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The Vodafone (LSE:VOD) share price has enjoyed a stellar 2025. Up 44% in the last year, it has easily outperformed the broader FTSE 100. Yet at 96p, it’s still well below historical levels, which could mean the stock could jump even further next year. Based on my research, here’s my outlook for the stock.
Building on a strong base
First of all, we need to review why the share price has outperformed this year. It mostly stems from the large restructuring effort that has been underway for the past couple of years. It’s continuing to execute a meaningful business shift, trimming underperforming assets and improving capital allocation. This included selling non-core businesses and reducing net debt by roughly £9.7bn. As a result, the efforts have materially strengthened the balance sheet and improved finances. Investors have clearly been impressed by the execution, which has led to the rising stock price.
Another big catalyst was the merger with Three UK back in the summer. The combined company makes it the UK’s largest mobile operator with almost 30m customers. Not only should this help boost profitability going forward, but it also offers significant scope for future efficiencies. Combining expertise and resources should help out significantly.
Factors supporting 2026 growth
Last month, the business announced it would increase its dividend for the first time since 2019. This tied in with an improved earnings outlook. The dividend yield is currently 4.08%, above the FTSE 100 average of 3.06%. A further boost to this will likely attract income investors.
The improved diversified operations also set the scene for a strong 2026. Vodafone’s footprint is now more focused on higher-growth regions such as Africa and parts of Asia. Yet if these underperform next year (which I doubt), the company can still can do well from the European core markets. This diversification can help sustain revenue momentum and keep investors excited.
Of course, next year has risks to navigate. Earlier this month, Ofcom announced an investigation regarding summer service outages. This will spill over into 2026, with the potential for reputational damage and fines depending on what gets uncovered.
Targeting growth
From a current price of 96p, I think the Vodafone share price could hit 127p next year. Currently, the projected earnings per share for next year is 0.07p. The average price-to-earnings ratio for the FTSE 100 is 18.2. Therefore, by using the projected earnings and multiplying it by 18.2, this gets us to a potential share price of 127p.
I think that’s a realistic target price for Vodafone over the coming year, making it an option for investors to consider. The share price could go even higher if earnings beat expectations. But there’s also a risk of unexpected costs, so the optimism needs to be tempered by being realistic.
