarter. Looking fiscal 2026. We are on track to generate free cash flow of between $710 million to $730 million, not including payments we expect to make under our current restructuring program. Our free cash flow outlook equates to a conversion rate of roughly 90% relative to expected non-GAAP net income and translates to a healthy free cash flow yield of roughly 8% and relative to Amdocs current market capitalization.

Regarding our capital allocations for the coming year, we expect to return the majority of our free cash flow to shareholders. Moving to Slide 21. 12-month backlog was $4.25 billion at the end of Q1, up $60 million sequentially and 2.7% from a year ago. Now turning to our revenue outlook on Slide 22. We are continuing to closely monitor the prevailing level of macroeconomic, geopolitical business and operational uncertainty in the current business environment. The second quarter and full fiscal year 2026 financial guidance reflects what we consider to be the most likely outcome based on the information we have today, but we cannot predict all possible scenarios.

For the full fiscal year 2026, we expect revenue growth of between 1.5% and 5.5% as reported, roughly half of which will be inorganic in nature. This includes the acquisition of Matrixx Software, which was already incorporated in our assumptions when we provided our fiscal 2026 guidance last quarter. This expected range compares with 1.7% to 5.7% previously with the change reflecting foreign currency movements, which are now assumed to provide the benefit of 5% for the full year as compared to 0.7% previously.

For the full fiscal year 2026, we are reiterating our outlook for revenue growth of between 1% and 5% in constant currency. As to the second fiscal quarter, we expect revenue between $1.15 billion to $1.19 billion. Moving down the income statement. We are on track to deliver non-GAAP operating margins within our target range of 21.3% to 21.9% in fiscal 2026, the midpoint of which is roughly 20 basis points higher than the prior year of 21.4%.

Our profitability outlook reflects an intentional decision to accelerate our R&D sales and marketing investments with respect to generative AI and our next-gen agentic operating system, while balancing this with ongoing cost and efficiency gains resulting from our continued focus on operational excellence automation and the internal deployment of generative AI based tools across our business.

As a reminder, our non-GAAP operating margin may fluctuate slightly on a quarter-to-quarter basis. Additionally, our margin outlook excludes additional restructuring charges we may take. Below the operating line, we expect non-GAAP net interest and other expenses to be impacted by higher finance costs this year resulting for a reduced cash balance and funding of our strategic long-term growth plans. As anticipated in the beginning of the year, we expect our non-GAAP effective tax rate to be within an annual target range of 16% to 19% for the full fiscal year 2026.

For your modeling purposes, in Q2 specifically, we expect our non-GAAP effective tax rate to be above the high end of this annual range. Bringing everything together on Slide 24, we are reiterating our outlook for non-GAAP diluted earnings per share growth of 4% to 8% in fiscal 2026. The midpoint of which positions us to deliver high single-digit expected total shareholders' return when including our dividend yield of around 2.7%. With that, back to you, Shuky.

Thank you, Tamar. I am pleased with our solid start for the fiscal year and the important progress we've made in respect to our long-term strategic partnerships, the expansion of our customer base globally in today's announcements for a new agent operation system aOS, which we believe can provide an additional engine of the long-term growth. With that, we are happy to take your questions.

[Operator Instructions] Our first question today comes from the line of Shlomo Rosenbaum from Stifel.

Shuki, Tamar, just the T-Mobile announcement, obviously, a significant positive. Everyone's kind of waiting for this renewal. I was wondering if you could give us just a little bit more color on that because it's just discussed as a multiyear agreement, doesn't say how long it is, how could we compare this to the prior agreement, I know you talked about revenue being down in '26. Is there a continued trajectory that way? Or should we assume there's a new baseline? And just is the scope of the same of what you were doing? I know there's -- T-Mobile in the third quarter announced a very sizable charge against its billing system, including what it seems like stuff that was still in development. And maybe you could just kind of put a -- just a finer point on what's going on over there since it is a very significant client. And then I have 1 follow-up.

Sure, Shlomo. So let me try and give some more color. We're talking about a 5-year agreement. This is quite typical for our long-term services engagement and additional long-term engagement with the top customers. We are covering in this agreement, as we indicated, managed services. We are covering development services, some AI-related activities, integration of common systems. So there's plenty of, I would say, breadth to the engagement that is covered there. .

We are also as indicated beyond this agreement that we are going to support in the integration of USCellular, which is, of course, a strategic move that T-Mobile announced already in the past. We feel that the relationship, of course, needs to take us to continue to support the T-Mobile and both and say feel is not the right word. We know it's going to support T-Mobile both on the consumer side of the business as well as the support of the business segment of T-Mobile. We continue to see -- specifically, we're guiding now for 2026. So we're talking about the fact that we want to be very transparent about the fact we still expect revenue to decline in 2026 as their spending appetite is lower, not just with that.

I think if you look into the commentary of T-Mobile, they are much more cautious. And the other point I will say is that specifically, again, it's specific to the contract is just to remind you that the kind of work we do for integration of systems, like the one we are doing withis USCellular that is typically not -- it's not recurring by nature, integration has a beginning and an end. I mean, hopefully, of course, it will be successful. And therefore, we wanted to make it clear. This is not a -- while we're talking about multiyear agreement and other activities with T-Mobile integration of cellular is not a 5-year thing, right? Usual integration is measured by quarters rather than years.

I think overall -- I agree with what Thomas said, I think it's -- we have relationship with T-Mobile, the previous version since 1999. So I think this is extend our partnership with T-Mobile -- for T-Mobile for the years to come.

Okay. And then just -- I want to dig in a little bit more on the Matrixx acquisition. Just you already bought a charging platform Openet like 5 years ago. And I wanted to ask just what strategically is this adding to what you had? And if you could put a finer point on to the revenue that you're expecting from it this year? Or is it -- if I take kind of the midpoint of your revenue guidance, assume half of it is coming from acquisitions and kind of split that over 3 quarters, it sounds like it's like around a $90 million run rate business. Is that the way to think about it?

I will start with the value of the products, and Tamar will answer more on the financial question. Look, we are dealing across the world with different sizes and different complication of customers. Some of the Tier 1 customer need different type of charging and capabilities comparing to what we call low tiers or mid-tiers. So I think the rationale of this acquisition was also -- it was consolidation of a competitor with very strong product.

So I think the rationale, a, it gives us additional charging engine that we can -- it's more like what we call Tier 2 level rather than -- this is one. It gives us a very nice set of customers, as we mentioned. And I think that between all our capabilities, I think it strengthens our position by far, the market leader in this critical domain of charging and monetization.

Yes. Maybe just to add, you mentioned the acquisition 5 years ago of Openet. Openet is an amazing solution that we've seen deployed in many leading customers and of course...

Openet is a significant Tier 1, yes,

continue to be our solution for the high scale. Back to your point about the revenue contribution coming from M&A. So we did incorporate in the original guidance of the year, about half of our growth coming from M&A. And Matrixx was definitely maturing the pipeline of M&As when we gave that guidance. So that's why I wanted to emphasize that it was planned and now is materializing. Now relative to the model of Amdocs, Matrixx is a product -- software product company, so less visibility into the model than our own regular model. We have taken that into consideration, of course, being the first year of integrating Matrixx being more cautious on the revenue view. So I think we are appropriately conservative there.

So yes, it's in the numbers. It's not necessarily the end of the M&A plans that we have for the year. We don't have any major build-up of expectations in terms of [indiscernible] I'm not talking about revenue. I'm just talking about the fact we do sales, so additional pipeline of good ideas on the M&A side as we may execute upon. But as I always say, M&A, is not something you can plan for in a linear way, we want to do the right deals for the right reasons with the right prices. So I think we are building it into a very prudent way into our guidance.

And our next question comes from the line of Dan McDermott from Oppenheimer.

It's Dan on for Tim Horan. Just 2 quick ones. Can you give us some more color on your new agentic operating system you announced today, why it's unique and how can serve as a new growth engine. And then second, Verizon has been very vocal about aggressively cutting expenses -- we're wondering if you're doing anything there to help them with their restructuring and their AI initiatives

So the -- what we call aOS, the agentic operating system. If you remember last quarter, we started to talk about this that we are developing a next-generation platform for GenAI. At the time, we talk about cognitive core, which is part of the overall aOS. And in a simple way, and I want to become an architectural discussion, it's a layer that can sit on top of any BSS/OSS infrastructure and actually can provide with obviously giving our knowledge of this very deep intimate knowledge of this industry, we are building an agenting platform that actually eventually you can operate all the activities through agents. .

We are going to showcase this in Barcelona, meet with many customers. And so today, we are announcing it and the full focus will be roughly a month from now. And we believe this will, in the future, will serve us as a new growth engine for Amdocs. We did not include any significant revenue for this in this current fiscal year, but we believe that from everything that we hear in the industry, this is going to be probably the most, I would say, permanent and strong foundation to leverage GenAI. We are very proud of what we are in the process of building. Regarding Verizon, I cannot comment more that you need to assume that we are engaging with Verizon. We'll see how we can help them in the future.

And our next question comes from the line of George Notter from Wolfe Research.

This is Karen on for George. Could you talk a little bit more about how the telcos are progressing in terms of looking to accelerate and simplify their AI journey? Specifically, can you talk about how the pipeline is progressing and any new opportunities that have popped for you?

I think, overall, and definitely, we talked about this before, we were very active in working with our customer, developing different use cases in the call center, in the retail store or any upsell or care type of scenarios. But this was more, I would say, a different solution to different needs, different use cases. The difference with the aOS is a complete holistic value proposition to address all what we believe the future telecom needs to leverage this technology.

All our customers are obviously are trying successfully in many cases, to leverage this but it's more, I would say, it's like moving from opportunistic to strategic. From different use cases and different capabilities that all our customers are already experiencing both in the IT and the network domain to a much more holistic value proposition that actually will translate converge in the future, the way our customers working to a full agentic way. So this is the difference what from what we've done so far to this [indiscernible] solution. But obviously, it's early days. I mean, most of our customers, as I said, are trying, we do a lot of POC. In many cases, also they are getting some value, but I think this is very, very, very early days in this domain.

[Operator Instructions] Our next question comes from the line of Tal Liani from Bank of America.

This is actually Thomas Zilberman on for Tal. Maybe 2 for me. You mentioned in the prepared remarks that you had a slight beat to your expectations this quarter on revenues and your 2Q guidance was also slightly above the street, but you were consistent in maintaining the fiscal year. Just wanted to ask if this is more about rightsizing when you expect the ramp down of T-Mobile revenues this year, if there's anything else to look there. And my follow-up is as we think about this new multiyear agreement with T-Mobile, can you give us a sense of the progression and the trajectory of the milestones you need to hit to really ramp the revenues there?

So on the first question, it's not anything specific in particular. It's not a customer that caused that. Actually, I'm happy about the fact that we were able to show now faster performance on the revenue to meet the numbers. We talked at the beginning of the year of a stronger half 2 than half 1. But even then, it wasn't like a big difference. So I would say it's a slight change and nothing in particular that I can point out that caused that.

On your second question, it's not a matter of meeting specific deliverable that is singular in nature. What we do for T-Mobile is including many activities. So we are doing the managed services that covers the ongoing IT operations. We are doing development work. Some of it is new project oriented. Some of it is helping them to enhance existing systems. We are going to embed new activities. We are doing the USCellular integration. We are going to work with other rationalization of common systems. So it's many, many things. It's not like a single project that I can point to a specific milestone. So it's mainly a matter of continuing to execute, bring value and push forward to the demand and the desires of T-Mobile.

This does conclude the question-and-answer session of today's program. I'd like to hand the program back to Matt Smith for any further remarks.

Okay. Thanks, operator, and thanks, everyone, for joining the call tonight. If you do have any additional questions, please give us a call in the IR group here. And with that, have a great evening.

Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.

[Audio Gap] I cover networking and cybersecurity here at Morgan Stanley. For any research disclosure, see morganstanley.com/researchdisclosures. We're delighted to have Amdocs here with us today. I have Shuky Sheffer, CEO of Amdocs.

Maybe just as an overview, for those of -- who don't know Amdocs, can you just kind of talk about the company, what does Amdocs do? And just kind of what is the role of Amdocs within the telco industry?

Okay. So as you mentioned, we are supporting the telco industry, the large telco companies of the world, our customer, AT&T, T-Mobile, Vodafone and others are 3 our customers. And I think that if you look about the telco environment, there are 2 areas. Obviously, there is the network domain, when you create all the network infrastructure. And there is the IT domain. Amdocs is in the IT domain mainly. And we support, I would say, all the monetization activities of our customers. So if you think about environment of a customer, you are familiar, there is the mobile application and the website in the retail store. And then the commerce engine, all the ordering engines, catalog, obviously, all the billing activities, general ledger, invoicing, AR and then all the touching of the network system from policy system to service fulfillment to rating charging. So we are doing the end-to-end activities that support all the infrastructure, what we call BSS, OSS system. All everything that our customer needs to monetize the network.

Amdocs is unique in, I think, in this domain, 2 different aspects. The first one is -- usually, there is a typical split between product companies like Salesforce, ServiceNow, and there is like the system integrators like Accenture, TCS. Amdocs is unique because we do develop the products. And we are ranked by far, the #1 -- is the #1 product in this industry to support our customer, and we do all the services too. So we are doing both product and services. We are what we call product-led services company. So we have all the products. We implement our products and we operate our products in managed services, which is very different. It create a very unique accountability model because usually, in this very complex environment or projects where something goes wrong, the product guy will say the system integrator doesn't know how to operate the product, the system integrator will say, the product doesn't work. So you can never have a real accountability. In our model, we do both the product on the services, you can get real accountability. So this is, I think, one big differentiator.

And the other one, we are the only one that have all the portfolio. As I mentioned, that there is a list of application that supports and we have end-to-end. Usually in a typical RFP, it will be Amdocs versus a system integrator that try to integrate several platforms to accommodate what -- and we are, I think, by far, the market leader in our domain. If you look at our blue-chip customer in the world, I mean, starting here in the U.K., so 3, Vodafone, British Telecom, everything everywhere, everyone is our customer. And also America, obviously, T-Mobile, AT&T, Bell Canada, Comcast Charter, Rogers, TELUS, in Latin America the large groups are Telefonica and America Movil. In Europe, definitely Vodafone is our largest customer, and we have many, many presence in APAC all over. So I think that we are, by far, the market leader in our domain.

Okay. So I mean in addition to kind of having a unique portfolio and value proposition, you guys have tech lead and kind of outcomes-based business model. Just talk about this and the way it kind of differentiates you versus the competition?

Definitely in the new world of Gen AI. So we -- the majority of our business is we don't have what we call rate card relationship. The vast majority of our business is outcome-based. Rate card relationship is -- if you want to do something, you come to Accenture or TCS or whatever and say, "I want to buy 100 people from you," and then you pay by role, by location. And definitely, in today's world of Gen AI, suddenly, you can do the tasks, not with 100 people for -- and it's a time and material based with 70 people, immediately, it's impact your margin and revenue, et cetera.

Amdocs is selling value proposition, which is outcome-based, meaning if we operate in environment by managed services, we are committed to service level and KPIs. And this is how we monetize. As long as we are meeting this -- so the idea is not, we are not selling people, we are selling value. And the monetization model is outcome-based. As long as meeting and we have a great reputation of meeting the service level, then the whole monetization model is based on outcome-based. And now we can see that mainly all the system integrators are starting to talk in this language of outcome-based, which has been our monetization model for probably from many, many years.

Everybody is coming around to you.

Yes.

All right. Can you just talk about maybe some of the transformation that has taken place in the business over the last year? You've been phasing out some of the lower margin noncore businesses and pivoting more towards AI and cloud and modernization focus initiatives?

So I think that they're definitely main trends that we follow and support in the last year. This phasing out of $600 million of noncore, low-margin business, this is we identify. We are doing some activities that we don't believe are strategic and very low margin and very low visibility. So it makes sense to phase them out. It's one time, and that's it.

But from the main trends that the company is supporting, I think the #1 that is, we are doing for several years, it's become a significant growth engine for us. It's roughly already 30% of the business. It's growing double digit is the journey to the cloud. We actually probably 6 years ago, we decided we want to take the industry to the cloud. And we created a platform for every Amdocs customer to move to the cloud. It doesn't matter if he's doing it in a way of rip-and-replace, pretty much like taking the legacy on-premise system and to do like a full migration to the latest and greatest cloud native system or taking an existing system and actually moving into the cloud version of this specific system.

So we created, obviously, journey for every customer this journey is still -- while we have many, many customers that are doing this journey, it's still early days. If you look at the industry as a whole, the mass majority of the industry is still on-premise. And these are a very complex project. It takes some time, huge migration, a lot of data. But I think that most of our customers already started the journey with us, with eventually move to the cloud or our customers. This is one thing that we created a foundation probably 4 or 5 years ago, and we are deploying it across the world.

The other one is definitely the Gen AI transformation. And here, we see what we call Horizon 1 and Horizon 2. Horizon 1 is we built a foundation called the amAIz. And in this foundation, actually, we help our customer to create what we call different use cases or different agencies or copilot. So -- and in this type of infrastructure, we are leveraging the fact that we are the system of record. We know the data and we understand the domain, in order to help our customers to insert and it could be in the call center, in the retail store, in many -- so to create these agents, agent could support care, agent could support upsell or agent assist or copilot. So this is something that we are doing for a while and quite successfully.

But when you look what we call Horizon 2, we are in the process of actually bringing to market what we call cognitive core. Cognitive Core is a Gen AI layer that we can put over every Amdocs platform. It doesn't matter if it was implemented a year ago or 10 years old. And actually, the whole dialogue with the core system will be done through the agents. This is something we are going to announce next year, first quarter, probably in Mobile Congress in Barcelona, but it's going to completely transform the way our customer is going to talk, operate, enhance their main core system, and this is something that probably we believe it will be another growth engine for Amdocs like the cloud.

Okay. Got it. You've talked about kind of a $60 billion TAM. Just how do you go about increasing your share of that opportunity with existing customers and penetrating new logos? You just listed off a list of very -- the largest customers there are. Talk about kind of recent strong sales momentum across your strategic domains and operating regions?

So I think that -- when we look at our -- obviously, the telecom market is the same market. I mean there are not going to be additional AT&Ts. So our strategy is to -- when we deliver value to customers, is we are constantly increasing our portfolio. So if you look at the portfolio of Amdocs, what used to be 10 years ago, what is today, we expand the portfolio. Some of it is in our current domain, like in what we call more the billing, BSS, monetization, some of them in the network domain. So if you can see, we are expanding and adding more and more products to our portfolio. Now this is one.

On the other hand, we're adding to our service portfolio, which is pretty big. I can give a couple of examples for each. So in the product portfolio, we added the platform around -- from fiber rollout, which is obviously happening all over to e-sim platform to marketplace platform. Today, it's very common that our customers are selling OTTs like Netflix and Amazon Prime and Disney+, et cetera. So we actually came with a platform that enables us to do it very simply. So we are adding platform all the time. So we expand with our customers by adding more and more products.

And the other one is a service portfolio. So for example, cloud migration. This is a competency that we've added, not just for Amdocs system but also for non-Amdocs system. For example, we signed a very large deal with AT&T a year ago. Actually, we are going to take all the mainframe application of AT&T and move them to the cloud over time in a complete managed service environment. So this is, for example, domain within AT&T that we have 0 presence before, and now we are expanding. So expanding in customers in both portfolio of product and services.

The other one is getting new logos. I mean we are getting several new logos every year in addition and also expand geographically in where we can. I mean, we don't operate in China, for example, but definitely in Europe, we are the market leader by far in APAC. And so getting new customers and expanding to new geographies. So between getting new -- expanding within existing customers by adding more portfolio of product and services, getting to new customer and new geographies, we had 0 presence in Japan. Now we are starting to develop presence in Japan. So this is how we expand within our addressable market.

Great. Gen AI, major focus of everybody, but also kind of the telco industry. Why are you well positioned to help here? And where is the momentum? You guys noted a success with kind of a UAE telco. Just how long did it take to implement a solution here? And how quickly were they able to see results?

I think that the differentiation of Amdocs in Gen AI will be based on things that I think help us before. We see -- and by the way, it's pretty common right now to see that if you take a multi-vertical platform, agent force, Salesforce or others. And you try to implement it in a very complex environment like telco, it's not successful because -- and when we build our platform, we understand the taxonomy. We are understanding the ontology. We are the system of record. We create an environment which we call 0 data copy. So we don't need to create additional data environment because we own or we understand the data. We are doing the orchestration. So when we build our solution, by the way, we don't pretend that you can take dissolution to other verticals. But if you take our solution, that I said, understand the ontology, the taxonomy, the orchestration, we understand the data. This solution can be very successful. So when we talk about, for example, our next-generation offering, that we're going to come to the market is what we call Cognitive Core.

What is Cognitive Core? It's a layer -- by the way, we're still looking for the name for this. But you are going to put this layer on top of every Amdocs platform. It doesn't matter if it's something that was implemented 5 years ago or 1 year ago. And the whole dialogue and interaction with the core system, with the system of record, we've done through agents.

Now you can say there are other platforms there that pretend to do the same, but in reality, it doesn't work. And the fact that the platform that we build and understand, as I said, understand the domain, understand how it works, all the connection, understand the data, you don't need to copy the data, help us to do this much more effectively and successfully. And we are going to announce in first quarter, as I mentioned, this new product, and actually, and the reason we believe is it's going to be successful because we understand the domain. So this differentiation, understanding the data on the orchestration help us a lot to do it in the right way. So the future is that everything will be done through agents on top of this Cognitive Core layer.

All the -- so if you want to -- I will give some tangible example, there's going to be a marketing agent. Today, when you want to come, for example, before Black Friday or iPhone launch and creating new offering to the market to certain population segment, you want to do something for students under 25 that are likely to do -- to upgrade their device and you want to plan device financing. So the marketing is dreaming about this offering and then we need to meet with the IT, and it takes a lot of time. You need to implement and to test it. You need to think that in the future, it's going to be an agent, it will talk to other agents that will say, okay, this is the new offering that we want to do. And the other agents, we implement this in the catalog and all the system to make it work. So this is the next generation of way that we believe we will operate. And I think that coming from really deep understanding of the domain, help us to do it successfully comparing to other options, which are more like general purpose type of engines that you find it very difficult to operate in the telco environment.

Okay. Cognitive Core in the terms of AI names, it's pretty good. There's some pretty bad ones out there. So all right. So we've often seen telcos as kind of laggards and technology adoption. You noted a lot are still on-premise. Many of them are still heavily reliant on internal IT. Just how are you seeing that change? And how do we see them start to catch up by relying more on partners like Amdocs?

I think that we have done a pretty good job in expanding. We do obviously, work with our IT partners. On the other hand, our partners. On the other hand, our biggest competitor is IT. I mean if you ask me what is the biggest competitor of Amdocs, it's not Salesforce, it's not Netcracker, it's not Oracle, it's the internal IT. But I think that there is a way of coexistence in a way that Amdocs is bringing all the -- and another way, we are spending hundreds of million dollar every year in technology. We are enjoying the fact that we see innovation from APAC and from Europe. So if you look our products actually represent all the trends that we see around the world.

And we continue to invest in R&D. So we are -- I think we are better positioned to come all the time with better tooling capabilities. And I think that in a way, the move to agent environment help us because then we can obviously collaborate with the IT in a way they say, okay, we are going to build this environment and the IT, you can build on top of it, any agent you would dream of to get the value from our core system. And so I think -- I mean it was always there. It was always tension between our partners and competitors. But I think that the more everything is based on IP and technology, I think this is what we do. I think it's positioning us better.

Okay. You've had a strong relationship over time with Microsoft and some of the other clouds. Just how are those relationships evolving? And how do you see those partnerships as tailwinds to the business?

For the most part, it's a partnership. It's not a competition. And obviously, we -- our platform are cloud native. So you can run any type of Azure on AWS, on GCP. I think that in Microsoft collaboration was a bit different because beyond the -- obviously, leveraging the cloud infrastructure. In Microsoft, we expanded it also to come with what we call the customer experience layer, that it's more using their platform beyond just the cloud infrastructure. And we are using their infrastructure, obviously, a very strong relationship with AWS, with Microsoft, deploying this across the world. All the -- we have a lot of activities of cloud migration. Even for non-Amdocs definitely, it includes partnership with these guys.

As I said, for the most part, it's partnership and not -- there are some areas there of overlap that we compete. For the most part, it's a great partnership. But we have an ecosystem. Our biggest partner today, by far in Gen AI is NVIDIA. I mean, we're working very closely with NVIDIA, when we develop our platform and they are our biggest partner in this domain. But there is an ecosystem of obviously, this part of what we do today of coming with the right solution to our customers.

Got it. You've always had this mix of project base versus kind of recurring managed services revenue. Just how do you see that mix evolving within the business? And just how does that change the visibility you have?

I mean if you look at the fundamentals of the company, and this is the fact that I think -- when we ask the Sky Amdocs, so I forgot to mention that we are dealing with mission-critical systems. Even if you look at stress tests, like I don't know, COVID or financial crisis in 2009, you cannot stop Amdocs, what we do. I mean this is the lifeline of the companies that -- of our customer.

So back to your question, I think that over time, the monetization model of Amdocs, if you look at 65% of our revenue is managed services, 75% of our revenue is recurring. We have 90% visibility within our 12 months backlog, which is pretty nice. I think that we'll see probably over time, more like more subscription-like models that will evolve over time. But the fundamentals of the company that the majority of the revenue of the company is recurring and very large full-managed services like [indiscernible] that are not going to change. I think we'll see more like a subscription model type of monetization model in the future.

Got it. You noted some pressure on the business heading into fiscal '26 with kind of headwinds from T-Mobile. Just what are some of the trends with your largest customers? And just how does macro tend to influence the business?

I think that we see the same macro impact like anyone else, I think, a little bit longer sales cycle. Everyone is -- now Gen AI is a little bit mixing everything. And I mean, we have a long-term relationship with all our biggest customers, very proud from AT&T to T-Mobile to Bell. To all the big, we have very long, I would say, relationship. We are supporting most of them or not all of them in full managed services, long-term agreements. I mean we have a cycle within customer. Customers have different priorities. It's not new. We used to have it in AT&T. Now we mentioned a little bit about T-Mobile. But over time, I think things are -- it's up and down. But I think we are strategic partners for all our big customers. We are supporting the core business for many years, and we enjoy a very strong relationship with all of them.

Got it. And then I'll end with some more CFO questions, I ask you to put your CFO hat on. You've seen improving margins over the last year. Just how has AI helped with that? And just how are you kind of sustaining some of that margin expansion potential while investing in Cognitive Core and -- yes.

At the end of the day, we are an engineering company. So when we look about Gen AI, there is the internal stuff and there is the external. So far, I talked mainly about the external. What will be our offering in the future that we are going to give our customer, Cognitive Core, different use cases, copilots, agent assist, all of this, I think the Cognitive Core is what we call the Horizon 2 of our offering. It's much bigger in scale and it can grow to be over time a growth engine to Amdocs like the cloud. But this is our -- what we offer our customer. Definitely, Amdocs is growing right now through internal transformation of Gen AI as we have engineering and R&D company. So we are implementing Gen AI in everything we do. It's everything around the software development life cycle in the way we do R&D, the way we test and the way we document. So we are leveraging across the board in marketing, in legal, in HR all over.

So today, we are implementing engine that doing the best risk allocation for employees based on location, skill, whatever. So this is definitely -- and it means eventually that we do more with less people. And over time, we believe that implementation of Gen AI, which is strategic for the company. Internally, it will help us to expand our margin. Now this year '26, we said that we are going to double down and invest more in AI capabilities, Cognitive Core. It's not just in R&D, in sales, marketing, everything, all the ecosystem that support it. But still, we are able to expand margin by 20 basis points because we are getting all the time and, I would say, a lot of value from doing things much faster and better and cheaper, using this technology, and we assume this will continue even maybe accelerate in the future. So we see a future that we continue to expand our margin over time. Obviously, we share with our customer. Some of it, but also, I think we can continue to expand our margin.

Great. Well, Shuky, it was great having you here today and telling us more about Amdocs.

Thank you.

All right. I think we're out set here. So I'm Richard Cohen. I'm the Wells Fargo software team. Today, I'm delighted to have with me, Anthony Goonetilleke.

Very good.

Practice. Group President, Technology and Head of Strategy at Amdocs. So thank you for coming here today. Appreciate you.

Thank you for having me.

Yes. And so I guess maybe a good place to start just in terms of level setting the conversation. Talk to me a little bit about Amdocs, the story, just kind of what does this company do? And what problems do they solve?

Yes. So we are a company very focused on customer experience and very focused on the vertical of telecommunications. So we've been there for quite a while. We provide a set of products and platforms that really sit at the core of telecommunications. And we don't do hardware. So it's purely software, all the way from soup to nuts. And we really focus on taking the complex and simplifying it, right?

So I always joke around and say, if you're Zappos, it's a cool job. You just have to pick a shoe, get the shoe size and get it delivered. If you're a phone company, it's like you need a phone number, you need to transfer your phone number to the device, you need a handset. You need to add it to a family plan. You need to make sure there's promotions, there's discounts that get applied. Is it a yearly contract? Is it -- there's so much complexity that goes into the back end. But we try and really abstract all of that and really provide a seamless customer experience to the user.

Great. And so I think a good pivot point from that is just in terms of the business model, I think Amdocs has a pretty unique business model in terms of the software and services combination. Can you tell me a little bit about that business model?

Yes, sure. Sure. So we have -- obviously, we have very strong recurring software revenue model. Our customers are Tier 1 customers, right? Like these are not companies that are in and out these -- I can mention any one of their names, and you would know them. They are the top-tier customers in any country. And so we build products and software, and we invest in R&D. And then we also take accountability to implement them.

So one of our philosophies is you get a product company, they throw the product over the fence and then you get a services company that gets it and they're trying to implement it and then there's a problem in the project and they're pointing fingers at each other. We like to take accountability to not just give you the products, but also implement it, make sure you hit your business outcomes and your KPIs.

And so we feel that, that accountability model is very unique, and that's something that our customers appreciate because at the end of the day, we're there for the long term. We have long-term contracts with our customers. We don't necessarily lose customers, right? And it's not like an industry of 50,000 customers. It's a fixed set of customers. And so we want to make sure we're delivering value, but they're not just buying software from us, they're buying value from us in terms of what are their business outcomes are.

That's great. And I guess with kind of that vertical focus, I'm curious, when you go out there and look at the telecommunications providers that aren't using Amdocs, what's the alternative?

Yes. The alternative is, I would say, a mixture of like 17 different things. So for example, some house maybe in-house, then you may get this company, that company, try and like stick it together with duct tape and glue and kind of hopefully that you will work. We spend a lot of money investing in research, investing in R&D, trying to bring like the best of what others do to the telecommunications industry, also understanding that at the end of the day, our industry is mission-critical, right?

I always make the joke that if -- obviously, we know about all of the Internet issues from today, right, with the Cloudflare stuff. But like your Gmail is down or WhatsApp is down, you'd be like, oh, WhatsApp is down. But if your phone service is down for 4 hours, I mean, people's lives are at stake, right? So when you're building software for the industry, you need to take like that responsibility is very, very high to provide a very high-level mission-critical carrier-grade level of software that delivers value.

So I think when we build software and when we think about it, all of these things kind of go into it, and that ties back to your initial question of the accountability model, why we think it's very important.

Yes. That's great. When we think about, I guess, if we were to bifurcate the business, there are 2 customers that make up a big chunk of the business. I think it's around 50% of the business. And then there's a lot of customers that make up the other half. When we think about, I guess, the growth drivers or the differences between those 2 types of customers, I guess, first, what are the differences in the growth drivers? And then second is, does that change over time? Do those smaller customers -- can they look a lot more similar to those larger customers?

Yes. And that's always the goal, right? Like when we come in, we might come in and a customer might choose to buy a single product or multiple products. And we always want to add value. And because we have a wide portfolio, we always have an opportunity to sell more and increase our footprint, right? So if you look at customers like we have PLDT in the Philippines, right, and we have Globe in the Philippines that just started off small and kind of started to grow as they got value from us and bought more from us.

So even though I would say, look, I mean, you talk about kind of this bifurcated couple of customers, but together, they're like revenue of $200 billion. So they're not small in a way, right? And we've been with them for the long term. We've had -- obviously, we've been loyal to them. They've been loyal to us and the business has grown over time. And we feel like also there are many other opportunities around the world. Just this last quarter, we announced some deals with PLDT, with BT.

These are customers that are very strong in their country, in their region. Brazil, for example, growing economy, growing customers. Japan, we had some announcements in the last couple of quarters. So we feel like definitely, like if you look at our top 12 customers, about 50% of them are coming from outside of North America, right? So that is obviously the goal, and we think that's an opportunity for us to expand and grow clearly.

Great. Okay. And so if we switch gears a little bit and talk about just the overall growth drivers of the business. One of them is cloud. I'm curious, cloud, I think it's 30% of the business, growing double digits. How should we think about how you guys define what a cloud customer is? And let's start there, and then I'll have a follow-up on that.

Yes. So if you think of telecommunications companies in general, they were the kings of data centers, right? Because they -- back to what I said before, they were running mission-critical stuff. No one else could run it for them. So they had their own data centers on-premise and they used to run software in them. Fast forward 2025, there is a bifurcated approach of moving some of these workloads to the cloud.

So we have very strategic partnerships with AWS, with Azure, with GCP, and we help our customers move these workloads to the cloud on a couple of different ways. One way is migrating to our new stack, which is cloud native, cloud-enabled, which runs on public cloud. So this is one way to do it. Another way is if you have legacy stuff, we think of -- we call it refactoring technologically, right, because maybe you don't want to put a huge investment in it, but you want to move it to the cloud.

So there's multiple different ways that you can take these workloads from on-prem and then migrate it to a public cloud. And so this is where kind of the growth and the revenue comes from. And we're still -- I would say, we're still maybe in the -- towards the end of the first quarter to use a football term in terms of the migration to the cloud. So I think that's still a multiyear journey.

And right now, the focus is on IT workloads, but we also have network workloads, which is an opportunity. So I think this is just a multiyear journey, which we've done some very interesting acquisitions like a company called Astadia, which helps migrate and modernize mainframe systems to the cloud. And so we think this will be a good growth pillar on an ongoing basis for the company, both from a product perspective and also our services perspective.

All right. You stole my second question. It was going to be what inning of cloud are we in? But that's great. And so I guess like kind of the second addendum to that is similar to cloud, your earlier stages on the curve with AI. So AI has been a big focus for the company lately. I guess let's start on the product side. Tell me a little bit about amAIz that's kind of live now, and you have some new things coming next year. So talk to me a little bit about the product side.

Yes. We kind of split it into Horizon 1, Horizon 2, Shuky, our CEO, very, very early on, I think it was like almost like a month after kind of OpenAI publicly launched a couple of years ago, we said, look, like we are doubling, tripling down, and we want to be the leaders in the telecommunications space. And we never look back. And some of that includes disrupting some of what we do internally ourselves, right? But it's better for us to do it than anyone else.

So it's clearly an opportunity for us. Some of the results we see, so we've been running more than a dozen POCs around the world. And I've been in technology for 20 years. I have never seen technological results like this. We created a partnership with NVIDIA. So we're working with the Agentic framework to include it in our amAIz platform.

And in Horizon 1, some of the results we saw, just give you a few examples. So if you take a call center, telecommunications providers have some of the biggest call centers in the world, right, probably next to financial services. And they generally measure 3 key KPIs. So the first one is called average handling time, meaning how long am I on the phone when I call, right? The second one is called first call resolution. Do I resolve your problem the first time you call me? And the third one is around what we call TNPS, or Transactional Net Promoter Score. Basically, it means are you happy with the service I provided you? Yes or no, would you recommend me to anyone else? All the KPIs boil down to kind of these 3.

Generally, a technological project or transformation gives you like maybe a 7% uplift on a good day, a 10% uplift. Like we are seeing 40%, 50% uplift on all 3 KPIs. And now we're starting to see in the last 2 quarters, customers going from proof of concept to go to production. So we think there is definitely something there. Obviously, we don't play in the BPO space or the labor arbitrage. So we are good with bringing technology that really adds value and moves the company forward. So this is really an opportunity for us.

And as we look towards Horizon 2, we believe there is an even bigger opportunity to help our customers kind of use their systems of record and then put what we call our cognitive core to modernize their transformation and go faster. So think about recognizing revenue faster, launching new products faster by using generative AI. And because we have this -- so we've built like a very deep taxonomy in the telecommunications space and in [ ontology. ] So these are things that are very verticalized in terms of generative AI.

So today, a lot of people talk about horizontal capabilities, which are good and nice. But when you're delivering results and value to an industry, you want to be very verticalized and understand what you do, right? So it's not just good enough for you to take an order, but you need to know that you can provision it, you can deliver it, that the number that you use is the number that you're going to get. So all of those things are being taken into account.

And so we are very bullish when it comes to generative AI. We think it's an opportunity for us. There's really no downside. And especially the strategic partnerships that we have with NVIDIA really kind of helps propel us in that space.

That's great. So when we think about -- kind of you mentioned some of the ROI that customers are seeing with some of these pilots. And so when we think about how that translates to your revenue, how should we think about the uplift from a customer that's now starting to use a lot of the AI technology that you're providing?

Yes. Look, I think as we go into 2026, this is the first time we're seeing some of these opportunities go from proof of concepts to production, right? So this is when we're just starting to see kind of some of the early Horizon 1 revenue start to hit. But we really think that customers are going to buy differently in the future, right? So it's not about saying, well, I used to buy this, I'm going to continue to buy that and then just buy a little sprinkled Gen AI on top, right?

No, the customers' behavior is going to change, right? I am going to have a workforce with several capabilities that are being delivered by agentic capabilities, not just my labor. So when they're buying from us, now they're thinking differently and buying differently. I was just talking to -- with a customer this morning around the network space. That's another big one for us. There's so much data there, right? Service assurance where you can be just proactive. And a lot of this work was done by labor, done by BPO and outsourced work and things like that.

And we think that should start to impact, obviously, our revenue starting '26. We're already starting to see some early signs of this revenue. But for us, it's all an upside, right? Because the core system business in terms of transformation will continue to be there. This is a system of record. It's not going to disappear. Generative AI is not going to replace the customer. The customer is the customer. But then you have these capabilities of being able to deliver things faster, better and also do that labor arbitrage for where you were using 10,000 people, maybe you only need 3,000, right? I know it's probably not a popular term these days, but it's happening, right? And people are going to be retooled and looking at different ways of doing things.

Yes. No, that brings up an interesting question, which is internally, I think a lot of the margin efficiency has been kind of utilizing AI internally. So what kind of things are you guys doing internally on the AI front? How have you seen that impact your own cost structure? And how does that kind of inform how you go to market with your own products?

Yes. I'll give you an example. We have a platform called connectX, which we launched in record time. We have about 15, 16 logos on it. It was kind of almost built Gen AI native, right? So it's smaller teams, it's faster to market. When it comes to our core bigger systems, we're delivering more value. There's a -- I don't want to get too technical, but there's a term called PIs, which essentially these are like project increments, which are releases we bring in and functionality we bring in, we're doing that faster, better.

And obviously, that has an impact in terms of how we can deliver stuff, right? So we are early, right? It's not about just dipping our toes in. I think about 70-odd percent of our employee base is trained in one shape or another, and that will only continue to increase. I think there will also be a bunch of people that won't make the cut, right? And we're starting to see that, and I know it's a tough message, but there will be the ones that do and the ones that don't.

But when it comes to software development, we are A to Z from all the way from design to build, to test, to delivery, to operations, we think generative AI is going to have an ongoing impact. We just saw Gemini launch today. The results are phenomenal, right? And we -- there's many great platforms out there like Cursor and things like that, that we embrace. But people do also forget that there is 2 types of software at the end of the day.

If I go like to a 40,000-foot macro view, there is what we call deterministic and nondeterministic, right? The deterministic software still has a place, like enterprise carrier-grade, mission-critical systems. When you call 911, you want to make sure that, that call is being made, right? You don't want to best effort. So there are still a place for deterministic software and nondeterministic software as well.

And how -- I guess, on that front, I'm curious, like I think there's been a lot of conversation around the limits of what the current state of generative AI can do in certain pieces. And so I'm curious like when you guys were thinking about productizing this, what did you find was working really well?

And you talked a little bit about the data advantage that you guys have. You guys have a lot of access to the telecommunications data that kind of runs through your own system. So I guess the combination of a couple of things, how does that data shape some of the products? And how does kind of the limitations you've seen so far, the things that it's really good at and things that it's not so good at inform also the product?

Yes. I'll start maybe from the end. Look, I think you can't have generative AI without data and vice versa, right? So I think the fact that we are the systems of record that we know -- for example, there's a term in telecommunications called ETF or early termination fees for different -- if you terminate a bundle or an offering or whatever, right? We know that there are 230 database entities that impact early termination fees, right?

So we can program this in and we can educate the system, right, tell our agent that any of these change, it will have an impact on proration. So you're smarter, you're focused, you're not guessing, right? So this is like a very simple way to kind of explain how the data connects to the logic of, at the end of the day, kind of what you deliver.

In terms of limits and what we found, look, I think the most amazing thing, and I don't think this is a surprise to anyone, is really the transition between kind of NLP, natural language processing, to technology, right? The fact that someone can go there and just type something in, in their own way, and it will translate. And by the way, we're doing it in -- we have agents running in Arabic. We have agents running in Spanish, and it translates across languages very, very well.

So we think that is kind of one of the massive, massive advantages. I wouldn't necessarily say, look, there's a limit. Things are changing every week and every month. I think obviously, we are living in the golden age of speed at the moment. I think every week, I pride myself that I wake up and try to read for an hour, 1.5 hours every day to catch up. And even that's not enough anymore, right? Like there's so much going on.

And so I think it would be unfair for me to say, hey, like here is the limit. I don't think anyone knows what that limit is. I think we're just going to get more and more value that's being extracted from it. And we will learn how to use it. We will learn how to have deterministic software, nondeterministic software. The models will mature more and more. I think we're in for a fun ride for the next 5 years. And I think if I think about what we believe we can do and how we can help our customers, it's really an opportunity for us. I mean there's no real downside.

Yes. That's helpful. So I'm curious, when we think about the underlying technology stack, you kind of messaged next year is a bit of an investment year on the AI front. And I'm curious like how do you balance like, oh, I'm going to use XYZ models off the shelf versus we're going to fine-tune a lot of these. And so how do you just kind of walk me through the under-the-hood technology stack?

Yes, yes. Look, I mean, we're still increasing our margins by 20 basis points, right? So we're not decreasing it, which kind of, without going into details, tells you that, yes, we're using some money for investments and stuff, but we still continue to return stuff, right? Last year, we also increased -- returned a big chunk from a margin perspective. So we -- as a company, we understand our investors also appreciate kind of the return of -- back to the shareholders, right? So we hold our margins from that perspective.

I think we also continue to invest. So we invest hundreds of millions of dollars in R&D every year, and we'll continue to invest it. Remember, we also can rearrange where we're investing in, right? So 5 years ago, if the biggest thing was around network automation, we'll go, okay, so now we'll take some of that spend and put it on this agentic models, so we will accelerate them because that can be a growth engine. So while those other engines are still functioning, maybe they don't need as much money.

And the second point to this is as kind of head of R&D and engineering, what I can get from $10 today is much more than I could have got from $10 3 years ago, right? So that's why I think that -- I think we have a good balance. And look, at the end of the day, I'm sure all our investors would love our top line to continue growing and us to have these growth engines for future years. But it's also something our customers require from us, right?

Our customers come to us, not -- we're not just a general FI that says, hey, tell me what to build and I'll go build it for you. Like we're coming to them going, hey, like, here's what we've done to this model. Here's how we're working with it. Here are several network agents you can use. So we are bringing technology and R&D to the table that they can incorporate into their ecosystem. And I think that's why customers choose us at the end of the day rather than just this a la carte menu and going, hey, sir, tell me what you want me to build and I'll go build it for you.

Yes. That's great. And you mentioned it a little bit earlier, but just kind of as it comes to the NVIDIA partnership, can you talk a little bit about the partnerships you have with some of the others in the technology...

Yes. Yes. Look, I think we have 4 key strategic partnerships, right? So it's NVIDIA, AWS, Microsoft and GCP. Of course, there are many others. But those are, I would say, the big, big 4. And really, they're valuable for multiple different aspects. Our customers are large customers. They're not small companies. And so yes, we may have a say on whether they go to AWS or whether they go to Azure. But -- also, they're very bifurcated sometimes in who they choose as a web scale provider. So they may say, hey, my core systems might be on AWS, my data might be on GCP. And you'll start to see more and more of that, I think, going into the future, right?

In the same way you see large language models, where else before we may have had OpenAI only on Azure, whatever. I think I read this morning about the Anthropic Azure announcement and stuff like that. So you're going to see this kind of coexistent bifurcation. But these strategic partnerships are just as important to the web scalers as they are to us because at the end of the day, telcos have huge workloads that need to be migrated to the public cloud.

So our systems run cloud natively on AWS. It's fantastic for AWS because they have an opportunity to take this compute workload and move it to the cloud. So in the same way that we want to have a partnership with them, they also want to have a partnership with us, and there's a very close relationship. We work very closely with them in both kind of migration projects, but also investment into kind of future road map items.

So with NVIDIA, we've worked since day 1 on what their NIMS infrastructure, kind of their microservices agentic infrastructure. And we couple ours very closely. Our R&D developers sit together, for example. And so when we come to the table, we can even help prioritize some of our customer requests to what they can deliver. I think the NVIDIA guys were telling me the stuff we've rolled out in one of our customers in the Middle East was one of the first time actual Agentic capabilities have been rolled out to customer care. And it's real, it's live and it's delivering real value in production.

And there's a lot of hand waving today, a lot of slides and PowerPoint saying you can do this, that. But when you actually see it and you go, wow, like your NPS just went up, it's pretty cool. It's very, very satisfying as a technologist to see this kind of -- the results come to life.

Yes. And ROI has been an interesting thing to measure with AI. And so it seems like you guys have a pretty defined I guess...

Come with [ to ] me, I could show you the ROI.

So do customers -- like are they -- you mentioned a little bit about the monetization element. But I also think one thing that's interesting is kind of the pricing model that you guys have. You guys have priced on outcomes, right? I feel like that's novel to a lot of other software players. So I'm curious, what informed that in the first place? And how do you think that helps you today?

Yes. I love that question because usually, I'm trying to educate someone asking the question about that. We've always worked on a kind of an outcome-based model from the perspective of we want to add value to our customers, right? So we're looking at business KPIs. We're looking at business milestones, making sure the software goes versus, hey, you have like 5,000 people, let me charge you 5,000 seats or you want 100 people, let me charge you. We don't have that type of model, right?

So our model is always we develop products and software. We are after a targeted outcome. We want to achieve your business KPIs and your business results. So when people start talking about outcome-based monetization models in Gen AI, we're like, okay, that's great. This is what we do. So again, it's not a huge disruption for us. And we're like, where do you sign up? Right? What I will tell you, though, as an industry as a whole, I think people are still trying to figure out what that monetization model is. It's not like anyone has come out and say, hey, this is the -- like first, we thought it was based on tokens, Microsoft has the PTU model. So everyone is trying to figure out exactly what that is, right?

And I think we still have a bit of where, but we're looking at it with a few different customers like how do you charge for an agent that adds value and reduces 40% of your workforce, right, versus buying a technology that does it versus having a managed services contract that does it. So the good thing is we have long-term service agreements and contracts. And so we have the ability to kind of test the waters and see.

But I think in the next 6 to 12 months, there'll be some equilibrium in terms of some monetization model coming out. But it will always be tied, I think, to some level of outcome because at the end of the day, every CFO out there is like, hey, it's great that you're buying 100 GPUs, like show me what the ROI is for this, right?

Yes. If you figure it out, let me know because that's one topic that has obviously debate across both software and services. I think you mentioned BPO and you're not them, right?

Definitely.

Now I guess from an economic standpoint, I could imagine that there's probably some friction on that type of model when we talk about outcome-based pricing versus billable hours, especially if I'm using AI internally to deliver some of these solutions, I can imagine the economics are good. So do you think it's the kind of thing where if we look 3 to 5 years out, it's going to benefit the margin profile much more than we could kind of really comprehend right now?

Yes. Look, I think definitely, when you kind of look at the longer term, right, and look at where things are going, on one hand, today, you may have 10,000 people running a call center and then you're paying for the 10,000 people, then you're buying 10,000 seats from another provider to pay for the software for the 10,000 people, right? This model is going to be disrupted, right? Because the moment you drop these 10,000 people to, let's say, 3,500, you're also reducing the seats. And that 6,500 that you're not spending for, maybe use 40% of that to buy the software that provides better value, better results and a seamless customer experience. So that model is definitely going to be disrupted.

And ideally, we would love to be the people that disrupt that model. And I think when you think from a longer-term perspective, when you're a technology provider, obviously, it should have more of a positive impact on your margin profile. Now whether you decide to invest it to grow top line and get faster growth and what you decide to do is a whole kind of another discussion. But definitely, you should see benefits from software development optimization, from software rollout optimization. And when you're a product company, definitely, you're in this space.

Yes. So we talked a lot about cloud, a lot about AI. Some of the other, I guess, product advancements, eSIM is one, big eSIM and AT&T deal last quarter. Talk to me a little bit about what's exciting about that and when you think about just kind of how that could evolve?

Yes. This is something I think we don't get enough credit for. Like we have a bunch of SaaS platforms in the company, our eSIM platform, our connectX platform, our MarketONE platform, really, that is doing really well. Now obviously, they're not massive material that it impacts the company from a huge way. But these have a ramp-up and they have an increase, right? And so you take eSIM where Apple is now starting to roll out in the U.S., you can't buy an iPhone with a physical SIM card. Internationally, you still can, right?

But as this started to change, we have over 30 customers on our eSIM platform today, right? So you start to see the network effects start to play. I mentioned connectX, which is a SaaS platform, we see a world where you have the Kardashians in L.A., you have [indiscernible], right? Think of influencers launching their own MVNO platform, right? Why not, right? Because if Taylor Swift launched her own mobile platform on Monday, I guarantee you she's going to have 6 million subs on Monday morning, right?

And so the connectX platform allows you to launch an MVNO literally in hours, right? We give you a login name and a password. You can go in there, fully Gen AI native. You can say, hey, I want to launch a brand that is Gen Z native, that targets these types of things, put in all of the information. It will create the app for you, it will create the framework for you and you'll be able to launch it. Obviously, you need a partnership with an AT&T or T-Mobile or Verizon or whoever you have the network connection, but will enable you to just launch it fast.

And so we feel like these are expansion areas for us potentially to get into spaces that are not necessarily core telecommunications revenue either, right? So you could have a celebrity that wants to launch. We're talking to many people at the moment that are really interested in launching it. And it's interesting talking to some of the celebrities and kind of influencers. They also want to curate their brand and curate their ecosystem, and they see connectivity as being a red thread maybe that glues these things together. So that's a very exciting opportunity for us together with eSIM.

And the MarketONE platform is another way for our service providers to sell digital products and services. We've gone from like everyone had one cable box to today, how many subscriptions do you have?

Too many.

Too many, right? And right -- so MarketOne is a place where -- it's like one place, you see all your subscriptions, you can buy it, remove it, add it and you kind of -- it's back to having a holistic view of the world. And this platform is going well. We have several million subscribers on the platform now. So these are small things we've invested on the side, but they have a good growth trajectory that we're very excited about for the future.

Awesome. Well, that's probably a good place to wrap it up. So Anthony, thank you for your time today...

Thank you for having me. Great to be here.

[indiscernible]

Thank you.

Alright.

Thank you for standing by, and welcome to the Amdocs Fourth Quarter 2025 Earnings Conference Call. [Operator Instructions] As a reminder, today's program is being recorded. And now I'd like to introduce your host for today's program, Matt Smith, Head of Investor Relations. Please go ahead, sir.

Thanks, operator. Before we begin, I need to call your attention to our disclaimer statement on Slide 2 of the presentation. It notes that some of our comments today may be forward-looking statements and are subject to risks and uncertainties, including as described in Amdocs' SEC filings and that we will discuss certain financial information that's not prepared in accordance with GAAP. For more information regarding our use of non-GAAP financial measures, including reconciliations of these measures, we refer you to today's earnings release, which will also be furnished with the SEC on Form 6-K.

Participating on the call with me today are Shuky Sheffer, President and Chief Executive Officer of Amdocs Management Limited; and Tamar Rapaport-Dagim, Chief Financial and Operating Officer. To support today's earnings call, we are providing a presentation, which you can find on the Investor Relations section of our website. And as always, a copy of today's prepared remarks will be posted immediately following the conclusion of this call.

On today's agenda, Shuky will recap our business and financial achievements for the fourth quarter and full fiscal year 2025, and we'll update you on our strategic progress, including our continued sales momentum in cloud and recent commercial developments in generative AI and data services. Shuky will finish by previewing our financial outlook for the full fiscal year 2026, after which Tamar will provide additional details on our Q4 financial performance and our forward guidance.

As we communicated previously, Shuky and Tamar will compare certain financial metrics on a pro forma basis, which adjusts prior fiscal year 2024 revenue by about $600 million to reflect the phaseout of certain low-margin noncore business activities, which was substantially already ceased in the first quarter of fiscal 2025.

And with that, I'll turn it over to Shuky.

Thank you, Matt, and everyone joining us on the call today. Starting on Slide 6. I want to express my sincere appreciation to our global team as we close out another year of important progress. Your dedication and commitment have driven solid financial results, consistent with our guidance, and you did it while executing our strategy to support our telco customers with cutting-edge cloud, digital and AI-based solutions.

To briefly recap fiscal 2025, revenue grew up by 3.1% in a pro forma constant currency, which adjusts for our decision a year ago to phase out certain low-margin noncore business activities to sharpen Amdocs' strategic focus while also resulting in a stronger business visibility.

Among the many highlights, we delivered double-digit growth in cloud, which contributes over 30% of total revenue this year. Share of revenue for long-term managed services reached a record 66%, further supporting Amdocs's already strong business resilience. Profitability improved by 300 basis points, including 60 basis points from ongoing business transformation and efficiency gains. And we maintain our commitment to technology, innovation and product leadership, tailoring our investments to serve our customer key business imperative.

These include B2B modernization, next-gen monetization, fiber networks and of course, generative AI, where this year, I'm proud to say we made a successful transition from proof-of-concept trials to winning actual generative AI-related deals. Overall, we delivered non-GAAP diluted earnings per share growth of 8.5% in fiscal 2025 and achieved our target to deliver double-digit expected total shareholder return, including our dividend yield.

Now let's take a close look at our fourth quarter performance, beginning with the financial on Slide 7. Revenue of $1.15 billion was above the midpoint of guidance and up 2.8% from a year ago in pro forma constant currency. Profitability improved by 20 basis points sequentially. Non-GAAP diluted earnings per share was $1.83, slightly above the guidance midpoint, and we finished the quarter with 12-month backlog of $4.19 billion, up $40 million sequentially and 3.2% from a year ago.

Growth in 12 months backlog was driven by strong sales momentum this quarter, contribute to our overall long-term book of business. As Slide 8 shows, pipeline to deal conversion was well balanced across our key operating regions and strategic domains, showcasing Amdocs' proven ability to scale our customer activities by continuously delivering fresh innovation over time.

In cloud, we signed a multiyear managed services SaaS agreement with AT&T to deliver entitlement server capabilities via our eSIM cloud platform, and we won new cloud modernization and migration awards at Lumen Technologies in the U.S. and TELUS in Canada. We expected our recent momentum in generative AI domain with -- we extended our recent momentum in generative AI domain with an exciting new award at Telefonica Germany, and we expanded our international footprint with new monetization and digital modernization awards at BT-EE in the U.K., Altice SFR in France, Telia in Finland, KT in South Korea and Claro Brazil.

Several deals this quarter were struck among under long-term managed services agreements, further deepening our customer relationship. This includes an exciting landmark multiyear strategic agreement with PLDT in the Philippines, which expands our long-term-standing managed service engagement to accelerate its IT modernization and streamline business processes through AI and generative AI capabilities. Rounding on operational highlights, Amdocs is engaged in the execution of complex mission-critical transformation projects, closely working with our customers as key partners.

Q4 was another quarter of consistent execution in which we achieved important project milestone at AT&T, Comcast, Bell Canada, BT Everything Everywhere, Vodafone and Vodafone 3, PLDT and e& UAE. I'm also proud to say that Amdocs ensured smooth customer operation during the high-volume launch on Apple's iPhone 17 in September.

Now turning to Slide 9. I would like to provide some additional color with respect to our growth strategy, which is designed to deliver the [indiscernible] product and services our customer needs to, accelerate the journey to the cloud, maximize the value of generative AI and data across our customer footprint, digitalize customer experiences for consumer and B2B, monetize next-generation network investments and streamline and automate complex network ecosystems.

Beginning with cloud on Slide 10. Demand for our cloud-native solution and proven ability to accelerate public, private and hybrid cloud migration remains strong as we continue our strategy of moving mission-critical system, workloads and applications that enable innovation, agility and cost savings for all our customers.

In the U.S., Lumen Technologies selected Amdocs to support its cloud transformation, moving mission-critical BSS application to Google Cloud to strengthen its digital foundation. TELUS in Canada expanded its multiyear managed service agreement with Amdocs to migrate on-premise wireless monetization operation to Google Cloud, enabling the faster launch of new consumer and enterprise offerings, improve customer experience and reliability and reduce operational costs. And Bell Canada, in collaboration with Amdocs is migrating existing system to the cloud to enhance scalability, resiliency and achieve operational efficiencies.

Our SaaS-based platforms, including Amdocs eSIM, Amdocs Market One and Amdocs ConnectX are also contributing to growth with rising customer adoption. To provide a few examples, we signed a multiyear managed services SaaS agreement with AT&T to deliver entitlement server capabilities via our eSIM cloud platform. This continued to expand our eSIM SaaS platform momentum, adding over 100 million devices to it. Additionally, Amdocs ConnectX has already more than 15 customers, including consumer cellular and PLDT, who are deploying the generative AI native platform to quickly launch existing new digital brands.

Adding to the list, I'm pleased to announce that Orange Belgium has selected Amdocs to lead key modernization initiative on their prepaid stack, leveraging our ConnectX platform. This project includes real-time charging and next-generation scalable architecture designed to support their needs. It will drive efficiency while transforming the user experiences with modern digital-first journeys that will redefine engagement for Orange Belgium prepaid subscribers.

Looking forward, cloud will remain a primary focus for Amdocs, as we continue to support our global telco customer base, many of which are only just getting started on their multiyear cloud journeys.

Now let's talk about generative AI and data on Slide 11. Following the generative AI-related deals we recently announced with e& UAE, Altice Optimum and Consumer Cellular, I'm excited to report that Telefonica Germany, one of the country's largest quad-play service providers, has selected Amdocs to extend its billing platform for both consumer and enterprise services.

As part of this expanded multiyear collaboration agreement, Telefonica Germany will deploy new generative AI use cases, leveraging Amdocs' amAIz Sales Agent to enable the efficient promotion of new products and to automate the upsell of personalized offers to drive higher ARPU. This award with Telefonica Germany is another proof point that shows that we are starting to see trial POC conversion to actual generative AI projects, and we are excited about the initial results we are seeing.

For example, one of the first service provider to integrate generative AI was e& UAE, a customer which is already achieving double-digit improvement in Net Promoter Scores after deploying amAIz agents. Such progress reflect Amdocs' core telco platform and data services expertise built on our vectorized amAIz platform, which we have deployed in collaboration with NVIDIA and other generative AI leaders. Moreover, I believe our recent success demonstrating the pivotal role Amdocs is playing as an IT player in helping accelerate generative AI adoption in telecom industry.

In addition to cloud and generative AI, we secured important wins in the strategic domain this quarter as highlighted on Slide 12. As previously announced, we finalized a significant 10-year digital modernization and managed service agreement with BT-EE in the U.K. to deliver a modern B2C mobile platform for its prepaid and postpaid segments.

We signed a multiyear strategic agreement with Telia Finland to build its next-generation digital BSS enhanced and with advanced AI capabilities. And AT&T Mexico closed a new digital program with Amdocs to enhance self-service experiences, expanding its digital selling capabilities.

Here in the U.S., we signed a multiyear software and IT service agreement with Fidium, a next-generation American fiber Internet and network service provider and a new logo for which Amdocs will modernize and manage its IT operation while supporting its broader digital transformation strategy. Elsewhere in the U.S., a leading Tier 2 operator selected Amdocs for additional 5-year renewal of their BSS ecosystem.

Service providers are also adopting next-generation monetization solution to support their wireless and fiber infrastructure elements. Amdocs recently signed an expanded multiyear billing transformation agreement with Altice, France's SFR to consolidate multiple billing operation to a unified cloud-ready platform. And we signed a new agreement with South Korea's telecom operator, KT, to upgrade and modernize its charging system to accelerate time to market and to boost operational efficiency.

This quarter was also -- we also expanded our activities with the 2 largest operators in Brazil. First, Amdocs entered an agreement with Claro Brazil to implement a real-time billing platform designed to enable full-scale converge across its multiple line of business. Claro also extended its multiyear service contract with Amdocs.

Second, in the network domain, we signed a modernization agreement with Telefonica Vivo to provide a future-ready foundation for ongoing operation by deploying our latest OSS products. Further underlying Amdocs expertise and growth potential in the network domain, we have expanded our managed services agreement with Globe in the Philippines to include network strategy and planning, mobile access engineering and optimization to enhance service quality and operational agility. Additionally, we delivered a successful go-live of Amdocs advanced network inventory platform for Vodafone Ireland and continue to expand our network activities with Vodafone Greece.

Before discussing our fiscal 2026 outlook, I wanted to circle back on generative AI to share our thoughts with respect to our strategy and investment plans as presented on Slide 14. Over the past couple of years, we've shared our belief that generative AI holds immense potential to transform the telecom industry. We've been working closely with our customers to deliver tangible improvement in critical areas such as customer care and network operation while building out generative AI capabilities in our amAIz platform.

As the technology matures, the industry advance and we see the progression from POCs to production, we believe there is now the potential to unlock even greater opportunities to enhance experiences, agility and efficiency. To fully capture this potential for Amdocs and for our customers, we are accelerating our generative AI investment, which we expect will open new pathway for future growth across our entire customer base, irrespective of their BSS or SS version. This included fast tracking the development of what we call a Cognitive Core, a next-generation platform built on the solid foundation of Amdocs amAIz.

It integrates advanced generative AI capabilities such as agent-to-agent MCP technologies, our vectorized telecom expertise and the enablement of agentic services. In the coming quarters, we'll share more about our vision for AI-powered telecom operating system. For our customers, this investment in generative AI may represent a substantial shift in how they will adopt future software and services. Notably, we believe it promises to simplify and accelerate their digital transformation and journey to the cloud delivered under our outcome-based model.

Overall, with focused and intentional investment, we expect Cognitive Core to emerge as a long-term growth engine for Amdocs by enabling us to better serve our full spectrum of customers from those running current platform seeking cost-effective line of business modernization to top-tier innovators already modernizing on Amdocs' next-gen platform to lead with future-ready digital experiences.

Now let me comment on the current operating environment and our outlook for fiscal year 2026. We are entering fiscal 2026 with a healthy 12-month backlog visibility and a strong overall book of long-term business supported by a recent win momentum. With our unique tech-led and outcome-based accountability model, Amdocs is strongly positioned within our serviceable addressable market of nearly $60 billion to monetize a rich pipeline of opportunities across cloud, digital network and generative AI and data. That said, we are closely watching for any impact of the uncertain global macroeconomic environment on us and our customers' demand and spending behavior.

Tying everything together with our outlook on fiscal -- on Slide 16. We expect revenue growth in the range of 1.7% to 5.7% as reported and 1.0% to 5.0% in constant currency for the full year fiscal 2026. As to our profitability, we expect a non-GAAP operating margin to increase by roughly 20 basis points year-over-year at the midpoint on our target range as we balance our strategic long-term growth investment with the benefits of ongoing cost and efficiency gains across the business.

All up, we expect to deliver a non-GAAP diluted earnings per share growth of between 4% to 8% in fiscal 2026, the midpoint of which equates to an expected total shareholder return in the high single digits, including our dividend.

With that, let me turn the call over to Tamar for remarks.

Thank you, Shuky, and hello, everyone. Thank you for joining us. Before I begin in today's comments, I will compare certain financial metrics on a pro forma basis, which adjusts prior year fiscal year '24 revenue by approximately $600 million to reflect the phaseout of certain low-margin noncore business activities, which were substantially already ceased in the first quarter of fiscal 2025. To further assist your modeling, the regional mix of this revenue was similar to the overall company, and it contributed roughly $150 million per quarter.

To begin, I'm pleased with our solid financial performance for the fourth fiscal quarter as detailed on Slide 18. Q4 revenue of approximately $1.15 billion was up 2.8% year-over-year in pro forma constant currency. Revenue exceeded the midpoint of our guidance with no impact from foreign currency movements as compared to our guidance assumptions. Reflecting the phaseout of certain business activities, reported revenue declined by 9% from a year ago.

On a regional basis, North America improved more than 2% sequentially, posting its strongest quarter of the fiscal year. Europe declined, reflecting normal business fluctuations following a record quarter in the previous quarter. Rest of the world was slightly lower on a sequential basis, reflecting mixed trends. With our strong sales momentum, we have clear visibility to continued growth in Rest of the World, but quarterly trends may fluctuate given the project orientation of our customer activities in this region.

Shifting down the income statement. Non-GAAP operating margin of 21.6% improved by 290 basis points from a year ago, driven by the announced phaseout of low-margin noncore business activities and the benefit of ongoing efficiency gains within our operations. Non-GAAP operating margin improved by 20 basis points sequentially. Interest and other expenses amounted to roughly $10.3 million in Q4.

On the bottom line, non-GAAP diluted EPS of $1.83 was slightly above the midpoint of guidance. Diluted GAAP EPS of $0.88 included a restructuring charge of $0.60 per share, resulting from certain transformational actions we have taken to optimize our workforce allocation, technology mix, infrastructure, workspace and other resources as we prepare to accelerate the internal adoption of generative AI in fiscal 2026. Excluding this restructuring charge, diluted GAAP was at the high end of the $1.41 to $1.49 guidance range.

To quickly summarize our full year 2025 financial performance, results were consistent with the original guidance we provided a year ago, as shown on Slide 19. Revenue was up 3.1% in pro forma constant currency, above the midpoint of guidance. On the bottom line, we delivered non-GAAP diluted earnings per share growth of 8.5% in fiscal year 2025, consistent with the midpoint of guidance and driven by sustained revenue growth, a 300 basis points improvement in non-GAAP operating profitability and the benefits of our share repurchase activity.

Turning to Slide 20. This year, we delivered double-digit growth in cloud, which exceeded 30% of overall revenue as compared with roughly 25% in the prior year. Further highlighting the ongoing diversification of our business and growing traction in international markets, half of our top 12 customers are international customers, 2 of which are new logos added in the last 10 years, as Slide 20 shows. Additionally, we continue to expand our footprint with long-standing customers and new logos in North America.

A great example is Charter, with which we had limited business a decade ago, but is now one of our top 10 customers. Over the years, we have also added new logos in North America, such as Consumer Cellular and Fidium in fiscal 2025.

Turning to Slide 21. Managed Services revenue was a record $3 billion in fiscal 2025, up 3.1% from a year ago. Managed Services as a share of overall revenue also reached a new high of 66% in fiscal 2025, further strengthening our business resilience as we maintained high renewal rates and expanded our customer activities under long-term agreements. As Shuky alluded to earlier, several of our key deals signed in the fourth quarter were struck under multiyear managed services engagements, the most significant being our landmark agreement with PLDT from the Philippines, for which Amdocs will manage its complete IT services requirements, covering architecture, implementation, operations and performance outcomes with end-to-end accountability.

Additionally, we expanded our managed services agreements with Globe in the Philippines to include network operations and TELUS in Canada to cover the migration of its wireless monetization operations to Google Cloud. Managed Services can also be a spearhead to winning new customer logos, such was the case with Fidium in the U.S. for which Amdocs will serve as the primary and exclusive partner to maintain and operate its ID fiber operation across multiple applications while supporting its IT transformation as a preferred development partner.

Moving to the balance sheet and cash flow highlights on Slide 22. DSO of 74 days was down by 2 days sequentially and unchanged year-over-year, reflecting normal fluctuations in the business activity. Unbilled receivables net of deferred revenue rose by $62 million sequentially in Q4 and was relatively flat compared to a year ago, aggregating both the short-term and long-term balances. As a reminder, the net difference between unbilled receivables and deferred revenue fluctuates from quarter-to-quarter, in line with normal business activities as well as our progress on multiyear transformation programs.

Driven by a strong fourth quarter, free cash flow before restructuring payments was $735 million in fiscal 2025 and above our guidance range of $710 million to $730 million. Including restructuring payments of $90 million, reported free cash flow was $645 million for the year. Overall, we finished fiscal 2025 with a healthy cash balance of approximately $325 million and an available $500 million revolving credit facility, providing ample liquidity to support our ongoing business needs while retaining the capacity to fund our future strategic growth.

Switching to capital allocation on Slide 23. This quarter, we repurchased $136 million of our shares. We had up to $1 billion of remaining repurchase authority as of September 30, 2025. We paid cash dividends of $58 million in the fourth fiscal quarter. Looking to fiscal 2026, we expect free cash flow of between $710 million to $730 million, not including additional payments we expect to make under our current restructuring program.

Our free cash flow outlook equates to a conversion rate of roughly 90% relative to expected non-GAAP net income and translates to a healthy free cash flow yield of roughly 8% relative to Amdocs' current market capitalization. Regarding our capital allocations for the coming year, we expect to return the majority of our free cash flow to shareholders. This includes dividends for which we are pleased to announce a proposed 8% increase in our quarterly cash payment to a new rate of $0.569 per share, subject to shareholders' approval at the Annual Meeting in January 2026.

Moving to Slide 24. 12-month backlog was $4.19 billion at the end of Q4, up 3.2% from a year ago. We expect 12-month backlog to represent roughly 90% of our forward-looking revenue, further underscoring the importance of this metric as a leading indicator of our business.

Now turning to our revenue outlook on Slide 25. We are continuing to closely monitor the prevailing level of macroeconomic, geopolitical, business and operational uncertainty in the current business environment. The first quarter and the full year fiscal 2026 financial guidance reflects what we consider to be the most likely outcomes based on the information we have today, but we cannot predict all possible scenarios.

For the full fiscal year 2026, we expect revenue growth of between 1.7% and 5.7% as reported and between 1% to 5% in constant currency. We expect our strong sales momentum in fiscal 2025 to contribute to fiscal year 2026 revenue growth, and we assume a stronger second half to the fiscal year as we ramp up activities on recently secured deals. On the other hand, our fiscal year 2026 revenue guidance assume a revenue decline at T-Mobile due to reduced discretionary spending. Our annual guidance also incorporates some contribution from inorganic deal activity. As for the first fiscal quarter, we expect revenue between $1.135 billion to $1.175 billion.

Moving down the income statement, we expect non-GAAP operating margins within a new and improved target range of 21.3% to 21.9% in fiscal 2026, the midpoint of which is roughly 20 basis points higher than the prior year. Our profitability outlook reflects an intentional decision to accelerate our R&D, sales and marketing investments with respect to generative AI and next-generation Cognitive Core platform while balancing this with ongoing cost and efficiency gains resulting from our continued focus on operational excellence, automation and the internal deployment of generative AI-based tools across our business. Our margin outlook excludes additional restructuring charges we may take.

Wrapping everything together on Slide 27, we expect to deliver non-GAAP diluted earnings per share growth of 4% to 8% in fiscal 2026. This outlook assumes pressure from below-the-line items in the year ahead. We anticipate a moderate increase in our non-GAAP effective tax rate to a rate for fiscal year 2026 of between 16% to 19%, primarily driven by a combination of regulatory changes, including the implementation of the Pillar 2 global minimum tax and other evolving international tax requirements. In the first fiscal quarter of 2026, our non-GAAP effective tax rate is expected to be above the annual range.

Additionally, we anticipate higher finance costs this year, resulting from a reduced cash balance and funding of our strategic long-term growth plans. Overall, we expect to deliver high single-digit expected total shareholders' return in fiscal 2026, assuming the 6% midpoint of our non-GAAP diluted EPS growth outlook plus our dividend yield of roughly 2.7% based on the new dividend payment we announced today.

With that, back to you, Shuky.

Thank you, Tamar. I'm pleased with our solid financial performance and continued strategic progress in fiscal 2025, and I'm excited by our technological leadership and potential to open new growth opportunities by accelerating our generative AI investment in the year ahead.

With that, we are happy to take your questions.

And our first question for today comes from the line of Timothy Horan from Oppenheimer.

You've had a lot more experience with AI at this point. Can you just talk about maybe qualitatively how impactful you think it will be to the telecom industry? And how much can you think improve productivity over time and generate kind of new services? And related to that, I guess the same thing internally, how much can it improve your own productivity internally? I realize you are reinvesting a lot of that productivity in R&D and in investing for longer-term growth?

Thank you, Tim. We are evolving our offering in the in the GenAI domain. Internally, as you mentioned, we are using more and more generative AI capabilities in the software development life cycle and operation. And this is improving gradually, and we see more and more, I would say, benefits. It's not just to cost, to quality, to speed, many items that we see using this technology.

From the offering perspective to customers, the initial offering that we have and which we are deploying and now successfully converting POCs to actual deals was more, I would say, add-ons on top system, some agents in the call center for care and for commerce and things like these type of capabilities, which now we are doing with many customers we mentioned and are pretty successful.

The next, I would say, GenAI capabilities is what we discussed today, what we call Cognitive Core. The idea is to add a layer on the top of our BSS systems or the different one that we are supporting today and actually create a new model that can support agentic activity, agent to agent and actually completely disrupt and change the way we are running this operation today.

Part of the investment that we discussed that we are going to accelerate this year is to build this layer. I think it's going to be -- it will take some time to deploy it. We believe it's going to be extremely exciting and give completely new capabilities to our customers in the agentic area. And we definitely believe that this will be another very important growth engine for Amdocs for the years to come.

And do you have a rough idea when that will hit the market?

Mid-'26.

And our next question comes from the line of George Notter from Wolfe Research.

I guess I wanted to just probe the decision to kind of reallocate more capital into the business from an R&D perspective. I heard certainly what you said about building more agentic capability. I guess I'm just looking for sort of the puts and takes, right? You're implementing AI internally. You've been on a path of generating 60 or 70 basis points of efficiency each year. The coming year, it's going to be more like 20 basis points. Is that the amount of the investment, that incremental 50 or so basis points. Is that the right way to look at it? And -- or are there some other kind of growth factors we should look at?

Yes. Most of the margin story here is this intentional decision to invest more into this opportunity that we see as an exciting one. So at the same time, as you said, that we are continuing to enjoy the productivity gains. We do want to reinvest in making sure we are capturing this growth opportunity. It's not just R&D. It's also in the sales and marketing aspects, the go-to-market, how we are going to support and accelerate our coverage of the different opportunities in the pipeline. So I would say it's both.

And definitely, we would like to see that keeping and accelerating the momentum we think we can bring on that aspect. We talked in the last 2 quarters about the fact that we are moving from proof of concept and feasibility to actual commercial deals. We continue to see that with the examples of Telefonica Germany we mentioned now and etisalat is much more mature and adding more and more use cases. PLDT as part of a large mega deal that we just signed is going to include adoption of our amAIz platform. So we are continuing to see more and more commercial pickup on that aspect and think that there's a great opportunity there.

Got it. Okay. And then also, I just wanted to ask about your conversations with customers. Obviously, the company prices its contracts, its businesses on outcomes, not billable hours times rate model. I get that. But I assume your customers do expect that you're using AI internally to improve efficiency. And I'm wondering if there's some expectation from customers to get better pricing or contract prices from you guys as part of that realization. I'd like to hear more about how those conversations are going. And at the moment of contracting with customers, are you seeing that pricing impact or pressure roll down on to Amdocs or not?

So this is not new. I mean, yes, now I think the most discussed item is generative AI, but this -- we have the situation pretty much in every renewal situation. Over then, we changed technology, we moved to the cloud. So technology is evolving. Definitely, there is discussion like this with GenAI.

What we are trying to do, obviously, is, a, our business model is, for the most part, as you mentioned, is outcome-based. So this is helping a bit. And I think what is more important that whenever we renew or sign a new agreement, we are doing a lot of effort very successfully to completely change the scope of the agreement by adding transformation to the cloud, generative AI capabilities and other automation and other products that we have.

So yes, there is pressure. Customers expect to see savings. But as you mentioned, because we are not in a rate cut type of relationship as part of this discussion, on one hand, we show the customer efficiencies; on the other hand, we're expanding the scope of our activities. We're adding new products and new services and GenAI capabilities. So between the 2, I think we are doing a pretty good job in minimizing the impact.

And just to add on that, George, our offering is very rich. And typically, what happens is as we get into these dialogues with customers looking on their own on total cost of ownership, how they want to achieve this kind of savings or what benefits they're looking for in terms of improving customer experience and other pain points they have. So engaging in this dialogue, we have a lot of tools to go into this -- to go back to Shuky's point of mentioning additional scope.

So we can take a bigger wallet share of what they need to invest in and give them the benefits that they're looking for. So it's not just a dialogue on, "Okay, what do we do for you right now and how are we pricing it moving forward?" It's a whole different dialogue that is emerging. And we've seen this quarter a lot of Managed Services expansion and extensions, and that has been part of this discussions. And as you can see, we're expanding the 12 months backlog beyond that. I feel very good about the fact that it's expanding our book of business beyond the 12 months that we are including in the backlog.

So I think the method works. We can bring them that value while giving them the TCR reduction they're looking for and looking how to bring more and more of our offering to support their needs.

[Operator Instructions]

Our next question comes from the line of Tal Liani from Bank of America.

I have like 5 questions. So stop me when I'm going through too much.

Cash flow is down next year. Why is it? And then I have -- I'm not asking the question in any order. Maybe I'll ask 2 at a time. But also the growth, if I take your midpoint on a constant currency basis, the growth is not showing much acceleration from this year. It's actually below -- slightly below Street expectations. What are the puts and takes in the growth because you also made the disclosure that T-Mobile is going to be down in 2026. So can you kind of elaborate on the good parts and the parts that are maybe more flattish and declining? I thought after some discontinuation of businesses, growth should somewhat accelerate from where we are or where we were?

Thanks, Tal. So I'll address the cash flow first. We ended the adjusted cash flow for 2025 of $735 million, but we started the year with exactly the same guidance range that we are starting now, $710 million to $730 million. We want to be appropriately conservative. So I don't see that as a cash flow decline. We are more or less at the same level.

When we are looking into the question into the revenue growth, as you rightfully articulated, we are seeing, on the one hand, an amazing sales quarter, finishing 2025. Very happy about the deals we've signed. A lot of that momentum on the sales will contribute more into the second half of the year as it's naturally taking us more time to ramp up deals that we are capturing. So that's why we said that within the fiscal year '26, we will see a stronger second half growth. At the same time we see this positive aspect, we do see the pressure of lower discretionary spending in T-Mobile, and this is why we feel we want to be absolutely transparent about the decline we expect there. It is a major customer.

I just want to give some context. T-Mobile has been a long-term relationship for us. We are supporting their billing activities across all their key brands, Magenta, MetroPCS, now UScellular. And this is obviously a core activity of what we do for them, and we are very focused on continuing to bring value. But at the same time, we need to acknowledge the fact that they are reducing some discretionary spend. So yes, there are positives, there are some negatives. But I believe that overall, looking on the sales activity and how strong we finished 2025, we feel good about our future.

Tamar, can you elaborate on your top 10 customers? That's number one. This is kind of -- you normally give this time of the year, you give the disclosure in the K, if you have the data. And then just on T-Mobile, they announced they made a disclosure that they are starting to transfer customers to a new billing system, and they made a few days ago.

And the question is, is this kind of an end of a project? That's why revenues are going to be down? And is this normal for big transformational projects that at the end, you start to see a decline? When you say discretionary spending, it looks like things are being pushed out. And I'm wondering if it's really things that are being pushed out or being deprioritized versus the big contract that is basically done?

So Tal, to the point on the top customers, we are typically giving this information in our annual report that is coming out in December, and we'll do the same this year. I will just say that, as I mentioned on the prepared remarks, we are happy to see the customer diversification evolving in a positive way with more customers entering, I would say, the high thresholds of our business, including many international names that we've added, including relationship that a long time ago, were relatively small like Charter and are now a top customer.

And we -- when we look into our relationship with T-Mobile, we cannot comment on the specific project or specific program plans, et cetera, on a single customer basis. But I can definitely tell you that we've taken all the reasonable assumptions in terms of the outcomes that we are seeing with relations to us into the guidance that we've given. So more to come, of course, in terms of what we can release moving forward. But I feel that we have taken everything we know as of today into the guidance.

Got it. Last question. I promised you 5 questions. So last question. You -- in the last year, you implemented AI in order to save -- to improve margins in order to reduce costs, and you've done it very successfully. And now you are talking about increased costs. Tell us about the margin trajectory, meaning on one hand, you are reducing expenses. On the other hand, you are spending more. What drives the increase in spend? And how soon could it translate into accelerated growth?

Tal -- by the way, congratulations on the award, if we speak. The best way to tell it, if we did not have all the tools of capabilities we developed with generative AI in our software development life cycle, all the engineering activities in the company, including operation, in a year like this that we accelerate investment in developing our next generation, I would say, GenAI capabilities around the core system, you could see even a situation there is some pressure on the margin.

The reason that we are able, on one hand to accelerate the investment in GenAI and still to generate maybe a moderate but still 20 basis points of increasing the margin is because we have all these capabilities that we develop and continue to see progress of actually doing everything much faster and better and with higher quality.

Got it. So if I take a step back for investors that are long term and looking at Amdocs as a kind of safe, relatively low-risk investment for the long term. The question that I'm asking is you've had tremendous success in the last 1 or 2 years with big projects with big customers, you are doing great in cloud. You're doing good. We start to see signs of GenAI. But the growth is still the same in a sense that even before you decided to discontinue some operations, you were growing between 3% to 4%. Now the guidance is for the same growth, maybe it accelerates second half, but we're still in the same neighborhood of growth.

The question is, if you look out, without giving us guidance for growth, like specific guidance, but when you look out and you say where you want to position the company as a CEO a few years down the road, do you think that what you're doing today and your activity in cloud and your activity in GenAI, could it change the growth profile of the company? Meaning can you grow sustainably above the current 3% to 4% going into new markets and new TAMs? So sorry, it's a long-winded question, but I'm just trying to understand kind of the longer term, what you have in mind, the longer-term goals for the company in terms of growth.

I think the answer will be shorter than the question. But I think in the last couple of years, the main growth engine for Amdocs was the cloud. In order for us to break this 3% and to go to a mid-single digit that we would like to be, we need more than one growth engine as big as it is, it's become already 30%. So we really believe that with the investments we do and with unique offering, we are going to have more than one significant growth engine like cloud, and we believe that what we develop right now in GenAI will be another one. And the answer to your question, I think in the mid, we established 2, 3 growth engines, then we can be there, and this is our intention.

And our next question comes from the line of Shlomo Rosenbaum from Stifel.

This is Adam, on for Shlomo. What is the organic constant currency growth implied in the guidance for fiscal 1Q '26 and full year '26? There's some commentary around some contribution from inorganic deal activity. If you could talk about that, please.

We expect to have roughly half coming from inorganic. When we started 2025 as well, we talked about some inorganic contribution and eventually, it was less than half of the growth. So we leave some flexibility for that, of course. And if you look back on the -- just on the type of deals we signed even this quarter in Q4, we already see direct relation to past acquisitions and the benefit it's bringing. So we feel this is a very important way for us to capture strategic growth opportunities, whether it's fiber -- some of those small deals that we've done in 2025 was around the fiber growth opportunity as an example. So we want that lever to stay open and contribute to the company.

Okay. And the change in AI spend, where are you seeing customers put their budgets and capital? And how does that match up to the areas where you're stepping up investments in GenAI?

So far, most of the investment we're building agents and use cases to support, as I said, to improve activities in the call center, both for our digital application, both for commerce and care. What we've built right now -- and by the way, the other thing we talked about is actually GenAI is all about data, so how to prepare the data to be available in real time to support the agents.

What we are talking right now, it's a completely different scale. It's meaning that we are going to augment our core billing systems or core monetization system with the cognitive core layer that will, as I said, will allow agent to agent and all the capabilities of agentic options. This is a different scale of capabilities, which is relevant for every Amdocs customer everywhere. So we believe that from a scale perspective, it's much bigger from what we've done so far.

Okay. And there was some commentary about some pressure from below-the-line items just on the modeling side. What areas specifically you're referring to and what's driving that?

Referring specifically to tax rates as we see more regulatory changes around the world, like the Pillar 2 minimum tax as well as other countries that are putting some new regulations. We elevated the effective tax rate range from 15% to 17%, to 16% to 19%. So that would be one point. And the other one is financing costs. As we are starting the year in the lower cash balance and continue to have plans to invest in some strategic growth areas, we will see some higher finance expense costs. So that's what we refer to as items below the operating income line.

This does conclude the question-and-answer session of today's program. I'd like to hand the program back to Matt Smith for any further remarks.

Okay. Thanks, operator. Thanks, everyone, for joining the call tonight. If you've got any additional questions, please give us a call in the IR group here. And with that, have a great evening. Thanks a lot.

Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.

Thank you for standing by, and welcome to the Amdocs Third Quarter 2025 Earnings Conference Call. [Operator Instructions] As a reminder, today's program is being recorded. And now I'd like to introduce your host for today's program, Matt Smith, Head of Investor Relations. Please go ahead, sir.

Thanks, operator. Before we begin, I need to call your attention to our disclaimer statement on Slide 2 of the presentation. It notes that some of our comments today may be forward-looking statements and are subject to risks and uncertainties, including as described in Amdocs' SEC filings and that we will discuss certain financial information that is not prepared in accordance with GAAP. For more information regarding our use of non-GAAP financial measures, including reconciliations of these measures, we refer you to today's earnings release, which will also be furnished with the SEC on Form 6-K.

Participating on the call with me today are Shuky Sheffer, President and Chief Executive Officer of Amdocs Management Limited; and Tamar Rapaport-Dagim, Chief Financial and Operating Officer. To support today's earnings call, we are providing a presentation, which can be found on the Investor Relations section of our website. And as always, a copy of today's prepared remarks will also be posted immediately following the conclusion of today's call.

On today's agenda, Shuky will recap our business and financial achievements for the third quarter and full fiscal year 2025. And he'll also update you on our strategic progress, including our continued sales momentum in cloud and recent commercial developments in generative AI and data services. Shuky will finish by discussing our financial outlook for the full fiscal year 2025, after which Tamar will provide additional details on our third quarter financial performance and forward guidance. As we've communicated previously, Suki and Tamar will compare certain financial metrics on a pro forma basis, which adjusts prior fiscal year 2024 revenue by approximately $600 million to reflect the end of certain low-margin noncore business activities which were substantially already ceased in the first quarter of fiscal 2025.

And with that, I'll turn it over to Shuky.

Thank you, Matt and everyone joining us on the call today. Starting on Slide 6. Amdocs delivered solid financial results and achieved important business milestone in Q3 as our global team of amazing people continue to support the strategic business imperative of our customers with innovative cloud digital and AI-based solution.

Touching on the quarterly financial highlights. Revenue of $1.14 billion was up 3.5% from a year ago in a pro forma constant currency exceeding the mid of our guidance with sequential growth in all regions and a record quarter in Europe. Profitability improved by 10 basis points sequentially driven by internal efficiency improvements. Non-GAAP diluted earnings per share was $1.72, a $0.01 above the midpoint of our expectation, and we wrap up the quarter with a healthy transfer backlog of $4.15 billion up 3% from year ago pro forma.

Jumping to Slide 7. Q3 featured several important wins, which showcase Amdocs market and technology leadership and our proven ability to power the mission-critical needs of our telco customers. We have continued to see positive sales momentum in cloud where we have recently won key modernization immigration deals, which expand our long-standing partnership with Elisa in Finland, Claro Brazil, and a leading Eastern European operator, leveraging our end-to-end cloud offering and telco vertical expertise. In the emerging [indiscernible] in data services I'm encouraged to say that our tech leadership and key partner collaboration with NVIDIA and Microsoft are bearing fruit as we start to convert previously discussed POCs into commercial success.

Notably, we recently won strategic Gen AI related deal with 3 customers, including a leading U.S. service provider Consumer Cellular and [indiscernible], and I believe this will provide a foundation to which we demonstrate Amdocs Gen AI capabilities to further expand our customer activities over time.

Turning to project execution. Amdocs is engaged in complex mission-critical transformation closely working with our customer as a key partner. During Q3, we delivered near record number of deployments, achieving key outcome milestones at AT&T, Comcast, Vodafone, Italy and Netherlands, [indiscernible] and others. Among the highlights, Bell Canada and Amdocs set a new benchmark by moving critical billing system to the cloud, simplifying thousands of daily operation and interfaces in the process. We also supported the go live of our B2B platform in Optus in Australia and completed BSS modernization supporting 25 million subscribers in telecom South Africa.

Rounding out my operational review. Q3 was another record quarter in Managed Services. Moreover, we have recently strengthened our managed services engagements with several key customers, including a leading service provider in the U.S., BT in the U.K. and Telstra in Australia.

Turning to Slide 8. I'd like to elaborate on our growth strategy, which is built to address our customer strategic business imperative and investment need to accelerate the journey to the cloud. simplify and accelerat adoption of generative AI and data services, digitalize customer experience and consumer -- of consumer and B2B and monetize next-generation network investments, and streamline and automate complex network ecosystem. The execution of our growth strategy is enabled by Amdocs unique tech-led business model, which integrates cutting-edge technology across platform and solution, project deployment and IP-based IT operation support.

By continually investing in innovation to further extend our tech-led offering and capabilities, we are consistently able to bring value to our customers. We see every engagement as an opportunity to showcase our value position and gradually scale activities within our existing customers as well as new ones. A great example of our model at work is the way which we help our customers on their journey to the cloud.

As we can see on Slide 9, more customer opportuning Amdocs as the primary partner for public, private and hybrid cloud migration using our comprehensive cloud solution and telco expertise. We are happy to announce the expansion of our partnership with Elisa in Finland to modernize their B2B platform using Amdocs digital suite deployed on Google Cloud DCP. This transformation will enable Elisa to accelerate time to market, streamline the lead to order journey and deliver a unified experience across mobile and fixed services, all on a single converged digital platform. It's marked a significant step forward, enhancing agility, improving customer engagement and supporting Elisa long-term growth in the B2B space.

We are pleased -- also pleased to announce a new win with one of Eastern European leading service provider will be leveraging our cloud-based customer experience platform, a solution designed to transform customer experience and operational agility. As part of this engagement, Amdocs will also work with the service providers to migrate newly acquired mobile customers to the platform, driving long-term efficiency and innovation. Among other notable awards, Amdocs has financed an agreement with Claro Brazil to modernize their enterprise systems.

I also want to highlight Amdocs unique suite of SaaS-based cloud solution, which are gaining market traction and contributing to growth. Our suite includes Connect X, which is helping everyone knows and telcos to launch strong powerful brands create to target specific consumer groups with unique user experiences. ConnectX was recently adopted by consumer cellular and several other new logos in addition to which we deepened our collaboration with AT&T by extending our ConnectX platform agreement to accelerate its next-gen market offering. An example of a way in which ConnectX is supporting our customers mobifone, leading Vietnam's operator, which recently used platform to launch semi its new digital brand, especially tailored to meet evolving needs of young tech-savvy [indiscernible] subscribers.

Supported by a strong sales momentum over the last several quarters, we expected to reach our double-digit revenue growth target for cloud in fiscal 2025. Furthermore, we believe cloud will remain a primary gross engine for Amdocs in the foreseeable future as most of our customers only just getting started on their multiyear migration journeys.

Turning to Slide 10. We are intensifying our focus on generative AI and data services as a key growth pillar for Amdocs. Let me take a moment to elaborate. First, a leading U.S. service provider has signed an expanded multiyear agreement, which extend managed services to transform its billing commerce catalog and order management through Gen AI power solution. This includes generally enabled Maze agent bill presenter to simplify billing inquiries and enhance customer experience.

Second, Amdocs expanding a multiyear agreement with Consumer Cellular as this wires provided transition to an AI-powered MVNE. Building on our recent deployment of ConnectX, this agreement leverage Amdocs AI and data platform, customer experience insight and the made suite to transform telecom data into actionable insights and real-time predictive analytics for greater automation intelligence.

Third, I'm glad to share that we expanded our collaboration with the UAE's largest service provider, ENA through additional new Gene use cases. This development built on the successful implementation of our MACE platform and marks another step in the journey towards fully powering all of and U.S. customer-facing channels with Gen AI. Overall, I'm encouraged by this recent deal because they reflect Amdocs Gen AI data service leadership in the telco industry and because they provide strategic foundation on which we can demonstrate value and gradually scale our customer activities in this emerging domain over time.

Moving on Q3 also include notable customer development across our additional key strategic pillars, as shown on Slide 11. BT is awarded Amdocs a digital transformation project. starting date to be finalized, that will enhance their consumer -- customer experience as part of a multiyear managed services engagement. Comcast extended the multiyear commitment to leverage the Amdocs Bill presenter solution across our services. In Network, we have extended an engagement with Australian Telstra and we will continue a multiyear OSS digitization, which will enable Telstra to benefit from our gen AI and network automation capabilities. Additionally, AT&T renewed its opened policy managed services engagement with Amdocs under an expanded long-term agreement. Claro Brazil, expedited policy platform agreement with Amdocs to better serve the evolving needs of its prepaid and postpaid customers and Globe Telecom in Philippines selected Amdocs to deliver end-to-end run optimization services.

[indiscernible] will cover the full spectrum of fund services, including installation, commissioning, integration testing, exception and optimization of its radio sites. Global service providers are also accelerate their fiber network expansion investments to enable converged value offering, which bundle broadband and mobile together. The trend is creating strong demand for fiber network design, the deployment, orchestration and digital infrastructure management solution, which Andres is positioned to support with our next-gen fiber solution. For instance, we have significantly increased our fiber engineering services to support in support of AT&T's fiber expansion, serving them as their connectivity design partner across the majority of AT&T's markets.

To further advance our capabilities and market position in fiber, we recently closed the deal to acquire the telco network engineering business of Mobia, a privately owned company, which will expand our fiber offering and fiber customer footprint in Canada. Finally, in next-gen network monetization, A1 Group in Europe has selected Amdocs billing charging and product catalog solutions to establish a converged cloud-ready monetization platform for iMacadonian affiliates.

Turning now to the current operating environment on Slide 12. We continue to see reach an encouraging pipeline of opportunities across our large [indiscernible] market of nearly $60 billion. Our 12-month backlog position is healthy. And as I mentioned, we are on track to achieve our double-digit growth target in cloud this year. That said, we are closely watching any impact of the uncertain global macroeconomic environment on us and our customer spending behavior.

Bringing it all together on Slide 13. We now expect slightly better revenue growth of roughly 2.9% in pro forma constant currency at the midpoint of our fiscal 2025 outlook. equating to an improvement of about 20 basis points compared with our fiber side. We are also on track to deliver double-digit expected total shareholder return for the fifth consecutive year, assuming the midpoint of our non-GAAP diluted earnings per share outlook supported by significantly improved profitable and robust earnings to cash conversion.

With that, let me turn the call to Tamar for remarks.

Thank you, Shuky, and hello, everyone. Thank you for joining us. Before I begin in today's comments, I will compare certain financial metrics on a pro forma basis, which adjusts prior fiscal year 2024 revenue by approximately $600 million to reflect the phase out of certain low-margin noncore business activities, which were substantially already seized in the first quarter of fiscal 2025. To further assist in modeling, the regional mix of this revenue was similar to the overall company, and it contributed roughly $150 million per quarter.

To begin, I'm pleased with our solid financial performance for the third fiscal quarter as detailed on Slide 15. Q3 revenue of approximately $1.14 billion was up 3.5% year-over-year in pro forma constant currency and exceeded the midpoint of our guidance even after adjusting for a positive impact from foreign currency movements of approximately $9 million compared to our assumptions. Reflecting the phaseout of certain business activities, reported revenue declined by 8.4% from a year ago.

On a regional basis, North America improved by 1% sequentially, posting its strongest quarter of the fiscal year. Europe delivered a record quarter with year-over-year revenue growth of nearly 8% driven primarily by the ramp-up of new deal activities as well as some contribution from the earlier acquisition of Profinit, which we closed at the end of Q1. Rest of the world was slightly higher on a sequential basis. We continue to see mixed trends while Southeast Asia growth is partially offset by weakness in Latin America.

Shifting down the income statement, non-GAAP operating margin of 21.4%, improved by 280 basis points from a year ago. reflecting the announced phaseout of the low-margin noncore business activities and the benefits of ongoing efficiency gains within our operations. Non-GAAP operating margin improved by 10 basis points sequentially. Interest and other expenses amounted to roughly $11.7 million in the third quarter and included a onetime charge taken in respect to $2.5 million write-off of a small minority investment this quarter.

On the bottom line, non-GAAP diluted EPS of $1.72 was $0.01 above the midpoint of guidance, and diluted GAAP EPS of $1.39 was slightly above our guidance range in the third quarter.

Turning to Slide 16. Revenue from Managed Services was a record $771 million in the third fiscal quarter, up 4.1% from a year ago. Accounting for roughly 2/3 of total revenue, Managed Services engagements are a key measure of Amdocs long-term visibility and business resiliency, underpinned by customer renewal rates, which have historically approached 100%. To provide some recent examples of the ways in which we deliver value to our managed services customers over time. We recently signed a significant multiyear agreement, which extends and expands our managed services engagement with a leading U.S. service provider, leveraging our generative AI powered platform. In Australia, Telstra extended its Managed Services engagement continuing the multiyear [indiscernible], which will enable you to benefit from our Gen AI and network automation capabilities. And BT has awarded Amdocs a digital transformation project, starting dates to be finalized that will enhance their consumer customer experience as a part of a multiyear managed services engagement.

Moving to the balance sheet and cash flow highlights on Slide 17. Days of 76 days was down by 1 day sequentially and up 2 days year-over-year, reflecting normal fluctuations in business activity. Unbilled receivables net of deferred revenue declined by $71 million sequentially in Q3, aggregating the short-term and long-term balances. This is the second consecutive quarter of sequential improvement in this metric as billings have been running higher than revenue. As a reminder, the net difference between unbilled receivables and deferred revenue fluctuates from quarter-to-quarter, in line with normal business activities as well as our progress on multiyear transformation programs.

With free cash flow before restructuring payments of $230 million in Q3, we are on track to achieve our annual target. including restructuring payments of $19 million, reported free cash flow was $212 million. Overall, we ended Q3 with a healthy cash balance of approximately $342 million and an available $500 million revolving credit facility, providing ample liquidity to support our ongoing business needs while retaining the capacity to fund our future strategic growth.

Switching to capital allocation on Slide 18. This quarter, we repurchased $135 million of our shares. Including the new $1 billion share repurchase authorization approved by our Board last quarter, we add up to $1.12 billion of remaining repurchase authority as of June 30, 2025. We paid cash dividends of $59 million in the third fiscal quarter. Looking ahead, we are iterating our annual free cash flow target of between $710 million to $730 million in fiscal 2025, which is before restructuring payments.

Our annual free cash flow outlook equates to a conversion rate of more than 90% relative to expected non-GAAP net income and translates to a healthy free cash flow yield of more than 7% relative to Amdocs current market capitalization. Regarding our capital allocations in fiscal year 2025, we expect to return the majority of our free cash flow to shareholders.

Moving to Slide 19, 12 months backlog was $4.15 billion at the end of Q3, up 3% from a year ago on a pro forma basis. We expect 12 months backlog to represent roughly 90% of forward-looking revenue, further underscoring the importance of this metric as a leading indicator of our business.

Now turning to our revenue outlook on Slide 20. We are continuing to closely monitor the prevailing level of market economic, geopolitical business and operational uncertainty in the current business environment. The fourth quarter and full fiscal year 2025 financial guidance reflects what we consider to be the most likely outcome based on the information we have today, but we cannot predict all possible scenarios. For the full fiscal year 2025, we now expect revenue growth of between 2.4% and 3.4% in pro forma constant currency, the 2.9% midpoint of which equates to an improvement of roughly 20 basis points as compared with our previous outlook.

Our annual guidance incorporates double-digit growth in cloud and some contribution from inorganic deal activity. As to the fourth fiscal quarter, we expect revenue of between $1.125 billion to $1.165 billion, and for your modeling purposes, revenue from acquisition of Mobia's network engineering business will be immaterial in Q4.

Moving down the income statement. We are on track to produce non-GAAP operating margins within our guidance range of 21.1% to 21.7% in fiscal year 2025. The midpoint of our guidance equates to a substantial increase of roughly 300 basis points this fiscal year, roughly 230 basis points of which is from the previously announced phaseout of business activities. -- another 60 to 70 basis points of margin expansion is resulting from our continued focus on operational excellence, automation and the gradual implementation of Gen AI. As part of our process of accelerating the internal adoption of Gen AI across everything we do at Amdocs, we are proactively evaluating our strategic investment priorities for fiscal 2026 and having regard to our future workforce allocation and the optimal mix of technology, infrastructure, workspace and other resources.

Below the operating line, foreign currency fluctuations and hedging costs are expected to impact non-GAAP net interest and other expense by roughly several million dollars on a quarterly basis. We expect our non-GAAP effective tax rate for fiscal 2025 to be within an annual target range of 15% to 17% for the full fiscal year 2025, consistent with our initial guidance.

Wrapping everything together on Slide 22. We now expect non-GAAP diluted earnings per share growth within a tighter range of 8% and 9% for the full fiscal year 2025. The 8.5% midpoint of which is unchanged as compared with our prior outlook of 6.5% to 8% -- sorry, to 10.5% previously. Assuming the 8.5% midpoint, we are on track to achieve double-digit expected total shareholders' return for a fifth consecutive year in fiscal 2025, including our dividend yield.

With that, back to you, Shuky.

Thanks, Tamar. I'm pleased with our solid financial performance and business achievements in the third quarter, including our ongoing momentum in cloud and encouraging signs of commercial progress in Gen AI and data services. With our unique technology-led business model, we are on track to meet our national targets for the full fiscal year.

With that, we are happy to take your questions.

Certainly. And our first question for today comes from the line of George Notter from Wolfe Research. Your question, please.

I guess I wanted to start just by asking about the British Telecom win. Looking back, I don't think you guys did much business there. I guess I'm just wondering how big that opportunity is for you if you could size it, that would be very interesting. Also, if I go back in the last 3 or 6 months, you guys talked about some bigger deals kind of working through your pipeline. I assume you're referencing the BT transaction. And then also, I'm just curious if that BT situation is in backlog at this point or not.

The second question is not in our backlog because it was signed after June 30. And second, we did have -- we are doing many years business with what used to be everything everywhere, which was acquired by British Telecom. And they are running some of our legacy platform. This deal is actually modernizing all the commerce domain of everything everywhere. It's a combination of full modernization project. with an extended managed services to support everything there. So it's an incremental activity -- significant incremental activity to our previous activities with everything everywhere, which is now BT.

And just to refer to your other point about having significant deals in the pipeline, we mentioned a couple of examples that were signed in the quarter, some of which, I would say, are important and strategic, not necessarily huge in size like Telstra and some of which like the U.S. leading operator, which we cannot mention by name right now is a significant deal, including modernization, including Gen AI, including multiyear managed services extension and expansion, so definitely an example of a deal that is in the other, I would say, scale in terms of sizing. So we see both George. And yes, we continue to sign deals as we speak. So like it's cut in a way by cats point on June 30, but in reality, it continues, obviously, in the week since.

Got it. That's great. And then I guess I'd also just ask you about AI. I know you guys, I think, had around a dozen POCs going on with the MAZE product I think, mainly in call center types of applications. So I was just curious about what kind of progress you're making there? Have you had customers convert from trial to production rollouts, anything you can say there would be interesting too.

Thanks, George. So we converted actually 4 different customers from POCs to actual deals this quarter. And this -- in one of them in the UAE is the expansion of the previous deal that we've signed. And actually, they will continue and expanding build agents on top of the infrastructure that we have built. In the other, 3 customers that we mentioned, we are installing our Maze platform, and we are building -- starting to build use cases on top of it. We are helping also the customer to arrange the data to support it. It's a combination of care-related billing care or care related use cases and also commerce and upsell use cases.

And our next question comes from the line of Shlomo Rosenbaum from Stifel.

It's good to hear about all the deals. And I just wanted to follow on a comment that you made, Tamar, about the June 30 being kind of just a cut point in time. So the first time in many years that we've seen a sequential ticked down even albeit small in backlog, it's down $20 million. Can you talk a little bit about that and what's contributing to that? And then afterwards, I just want to ask a little bit more following up on the AI deals. If you could just help kind of dimensionalize then? And do you think that that's going to -- at what point in time will we help see that be incremental to revenue growth, so kind of lifting up the expectation for revenue growth on a year-over-year basis even just a little bit.

Thanks, Shlomo. So when you look on backlog and as I always say, it's a good leading indicator as we look on the next 12 months backlog. And we continue to see nice year-over-year growth, 3% this quarter. you're right. Sequentially, it was down 20%. I'm less focused on that since eventually, signing of deals can happen on August 1 and August 2 and you're right that it's unusual, but at the same time, we've seen deals being signed, like the BT1 that is a significant one in others. So we are focused on looking forward and continue to see the back of giving us great visibility. We talk about roughly 90%. never take it as an accurate mathematical formula, but it is giving us a good coverage as we look forward, both in terms of understanding the revenue picture as well as ability to plan, which is really important in terms of resources and how we are thinking about executing the deals and being prepared to do so.

And regarding Gen AI, we do see contribution already, but it's starting in small increments. And I think the importance, like the E and UAE example, which we've been talking about them adopting our MACE platform. And since then, every quarter, we see adoption of additional use cases. So the idea is we get the customer excited about what they see, and we grow from them. And we bring the value, and hopefully, we can grow even further. And other layer I would mention is that the data-related services preparing for the Gen AI use cases is another important part and actually comes first typically in the cycle in terms of getting the data ready and the services associated with that as well as our data on platform in order to help customers do so. So this is the 2, I would say, vectors that we are seeing from pure revenue point of view, the data-related activities are bigger right now, and the Gen AI use cases are the ones we as we said, converting now from PCs to commercial deals, and we like this conversion rate, and we expect to see more as we move forward.

Our next question comes from the line of Timothy Horan from Oppenheimer.

The North American win, is that a relatively smaller customer that's going to become larger? Or can you give us some sense of how meaningful and material that is? And then on...

It's a bigger customer that become bigger.

Got it. On the SaaS products, can you tell us how meaningful that is to overall revenue or maybe just incremental revenue growth at this point? And I know you talked a lot about ConnectX. Are there other SaaS products that are doing well?

I will start to describe the SaaS product and Tamar will give more. It's growing double digit. I mean it's a growth engine for us. We have several SaaS products. There is obviously the ConnectX market one, which is our monetization platform, is also SaaS, and our eSIM platform is also a SaaS platform. I think that we developed quite nice. And I think in easing, we have more than 40 customers worldwide. So we see more and more traction. I think the -- obviously, the ConnectX getting a lot of attention lately because this is really, really we achieved there, I don't know, tens of customers...

It's the newest one and one that we launched though the market several quarters ago, and we see very nice traction since addressing both the MVNO opportunity as well as the digital brands of the larger players and people are really excited about -- we mentioned, for example, consumer cellular. It's a new win of last quarter. This quarter already, we've seen expansion of the business with them. So the momentum is being built. Now aggregating all of the revenue we see in the SaaS business, it's not in the hundreds of millions, don't get me wrong, but the fact that it's growing very nicely and it is obviously generating as it scales up, nice margin is giving us the appetite, I would say, to invest more into these kind of offerings.

And do you have a sense of where we are in the cloud migration by your customers? Maybe what percentage or what inning we're in and -- do they recognize that they have to migrate to the cloud to really use Gen AI? And are they thinking that Gen AI is going to really help them move the needle fundamentally?

I think it's 2 different things. I think that -- although, obviously, we are using Gen AI tools, but many customers of Amdocs started the journey to move to the cloud. The journey includes obviously some type of consulting. And then you need to have all the activity of taking the platform to the cloud, then you have migration. So it's not a simple necessarily. Definitely, it's not a short project. So we have many, many customers that are starting to remuneration or the mid of the migration, but I would say, less than a handful of Amdocs customer completed that, but we really -- we did start the journey from with many customers. So there is a lot of activities ahead of us in this specific domain.

And last more margin expansion you sold this year, 60, 70 basis points. Do you think that's sustainable or repeatable?

We're not committing now to next year margin expansion. But the trajectory, I would say, of the ability to take technology and automation and definitely Gen AI now is an accelerated opportunity is definitely there, and it's in everything we do. At the same time, there's always a balancing act between how much we see productivity gains and how much we are investing into the business and the growth. So this is why I'm being careful to get ahead of ourselves and talk now explicitly about what's the margin number for 2026. But we continue to see the productivity gains. We continue to see the ability to take different capabilities that we have at the [indiscernible] and build that into the way we do things internally.

[Operator Instructions] And our next question comes from the line of Tal Liani from Bank of America.

This is [indiscernible] on for Tal Liani of Bank of America. I have 2 questions for you. The first one is about Gen AI and I know we already had some questions about Gen AI, but I wanted to ask you in a little bit of a different sense in the terms of -- what are you guys thinking about the potential for Gen AI to contribute meaningfully to revenue over time, whether it's a stand-alone opportunity or an accelerator of the existing service lines. And directionally speaking, is it crazy to think that in a year from now, that Gen AI is a meaningful contributor to revenues? Or is it still a few years out?

I think what we see in 2025, as we said, it's the year of exploration. As we expected, during the year, we had several or I'd say, quite a lot of proof of concepts, engagement with customers, they're evaluating the capabilities, how to take it into supporting their business either to create a better customer experience or reduce cost and create efficiencies. We are starting to see conversion, again, as expected, of this proof of concept into commercial deals now. The pace is hard to predict. Another thing that we are seeing, as I noted before, is that a lot of the investment needs to go into the data layer, meaning in order to be ready to leverage the opportunity of Gen AI there needs to -- Shuky like to call it the plumbing, the plumbing behind the scenes of the data domain.

So we do see the revenue picking up on that aspect already. We are not in -- with the crystal boiler, I would say, to say exactly what's going to be the revenue contribution and the pace of maturity. But I'm optimistic as we are seeing it. I mean, we're seeing the value, we'll think the dialogues with customers, they start definitely to experiment and move to commercial deployment. We are seeing -- it's not just -- when we say [indiscernible], just to be clear, it's not in a lab. It's taking real production environment, real customer data and showing concrete KPIs improvement relative to the comparison. So the -- I would say the elements are there. The pace of impact of revenue yet to be seen.

Got it. And then again, I'm not asking for any number, but just again, directionally, as we get towards the end of the year and into fiscal year '26, can you maybe speak to some of the broader demand trends you're seeing across your service lines? Is there anything structural or secular drivers or anything that's really sticking out that would make you believe that the current fiscal year growth rate of fiscal year '25 growth rate could differ up or down in fiscal year '26 or are we seeing kind of more consistent trends?

I think that from spending behavior, we see the same, still the same uncertainty that we discussed before. And because of different rates and be macroeconomic tariffs, geopolitical and others. So we see the same interest rate cuts, et cetera on. So we see the same pressure on spending, but it's the same. We don't see any change, I think, from this quarter to previous quarter. We don't see any erosion but at the same time, we don't see necessarily that these things is changing. But we believe we are -- so far, we are navigating in pretty much the same environment that we have in the prior quarters.

This does conclude the question-and-answer session of today's program. I'd like to hand the program back to Matt Smith for any further remarks.

Thanks, operator, and thanks, everyone, for joining the call. If you have any additional questions, please give us a call here in the IR department. And with that, have a great night. Thanks.

Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.

We'll get going here. Well, good morning, everybody. Thank you for joining us here today. My name is Jack Cassel. I'm with Nasdaq. I'm the Senior Vice President and Head of our Listings for Western and Central U.S. And I'm fortunate to have a great conversation for upcoming. Maybe we'll start just so I don't butcher it hits both of you, Shuky and Matt, introducing yourselves for the group.

Good morning, everyone. Shuky Sheffer. I'm the CEO of Amdocs. And Matt?

Good morning. Matthew Smith, Head of Investor Relations for Amdocs.

Perfect. Well, thank you both for coming here.

So maybe we'll just level set for the group, for the investors that are unfamiliar with Amdocs and your incredible story, let's start with just a brief history on the company and really the mission-critical role you play within the global communications industry.

So as said, Amdocs operates mainly in the what we call the communication in the service provider industry. I think probably in this domain, it's probably in the last 30 years. And so we actually were fortunate to build our position through all the wireless buildup that started in the '90s. And just to explain a little bit what Amdocs is doing is everyone is using broadband at home, consume content, it's about connectivity, any type of broadband connectivity through 5G. So you [indiscernible] fixed wireless, everything.

So in the service provider domain, there are 2, I would say, main pillars that -- the first one is, okay, you need to build a fiber network, we need to build -- to roll out radio network for the use of 5G. And then there is all the system that actually the support of this operation. So if you think where is Amdocs' role, from -- we operate in an end-to-end environment of what you call the IT, information technology of our customers. So it's -- we are not in HR or ERP, but everything runs, all the monetization, all the fulfillment, provisioning current, everything is going through Amdocs' Systems.

So if you connect to your service provider through a mobile app or web application or whatever, and then you want to come with new offers, all the order management, everything you order from the service to the device to -- and then all the way from all the billing system, account receivable, invoicing, everything, including charging, rating of all the services, so it's the end-to-end support for our customer to actually to monetize the services.

This is a very, very highly mission-critical system. Sometimes I wonder how I can sleep at night, giving our position that the vast majority of the service provider in the world of using Amdocs system. We say that roughly 3 billion people are touching Amdocs every day. We are here in the U.K. So here, our customer is obviously everything, everywhere, Tree and Vodafone. If you go to the U.S., it's obviously AT&T, T-Mobile, some degree Verizon, Charter, Comcast. In Canada, if you guys are aware, Bell Canada, TELUS. In Latin America, all the big groups between the Carlin, the América Móvil and Telefónica. And definitely across Europe with Vodafone and others.

So -- and we are, by far, the market leader in APAC. So if you need to think all the services that you consume from a service provider, which it could be connectivity or content, all of them are through the Amdocs systems.

Okay. That's very helpful and especially the global nature of the business. Amdocs often highlights its unique business model. So maybe can you share a bit more about the various elements of this model, the importance to Amdocs market success and the way in which it supports high levels of recurring revenue, financial stability and really that visibility?

So there are 2, I would say, main things which differentiate Amdocs from the rest of the competition that I'm sure we'll talk about. And the first one is usually, if you want to split the world in a simple way, there is the product companies of the world, like Salesforce and others; and there is the system integrators of the world, like Accenture, Infosys and others. And what is unique about Amdocs is what we call we have posed services company, meaning that we develop the product. We invest a lot of money to develop. We have the, by far, if we go to Gartner, we have, by far, the best product. So we developed the product, which is built.

It's not like a multi-vertical product. It's a product which was built for telco. So we develop the product, we implement the product and then we operate the product in a minute or the services and managed services. And this creates a very unique accountability model. Why? Because if you look at probably 10, 15 years ago, there was some type of fight between our model, which you say, okay, this is like a full accountability model and the best-of-breed.

So in Amdocs' case, we are bringing the whole suite to the whole portfolio. We are responsible for implement it and to operate it. So you have a full accountability model. In the other mode of operation, which still obviously is there, is what we call best-of-breed. So you bring a system integrator that try to stitch together different products and to get to the same outcome. And in many cases, like this is very complex. I mean, this is a very complex environment. And one of the toughest complex environment, mainly in the same level of financial services or banking, I mean the data is huge. I mean it's mission-critical. It has to work all the time.

How much patient do you have if you bond well will be down for 2 seconds. I mean, or your mobile service will not work because there is some problem in the back end. People have 0 tolerance. I mean this is like if you ask my kids, what is the most important utility at home? Is it running water or Internet? I mean, it will be -- they will say we can -- let's have Internet first.

So this is why I said this is a very unique accountability model because in this project, if something goes wrong in the other model, not Amdocs, then the system integrator will say the product is not working. The product guys will say, the system integrator doesn't know how to operate the product, and there's no real accountability.

And the other thing is that since we are focused on the telco industry on the communication industry, we build the whole portfolio. So if you look at the Amdocs portfolio, it's an end-to-end form, as I said, from the channels to the catalog to ordering, beginning, invoicing AR, general ledger, charging, rating, provisioning, fulfillment, assurance. So it's end-to-end suite, which is completely, I would say, pre-integrated.

If you try to the competition, probably no one has the whole breadth of products. So we'll have to bring like 2, 3 products, so we have to bring Salesforce and maybe Netcracker and metrics, like 3 or 4 companies together to have the same portfolio that Amdocs is having. Now you need to assume, so you're getting more and more complexity because then you need to integrate 3 different products, and we know it's complex. Then you have a system integrator that is not an expert really, is trying to stitch together all these products.

So the success rate of this type of project is very low. We in Amdocs enjoy very, very high success rate. And people will say about Amdocs, they are a great company. The products are the best. Maybe they are too opinionated, they are maybe expensive, but they always deliver. This is our claim for fame. This is a very complex projects and huge operation. You think about this that while most of the world throughout the -- obviously, December holiday season is taking an app, this is the most critical time for us. I mean, talking about Black Friday. I mean this is like the huge operation that have to work flawlessly at any given point.

So I think, as I said, it's a very unique business model for accountability, doing both the products and the services. It brings us some additional value. We'll talk about this later. Comparing to the other model now, it's not that we have 10% market share. We have a very big market share. But definitely, if you see -- if you check, you'll see that our success rate is significantly higher than the competition.

Yes. Sticking with the competition and maybe taking a step further, can you talk about internal IT as a key competitor and really the case for why customers will continue the gradual shift toward industry specialists like Amdocs?

So as I said, we have a lot of competition. By the way, competition is growing because we are all the time expanding the portfolio. You used to do -- 20 years ago, we do -- used to do only billing. Now we do the whole portfolio. So obviously, whenever we expand our portfolio, we are getting a new competition. But I think that, as I said, the competition is there. Still half of the spend, we have roughly close to $60 billion addressable market.

By the way, we don't operate in China. So we don't have any exposure to China. And so far, we don't see any major exposure to hold the target for, et cetera, so what it was. And -- but if you look about this TAM, which is roughly $60 billion, half of it is spent by internal IT, and the rest is split between companies like Amdocs. We have $4.5 billion and others.

So you can say that the internal ITs are our main competitor. By the way, it's also our main partner because we said we are always as good as our customer. Amdocs cannot -- if you don't have a very strong IT team as good as we are, I mean, it has to be a very collaborative environment to be successful together. Definitely, the internal IT is, in a way, our largest competitor.

Now I think over the years, what our customer took some decision they say, okay, what is strategic for us? And where we buy the services from someone like Amdocs, and you can see that there are more focused on the network domain. This is where they believe this is the differentiator from the network domain expertise. In the IT domain, they rely more on Amdocs. And I think developer proposition is beyond what I said. We see it in the place that we see when we build our product. So today, no disrespect to any one, most of our innovation is in APAC.

They were the first one to deploy 5G or 5G in Singapore City. I mean it's 1/3 of London. I mean, so they were able to develop 5G faster than anyone else. So we are working with Singapore Telecom. So we got a lot of experience what will be the best way to monetize 5G. Or in Korea, for example, that we are operating with Korea Telecom.

So when we see it, it's not just, okay, we are not just bringing a product. We are not throwing the product over the fence and tell the customer, okay. We also come with what we believe is best-in-class business processes and practices. So we see what's happening in APAC and in North America and in Europe. And so when we come to customers beyond the regular value, it's not just a product, it say this is a product. And by the way, this is the best business process to deploy a converged offering of content, broadband through fiber and mobile. So it's beyond.

So I think this is -- and customer give it a lot of value. I mean I understand that it's not just not specifically what is going on in their market, the different Amdocs, they get the press of what is happening globally. So for the most part, now even within the IT domain, for example, customer wants all the back-end system to be Amdocs. They want all the, obviously, all the ordering system, catalog, all these heavy-duty system to be Amdocs and say, we want to own the, let's say, the mobile application because we feel that we have -- we know we touch in the consumer. So there is a demarcation there. But yes, the internal ITs are our largest competitor in a way, giving the spend.

Okay. The -- so with that, and you touched upon the addressable market. Can you describe Amdocs' growth strategy going forward?

So obviously, the growth strategy is evolving. Many years ago, we used to do strategy session every 3 years, now then it become 1 year, then become ever 3 months because things are changing so fast. But there are some clear growth engine that is supporting our growth in the last 4 or 5 years. The first one is the move to the cloud. The industry is still behind, moving slowly. By the way, Amdocs is the leader in moving -- all our customers are moving to the cloud with Amdocs. And moving to the cloud, it's not just -- it's not about TCO reduction.

By the way, if you compare, we'll see that actually, cloud environment is not that cheap, even comparing to the traditional on-premise environment. So moving to the cloud, it's about elasticity. Our customer used to have the harbor to support Black Friday volume, which is maybe 2.5x the regular volume because of 2 days a year. In the cloud, you can do this. -- so it's about elasticity. It's much more secure environment. You're talking about cyber threat, et cetera. Time to market and ability to deploy new services is much faster.

This is the first time that you really have it is not a recovery. It's usually the fact that you save some data center somewhere else, I mean it's not really -- so there are many, many, many aspects. So moving to the cloud is a big thing. I'm not sure it's very -- in the U.S., everything is in baseball terms. So they ask us if we are in the third inning or the eight inning. So we are in the second inning from this perspective. I mean this is our way -- because we have many projects, 20% of Amdocs revenue is cloud related. It's growing double digits, but still the industry is behind. So moving to the cloud.

Then obviously, about 5G monetization. 5G, all the standard change, there is much more capacity, capabilities in 5G. Not everything is yet to be deployed. In today's environment, you don't get what we call quality of service. It's like best effort. So they don't tell you, you are going to get that speed in that latency regardless where you are in London. In 5G, you can get to situations, network slices and another. So the whole monetization of 5G, and this is another growth engine for us in the last several years.

The other one is we talk about B2B. So customer obviously have what we call B2C, the consumer domain, and then they have domain. Amdocs have done a lot and invested for many years in the consumer domain. We got it to the level of automation in the high 90s of the whole thing. B2B was left behind. Now we are investing in this in the last 2, 3 years. It is much more complex. You're coming from the U.S. I think about if you want to -- if you're a large business and you want to do a connectivity deal with Comcast or Charter or whatever one, and this is like a nationwide, 50 states, you might have the infrastructure only in 20. You need to -- if you are a Comcast, for example, you have infrastructure in 20. You need to buy from Verizon, from Lumen, from AT&T, it's a very complex business. This is a growth engine to our customers, and this is another domain.

Everything around network automation in general, network was very bespoke propriety environment. Now that network figuration, everything has become obviously a network optimization and around deployment, many, many things we can do in the network domain. And obviously, the last one I'm sure we'll talk about is that emerge lately is everything around generative AI and data, which is definitely evolving right now.

Yes. And you -- good preface to the next question because there wouldn't be a discussion in 2025 without hitting the topic of Gen AI. But maybe you can expand on that a little bit just around your strategy and then perhaps also on the partnership with NVIDIA.

So we look in -- when we talk about generative AI, we believe it's going to change Amdocs in the years to come. And it's from what we offer our customers and how it's going to change us internally. Now I'm sure there are some basic -- well, not basic, simple, low-hanging fruit corporate. I mean in marketing, we don't buy any more creative. This is -- but -- so we can optimize our legal and finance and everything, this is more.

And then obviously, the most of the activity that we do is in the software development life cycle, in operation in general, managed service operation. So -- and this is internally and then externally what we offer our customers. So let me start with what we offer our customers. So we embed, like many others, generative AI capabilities in our products. A good example is if you look at the product catalog, which is the heart of the offering, an offering is extremely complex in the telco environment. So it's a nice tool, market tier can play and plug and play and create a new offering. So we created, obviously, generative AI.

So now rather than starting to build the offer, you can write, I want to create for the iPhone launch in September, a new offering for millennials under 25 in London that are likely to upgrade the phone and our students. And rather then you will start -- we will give you -- bring demographic information, et cetera, and try to help you. It's like a Copilot for the marketeer to -- so this is, for example, in the product domain.

We mentioned about the B2B. Today, in order to create a large B2B order, it takes weeks and weeks and weeks. So now we can get like if you talk about serviceability and offering, so we can expedite this. We can create an offer probably which is 90% then. It used to take weeks to build before. And so this is an example. This is how we're implementing our products.

Another area is -- we talk about how we embed because we understand the data and AI, Gen AI and data comes together. The most -- we took a 50,000 call from a call center of one of our customers, run them from speech to text and the most common question in the call center, not surprising, is why my bill this month is higher than last month. This is the most -- this is a very complex question for the call center representative to answer because it can happen for many, many reasons. It can come from -- your promotion ran out. You don't know your kid subscribed to Disney, Amazon, you don't even know about it, suddenly it's added to you. You've got pissed off. You called the call center the months before, they gave you $20 just because they wanted to give you something to make you happy. This is not repeatable.

So the way we are looking at is we combine data, the understanding of the system and gen AI together rather than -- so you can take 2 PDFs of the January deal and December bill and send them to someone OpenAI, whatever, the latency will be terrible because this is huge, fines. The accuracy will be less than 50%, and it's going to be extremely expensive because we, for example, OpenAI, they charge bag. So what we show is NVIDIA -- so leveraging their technology, open source, LLM, we would see some open AI so we can bring in real time the data which is relevant to the question. And we got to like high 90s accuracy with a fraction of the cost with 0 latency.

So this is an example of what -- so it's between -- you wanted to call it copilot, agent and definitely also from the upside. So when you call to the call center, immediately, we look what is your pattern, I mean, how much you subscribe, what is your connectivity, how much you use on the network, what type of OTTs, do you buy Netflix. So we can create a much better -- so the service rep or even the chatbot, we can tell you this is the best package for you because this is what we see that you do.

So this is from the externally how we work with our customers. Internally, it's going to completely change the way we develop software, the way we operate. I don't -- we have no time to get the details, but it's going to completely change what we do. And obviously, in the future, it will help us to be much more efficient.

Very much. Switching gears a bit, you had delivered strong Q2 results with a 12-month backlog, up 3.5% year-over-year and revenue up 4% year-over-year on a pro forma constant currency. I had to read that one. Can you share a little bit about how you're thinking about the full revenue -- or full year revenue growth outlook?

So we guided to close to 2.7% roughly, close to it. We are very happy with the business momentum, and we see backlog is growing nicely. And -- but at the same time, I think like everyone else, so we reiterate our numbers last quarter. But at the same time, yes, it depends on each day in current environment. Every day, there is new news, but we remain a bit cautious. I mean, given the macro environment, interest rate environment, that is still -- our customers are highly leveraged. So this is why interest rate is significant for them, geopolitical macroeconomics, all of this together.

So we -- while we reiterate the numbers, we see good growth. I mean, nice momentum in our backlog. And overall, if you talk about what is the investment thesis in Amdocs, I mean, because of -- so we are not a 20% growth company. But at the same time, if you look at our business model, I mean, roughly 65% of our business is what we call managed services. What does it mean? It's a long-term agreement that we run all the operation for our customer in managed services, meaning with a full end-to-end accountability that -- by the way, which is outcome based. We are committed to service level, and this is -- so roughly 65% of our revenue is this type of nature.

This is more like the most strategic, I would say, relationship you can get with the customer, 7 years deal, a 5-years deal that we run everything from them. 75% of our revenue is recurring, meaning it's on carrying revenue that is going on. And if you look about our -- since this is mission-critical systems, then you can have, for the most part, it's not that easy to shut it down. I mean if you look stress cases of 2008, '09 financial crisis or COVID, for example, most of the projects were not stopped. I mean, this is -- I mean, if God forbid we are not working, the organization not work.

So we have -- we say we have roughly 90% visibility through our 12-months backlog, which is relatively high. And I think at the end of the day, I think that we deliver good services to our customer, and we are very connected with the strategy. So this is from this perspective from -- we have a very disciplined capital allocation between our dividend yield, which is roughly 2%.

2-and-a-bit percent.

2-and-a-bit percent. We are very disciplined buyback. I mean we roughly return the vast majority of the free cash flow to our shareholders, to the buyback or to -- or the dividend. We -- and if you go back to do what is unique about Amdocs because we do both the product and the services, we have much more opportunity to automate what we do. So in a typical environment, which is not Amdocs, you will have a product and you have the system take Accenture or Infosys, whoever. And let's say there is some order fall out. So the system tier say, we have this order fall out, let's run these scripts or patches and put a team that will deal in the ongoing order fallout. This will be probably the model.

In the Amdocs case, because we do both, so the operational guys that will see this order fallout, they will call it the same company, the product guy say, guys, we are seeing this order fallout. So let's check the problem, fix it to prevent this order fallout from the wood cost rather than put some patch and fix it. So we try to automate most of the things that we do, both in the sovereign life cycle and operation. We have a rough economy of scale. We have more than 50 large minute services agreements that we run. So every efficiency automation that we are doing, we can deploy across many accounts. We were very successful in the last years to gradually increase our profitability to where we are today. I think the guidance were like 21...

21.4.

Like at the midpoint. And we are growing it nicely over here. Most of the things or the vast majority of the things that we are able to do so far will build on the all the automation that we build in the simple AI and self-healing and all these tools that the gen AI is the next. It's the future. This is the next wave, but given the very, I would say, stable business environment and the fact that this is a high mission-critical system, I think we can plan ahead.

So I think that we perfected -- remember, at the end of the day, we have 28,000 employees, separate from R&D centers, nearshore, offshore, onshore, I mean -- and you know this -- today, when you plan the resource management, it's not -- it's skills, it's language, it's tax. I mean there are so many -- so we -- by the way, gen AI is measuring how you deploy the right people on the right time to the right project. They need to have skills. Sometimes, we need Portuguese speaking. So on specs many speaking. They need to -- you want to opt tax, you want to optimize knowledge. I mean it's -- you don't want to spread them too much across 10 centers around the world.

So I think that between the fact that this is a lot of the business is recurring, you can plan ahead, you can invest a lot of automation to do things much efficient. And this is what I think helped us over time to be very consistent in increasing our margin over time because of this capability.

Yes. Well, we are at time. So -- but that said, I do want to open it up to the audience if anyone has any questions. Okay. Well, I think this has been an incredible story. Is there anything else that you want to leave us with? I thought that was a good wrap there.

Yes. I mean -- well, I mean, obviously, we believe that Amdocs will continue to be the market leader in this domain. Communication in general, I mean, this has become like the backbone of society. I mean all of us felt is definitely in COVID suddenly, I mean the most important thing was, I think that we invest a lot in the future for R&D, I think we have a very strong partnership. NVIDIA is our largest partner in the Gen AI domain. Obviously, AWS, Microsoft in the cloud, in general, this is very strong partners to Amdocs. We have an amazing team, amazing team -- management team and also great employees, a lot of innovation, and we are very proud of what we do, and we'll continue to push forward.

Yes. Incredible customers, visibility going forward and resilient offering. And thank you. [indiscernible] I get -- you don't know if there's a problem until there's a problem. So you're the security that's keeping us all sleeping well at night. So thank you both for your time today.

Thank you, guys.

Thank you all.