VEON (NASDAQ: VEON) reported second-quarter FY26 revenue of $1.27 billion, up 17% year on year, as its digital services segment accelerated growth. The telecom operator raised its full-year revenue and EBITDA guidance, citing strong execution across emerging markets.

Financial Performance

Group EBITDA reached $552 million, representing a 43.4% margin, up 6.2% from the prior year. While overall profitability expanded, the underlying drivers diverged significantly between the legacy telecom business and the new digital engine.

Digital revenue grew 53.6% to $342 million, now contributing nearly 27% of total group revenues. More critically, digital EBITDA surged 66.2% to $123 million. In contrast, telecom and infrastructure EBITDA fell 3.8% to $428 million, with margins contracting to 46.1%. Management attributed the telecom decline to a one-off provision release in Bangladesh during the same quarter last year.

Operating cash flow rose 238% to $463 million for the quarter. Equity free cash flow after leases and licenses grew 47.5% in the first half to $320 million. The company ended the period with $2.2 billion in cash, including $468 million at headquarters. Net debt excluding leases stood at $1.8 billion, with lease-adjusted leverage at 1.1 times.

What the Numbers Show

The divergence between segment margins highlights VEON’s shifting value profile. Digital services now operate at a 36% EBITDA margin ($123 million / $342 million), significantly higher than the telecom segment’s 46.1% margin but with vastly superior scalability. With digital capex-to-revenue ratios holding at just 7%, compared to 20% for the foundation telecom business, the digital engine is generating cash more efficiently than the core network assets. This structural shift supports management’s claim that digital is now generating more profit and cash than the telecom business.

Guidance and Capital Allocation

VEON raised its full-year outlook, projecting revenue growth of 15-18% and EBITDA growth of 9-12%. The upgrade reflects better-than-expected macro conditions and digital adoption rates.

On capital allocation, the company purchased $183 million worth of shares since August 2024. It committed to canceling at least $100 million of shares annually starting this year. Additionally, VEON completed a $1.4 billion bond offering to address 2027 maturities ahead of schedule, extending average headquarters debt maturity beyond four years.

Operational Highlights

• Pakistan: JazzCash processes transactions close to 16% of Pakistan’s GDP, with 27 million monthly active users and 60 million bank accounts.
• Bangladesh: Despite energy outages reducing national data consumption by 15%, VEON maintained growth. Digital revenue benefited from World Cup streaming rights via the Toffee platform.
• Ukraine: Over 6 million users accessed satellite connectivity directly via smartphones through Starlink integration, bypassing terrestrial infrastructure limitations.
• Kazakhstan: Margins faced pressure from a 6 percentage point VAT increase and accounting adjustments related to smartphone bundling strategies.

VEON Ltd. raised its full-year 2026 revenue outlook to a range of USD 5.059 billion–USD 5.191 billion, up from the previous guidance of USD 4.883 billion–USD 5.015 billion. This updated forecast surpasses the market estimate of USD 4.965 billion. The Nasdaq-listed digital operator also lifted its EBITDA growth forecast to 9%–12% year-over-year in USD terms, compared to the earlier range of 7%–10%. The upgrade follows a strong second-quarter performance where the company reported earnings per share (EPS) of USD 1.69, beating analyst estimates of USD 1.60, and quarterly sales of USD 1.271 billion, surpassing expectations of USD 1.219 billion.

The revised guidance reflects accelerating momentum in VEON’s digital services segment, which grew 53.6% to USD 342 million in Q2FY26. Digital revenue now accounts for 26.9% of total group revenues, up from 20.5% a year ago. Traditional telecom and infrastructure revenue also contributed to top-line strength, growing 7.6% to USD 929 million, supported by a 6.3% rise in mobile average revenue per user (ARPU). Capex intensity excluding Ukraine remains unchanged at 15%–17%.

Revised 2026 Guidance

While operational metrics improved, net profit for the quarter fell 77.0% to USD 140 million due to non-recurring items. The decline was primarily driven by the absence of a prior-year provision release in Bangladesh and a gain on asset sales recorded in the same period last year. EBITDA grew 6.2% to USD 552 million, with first-half EBITDA expanding 11.5% to USD 1,069 million. Equity free cash flow reached USD 74 million in the quarter.

What the Numbers Show

The divergence between robust EBITDA growth and declining net profit highlights the impact of one-off items on VEON’s bottom line. Underlying operational health remains strong, as evidenced by the 6.2% rise in EBITDA and significant acceleration in digital revenue. The company’s ability to scale digital services, which now constitute over a quarter of total revenue, provides a new margin expansion lever distinct from traditional telecom operations. This structural shift supports the management’s confidence in achieving the higher end of the revised growth ranges.

Capital Allocation and Strategic Moves

VEON completed a USD 1.4 billion bond offering, refinancing debt due in 2027 and extending its average debt maturity to over four years. Cash and equivalents stood at USD 2,193 million, with a lease-adjusted leverage ratio of 1.10x. Management announced it has repurchased USD 82.5 million under its current USD 100 million share buyback program and intends to cancel a minimum of USD 100 million of shares annually. Strategic partnerships continue to expand, including collaborations with Mastercard for digital financial services and progress on Starlink integrations in Ukraine, Kazakhstan, and Bangladesh.