Investing.com -- QinetiQ Group’s (LON:QQ) stock sank over 21% on Monday following an unexpected trading update that signaled a sharp reduction in earnings expectations.
The UK-based defence technology company warned that consensus EBITA for fiscal year 2025 is expected to fall by about 20%, with revenue also taking a hit due to ongoing challenges in key segments.
This downward revision, combined with charges related to its U.S. business, sent shares tumbling.
“A weakness in short-cycle order intake for the UK Intelligence and US Sectors business are the major source of downgrades to the top line,” said analysts at Jefferies in a note.
Delayed contracts and continued geopolitical uncertainty have further dampened sales in QinetiQ’s higher-margin Global Solutions division, which accounts for around 25% of the group’s revenue.
In the U.S., the company is also facing additional financial strain due to restructuring efforts, which include a goodwill impairment charge of approximately £140 million and non-cash charges of £35-40 million related to inventory and cost recovery.
Beyond these immediate pressures, management has acknowledged that organic revenue growth for fiscal 2026 is projected to be between 3% and 5%, falling below the company’s previously stated high-single-digit target.
While margins are expected to recover, the company faces a challenging period of rebuilding market confidence at a time when other defense firms are seeing their valuations improve.
To mitigate some of these concerns, QinetiQ has extended its share buyback program by up to £200 million over the next two years.
However, with EBITA estimates sharply cut and ongoing headwinds in key revenue-generating segments, Monday’s sell-off underscores the depth of uncertainty surrounding the company’s near-term performance.
Jefferies maintains a “hold” rating on QinetiQ, with a price target of 520p, reflecting limited upside potential following the latest guidance cut.