EPAM

EPAM’s second quarter results were met with a significant negative market reaction, as investors focused on the company’s underwhelming growth trajectory in North America despite outperforming market revenue and non-GAAP profit expectations. Management attributed the quarter’s performance to continued strength in AI-native services and solid gains in Financial Services and Life Sciences, while acknowledging that growth was offset by project ramp-downs in Software & Hi-Tech and persistent challenges in the Americas. CEO Balazs Fejes was direct about these issues, noting, “North America is not growing fast enough...this is not a story about waiting for the macro to turn, we own it.” Is now the time to buy EPAM? Find out in our full research report (it’s free). Revenue: $1.41 billion vs analyst estimates of $1.41 billion (4.5% year-on-year growth, 0.6% beat) Adjusted EPS: $3.38 vs analyst estimates of $3.14 (7.6% beat) Revenue Guidance for Q3 CY2026 is $1.42 billion at the midpoint, below analyst estimates of $1.44 billion Management slightly raised its full-year Adjusted EPS guidance to $13.16 at the midpoint Operating Margin: 10.8%, up from 9.3% in the same quarter last year Constant Currency Revenue rose 3.4% year on year (5.3% in the same quarter last year) Market Capitalization: $5.17 billion While we enjoy listening to the management’s commentary, our favorite part of earnings calls is the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention. Bryan Bergin (TD Cowen): Asked about drivers behind reduced outlook and North American weakness. CEO Balazs Fejes explained that client budgets are shifting rapidly to AI modernization, outpacing the ramp-up of replacement work, and outlined steps to address sales execution gaps. Margaret Nolan (William Blair): Inquired about parallels between EMEA and North America go-to-market strategies and timing for a turnaround. Fejes said the transformation would take time but is modeled after successful EMEA changes, with significant revenue contribution from large deals expected in 2027. Puneet Jain (JPMorgan): Queried whether the sales challenge is a capability gap or messaging issue. Fejes clarified it is a business development capability gap, not delivery, and expressed optimism that new sales approaches would eventually yield results. Yu Lee (Guggenheim Partners): Questioned the durability of the revised outlook given the rapid shift in client demand. CFO Jason Peterson said the full-year guide is “de-risked” and expects ongoing strength in Europe and Financial Services, with underperformance likely limited to North America and Hi-Tech. Tyler DuPont (Wells Fargo): Sought clarification on the extent of client spend shifting away from services and on pricing dynamics. Fejes said both internal capability and client priorities are factors, while Peterson noted early-year price increases and incremental opportunities in agentic managed services. Going forward, the StockStory team will focus on (1) the pace and success of EPAM’s North American sales transformation and ability to rebuild growth, (2) the closing and ramp-up of large AI-driven managed services deals in the pipeline, and (3) sustained margin performance amidst muted discretionary spend and evolving client technology priorities. Progress in these areas will be closely watched to assess the company’s strategic execution. EPAM currently trades at $100.16, down from $109.87 just before the earnings. At this price, is it a buy or sell? The answer lies in our full research report (it’s free for active Edge members). ONE MORE THING: Top 6 Stocks for This Week. This market is separating quality stocks from expensive ones fast. AI is taking down whole sectors with no warning. In a rotation this fast, you need more than a list of good companies. Our AI system flagged Palantir before it ran 1,662% between October 2022 and February 2026. AppLovin before it ran 753% between February 2024 and February 2026. Nvidia before it ran 1,178% between January 2023 and February 2026. Each week it produces 6 new names that pass the same tests. Get Our Top 6 Stocks for Free HERE. Stocks that have made our list include now familiar names such as Nvidia (+1,460% between June 2020 and June 2025) as well as under-the-radar businesses like the once-small-cap company Comfort Systems (+1,154% between June 2020 and June 2025). Find your next big winner with StockStory today.

EPAM Systems EPAM stock climbed close to 5% after announcing strong second-quarter 2026 results, with revenues and earnings surpassing the Zacks Consensus Estimate despite continued macroeconomic uncertainty. EPAM reported second-quarter non-GAAP earnings of $3.38 per share, which increased 22% year over year and beat the Zacks Consensus Estimate of $3.14 by 7.6%. The company’s second-quarter revenues of $1.415 billion surpassed the Zacks Consensus Estimate by 0.52% and increased 4.5% year over year. On an organic constant-currency basis, revenues grew 3.4% year over year. EPAM Systems’ year-over-year revenue growth was driven by strong performance in Financial Services and Life Sciences & Healthcare, while Software & Hi-Tech and Business Information & Media remained weak. Financial Services revenues were $366.2 million, accounting for 25.9% of total revenues and increasing 11.5% year over year. Life Sciences & Healthcare revenues were $169.1 million, or 12% of total revenues, up 8% year over year. EPAM Systems, Inc. price-consensus-eps-surprise-chart | EPAM Systems, Inc. Quote Revenues from Consumer Goods, Retail & Travel were $274.3 million, representing 19.4% of total revenues and increasing 2.3% year over year. Emerging Verticals revenues were $236.5 million, or 16.6% of total revenues, up 4.9% year over year. Meanwhile, Software & Hi-Tech revenues declined 1.3% year over year to $202 million, while Business Information & Media revenues fell 2.1% to $166.7 million. Geographically, Americas revenues were $805.4 million, up 0.5% year over year, while EMEA revenues increased 10.9% to $582.3 million. APAC revenues declined 0.3% year over year to $27.1 million. Management attributed the lower revenue outlook primarily to slower growth in North America and project ramp-downs in Software & Hi-Tech. The company said North American clients are shifting spending away from more traditional services toward AI-led modernization, creating a gap as replacement work ramps up. EPAM expects several large AI-related opportunities to contribute more meaningfully beginning in the first half of 2027, rather than in the second half of 2026. EPAM’s non-GAAP gross profit increased to $452.9 million from $407.7 million in the year-ago quarter, while the non-GAAP gross margin expanded 190 basis points to 32%. Non-GAAP operating income increased 14.7% year over year to $232.7 million, with the operating margin expanding to 16.4% from 15%. Non-GAAP net income rose to $176.8 million from $156.8 million. The company said its AI-native revenues continued to accelerate, extending a run of double-digit sequential growth and accounting for more than 11% of total business. EPAM also expanded its strategic AI partnerships, including joining the OpenAI Partner Network as an Advanced Partner, certifying more than 2,000 professionals through Google’s Gemini program and becoming one of Anthropic’s top five globally certified partners with more than 5,700 certified engineers. As of June 30, 2026, EPAM had $789.4 million in cash and cash equivalents, down from $1.04 billion as of March 31, 2026, while long-term debt stood at $25 million. During the first six months of 2026, cash used in operating activities was $38.8 million, compared with cash generated of $77.4 million in the year-ago period. Free cash flow was negative $71.8 million during the first half, with second-quarter free cash flow of negative $17.6 million. EPAM spent $409 million on share repurchases during the first six months, including $85 million in the second quarter. For the third quarter of 2026, EPAM expects revenues to be in the range of $1.410 billion to $1.425 billion, implying year-over-year growth of 1.7% at the midpoint. Organic constant-currency revenue growth is expected to be 1.8% at the midpoint. The company expects third-quarter non-GAAP operating margin to be between 15.5% and 16.5% and non-GAAP EPS to be in the range of $3.38-$3.46. For full-year 2026, EPAM now expects revenues to grow 3.2% to 4.2% year over year, with organic constant-currency growth of 2% to 3%. The company expects a non-GAAP operating margin of 15.5-16%. EPAM now expects non-GAAP diluted EPS of $13.08-$13.24. At present, EPAM carries Zacks Rank #3 (Hold). Some better-ranked stocks in the broader Zacks Computer and Technology sector are Lumentum LITE, Applied Materials AMAT and Analog Devices ADI, each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here. Shares of Lumentum have surged 141.5% year to date. The Zacks Consensus Estimate for LITE’s fiscal 2026 earnings is pegged at $8.19 per share, up by 5 cents over the past 30 days, indicating an increase of 297.6% year over year. Shares of Applied Materials have jumped 109.8% year to date. The Zacks Consensus Estimate for AMAT’s fiscal 2026 earnings is pegged at $12.14 per share, up by 3 cents over the past seven days, indicating a rise of 29.2% year over year. Analog Devices shares have surged 43.8% year to date. The Zacks Consensus Estimate for ADI’s fiscal 2026 earnings is pegged at $12.42 per share, up by 10 cents over the past 30 days, indicating an increase of 33.9% year over year. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report EPAM Systems, Inc. (EPAM) : Free Stock Analysis Report Analog Devices, Inc. (ADI) : Free Stock Analysis Report Applied Materials, Inc. (AMAT) : Free Stock Analysis Report Lumentum Holdings Inc. (LITE) : Free Stock Analysis Report This article originally published on Zacks Investment Research (zacks.com). Zacks Investment Research

Interested in EPAM Systems, Inc.? Here are five stocks we like better. Q2 revenue reached the high end of guidance at $1.415 billion, up 4.5% year over year, while profitability improved significantly. Non-GAAP operating margin rose to 16.4% and non-GAAP EPS increased 22% to $3.38. AI-native revenue exceeded $160 million, accounting for more than 11% of the business, but larger AI opportunities have not yet been signed. Meaningful revenue from these multiyear deals is now expected to begin in the first half of 2027. EPAM lowered its 2026 revenue outlook to 3.2%–4.2% growth because of weak North American performance and slower replacement of legacy services with AI-related work. The company maintained a stronger profitability outlook, including projected full-year non-GAAP EPS of $13.08–$13.24. Why These 3 Tech Stocks Could Be the Best Opportunities You're Overlooking EPAM Systems (NYSE:EPAM) reported second-quarter 2026 revenue growth that reached the high end of its outlook range, while raising its profitability expectations for the full year. However, the company lowered its revenue outlook as it expects slower growth in North America and delayed contributions from larger AI-related opportunities. Revenue for the quarter was $1.415 billion, up 4.5% from a year earlier and 3.4% on an organic constant-currency basis. CEO and President Balazs Fejes said the company’s AI-native revenue exceeded $160 million, representing its sixth consecutive quarter of double-digit sequential growth. AI-native revenue accounted for more than 11% of EPAM’s business, according to management. → Meta’s Earnings Drop Shows Wall Street Wants More Than Ad Growth Buyback Accelerators: 3 Stocks Boosting Capacity & Spending Speed “The gap between AI experimentation, adoption, and optimization is EPAM’s opportunity,” Fejes said, describing demand for modernization, data engineering, cybersecurity and other foundational work needed before enterprises can deploy AI at scale. EPAM said GAAP income from operations rose 20.4% year over year to $152 million, or 10.8% of revenue. Non-GAAP operating income increased 14.7% to $233 million, or 16.4% of revenue. → Sandisk Just Delivered a Blowout Quarter—Here's Why the Stock Is Falling Market Got It Wrong—Why Progress Software Deserves a Second Look GAAP diluted earnings per share increased 26.3% to $1.97, while non-GAAP diluted EPS rose 22% to $3.38. GAAP gross margin was 30.4%, compared with 28.8% in the prior-year quarter, and non-GAAP gross margin improved to 32% from 30.1%. Chief Financial Officer Jason Peterson said the company benefited from price increases implemented earlier in the year, improved profitability on fixed-fee work and cost-efficiency efforts. He said EPAM expects gross margin above 32% in each of the third and fourth quarters. → 4 Oil and Gas ETF Plays as Prices Stay Sky-High Financial services was EPAM’s fastest-growing industry vertical, with revenue rising 11.5% year over year, supported by insurance and asset-management clients in both the Americas and EMEA. Life sciences and healthcare revenue increased 8%, while emerging verticals grew 4.9%, led by energy and manufacturing. Consumer goods, retail and travel revenue rose 2.3%. Software and high tech revenue declined 1.3%, primarily because of a large client-program ramp-down and shifting client priorities. Business information and media revenue fell 2.1% as several client projects were completed. The Americas, which represented 57% of second-quarter revenue, grew just 0.5% year over year. In contrast, EMEA, representing 41% of revenue, grew 10.9%, or 9.4% in constant currency. APAC revenue, which accounted for 2% of revenue, declined 0.3%. Fejes said North America is “not growing fast enough” and acknowledged that EPAM’s go-to-market operations in the region have not performed at the required level. The company has begun a multi-quarter commercial transformation focused on prioritizing large accounts, developing new-logo pipeline management, expanding sales capabilities and improving training. Management said North American clients are shifting spending away from task-based services, including manual testing, user experience and JavaScript front-end engineering, toward AI-led modernization. In software and high tech, particularly among SaaS clients, some spending has also moved toward tokens, graphics processing units and other infrastructure needs. Fejes said the transition is occurring faster than replacement AI work is being ramped, creating a growth gap. He said EPAM has the delivery capabilities to address demand but needs stronger business-development and commercial capabilities in North America. EPAM said it is developing a pipeline of larger, multiyear AI opportunities with existing clients, including agentic managed services and application-maintenance work. None of the opportunities had been signed as of the call, and management said it now expects meaningful revenue contribution from them to begin in the first half of 2027 rather than the second half of 2026. The company said several potential large deals are in regulated sectors, including financial services, banking and insurance. Management also cited progress in vendor-consolidation opportunities and AI-supported modernization programs using EPAM intellectual property. EPAM continues to invest in AI partnerships and training. During the quarter, it joined the OpenAI Partner Network as an advanced partner and committed to certify more than 5,000 OpenAI consultants and train more than 10,000 specialists in the first year. The company also said it had certified more than 2,000 employees under Google’s Gemini Enterprise program and more than 5,700 engineers under Anthropic’s certification program. For full-year 2026, EPAM now expects reported revenue growth of 3.2% to 4.2%, including an estimated 1.2% positive foreign-exchange impact. Organic constant-currency growth is projected at 2% to 3%. GAAP operating margin is expected to be 10.5% to 11%. Non-GAAP operating margin is expected to be 15.5% to 16%. GAAP diluted EPS is projected at $8.22 to $8.38. Non-GAAP diluted EPS is projected at $13.08 to $13.24. For the third quarter, EPAM forecast revenue of $1.410 billion to $1.425 billion, representing 1.7% year-over-year growth at the midpoint. The outlook implies 1.8% organic constant-currency growth at the midpoint. The company expects modest sequential revenue growth in the third quarter followed by roughly flat revenue from the third to fourth quarter. Cash flow from operations was negative $2 million in the second quarter, compared with positive $53 million a year earlier, while free cash flow was negative $18 million. Peterson attributed the decline partly to variable compensation payments and payments from clients that were expected late in the quarter but arrived in early July. Days sales outstanding increased to 82 days from 76 days in the first quarter. EPAM ended the quarter with about $800 million in cash and cash equivalents. It repurchased approximately 1.3 million shares during the quarter and said it has returned about $1.6 billion to shareholders since starting its repurchase program. EPAM Systems, Inc is a global provider of digital platform engineering and software development services. The company partners with clients across industries—such as financial services, healthcare, retail, and technology—to design, develop, and maintain complex software applications and digital experiences. EPAM's offerings include custom software development, application management, infrastructure management, quality assurance, and testing services, enabling organizations to accelerate digital transformation and enhance operational efficiency. In addition to its core engineering capabilities, EPAM delivers a range of specialized services, including product design and consulting, data and analytics, cloud computing, DevOps, and cybersecurity. This instant news alert was generated by narrative science technology and financial data from MarketBeat in order to provide readers with the fastest reporting and unbiased coverage. Please send any questions or comments about this story to [email protected]. The article "EPAM Systems Q2 Earnings Call Highlights" was originally published by MarketBeat. View MarketBeat's top stocks for August 2026.

For the quarter ended June 2026, Epam (EPAM) reported revenue of $1.41 billion, up 4.5% over the same period last year. EPS came in at $3.38, compared to $2.77 in the year-ago quarter. The reported revenue represents a surprise of +0.52% over the Zacks Consensus Estimate of $1.41 billion. With the consensus EPS estimate being $3.14, the EPS surprise was +7.64%. While investors closely watch year-over-year changes in headline numbers -- revenue and earnings -- and how they compare to Wall Street expectations to determine their next course of action, some key metrics always provide a better insight into a company's underlying performance. As these metrics influence top- and bottom-line performance, comparing them to the year-ago numbers and what analysts estimated helps investors project a stock's price performance more accurately. Here is how Epam performed in the just reported quarter in terms of the metrics most widely monitored and projected by Wall Street analysts: Headcount: 62,850 compared to the 62,964 average estimate based on two analysts. Delivery professionals: 56,650 compared to the 56,854 average estimate based on two analysts. Revenues by Customer Location- Americas: $805.41 million versus $830.28 million estimated by two analysts on average. Compared to the year-ago quarter, this number represents a +0.5% change. Revenues by Customer Location- APAC: $27.12 million compared to the $27.9 million average estimate based on two analysts. The reported number represents a change of -0.3% year over year. Revenues by Customer Location- EMEA: $582.23 million versus $542.34 million estimated by two analysts on average. Compared to the year-ago quarter, this number represents a +10.9% change. Revenues by Industry Verticals- Financial Services: $366.19 million compared to the $344.04 million average estimate based on two analysts. The reported number represents a change of +11.5% year over year. Revenues by Industry Verticals- Software & Hi-Tech: $202.02 million compared to the $212.19 million average estimate based on two analysts. The reported number represents a change of -1.3% year over year. Revenues by Industry Verticals- Life Sciences & Healthcare: $169.08 million versus $163.83 million estimated by two analysts on average. Compared to the year-ago quarter, this number represents a +8% change. Revenues by Industry Verticals- Emerging Verticals: $236.5 million versus the two-analyst average estimate of $236.08 million. The reported number represents a year-over-year change of +4.9%. Revenues by Industry Verticals- Consumer Goods, Retail & Travel: $274.25 million versus the two-analyst average estimate of $277.49 million. The reported number represents a year-over-year change of +2.3%. Revenues by Contract Type- Time-and-material: $1.1 billion versus the two-analyst average estimate of $1.16 billion. The reported number represents a year-over-year change of +1.5%. Revenues by Contract Type- Fixed-price: $305.49 million compared to the $232.65 million average estimate based on two analysts. The reported number represents a change of +18.4% year over year. View all Key Company Metrics for Epam here>>> Shares of Epam have returned +6.6% over the past month versus the Zacks S&P 500 composite's +2.3% change. The stock currently has a Zacks Rank #4 (Sell), indicating that it could underperform the broader market in the near term. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report EPAM Systems, Inc. (EPAM) : Free Stock Analysis Report This article originally published on Zacks Investment Research (zacks.com). Zacks Investment Research

Our analysts just identified a stock with the potential to be the next Nvidia. Tell us how you invest and we'll show you why it's our #1 pick. Tap here. Revenue growth reached the high end of the outlook range, driven by strong double-digit performance in EMEA and the Financial Services vertical. Management identified a 'growth gap' in North America where clients are reprioritizing budgets away from task-based services like manual testing and front-end engineering toward AI-led modernization. The Software & Hi-Tech vertical experienced project ramp downs in non-AI services that outweighed growth in AI, cloud, and cybersecurity work. EPAM is executing a multi-quarter commercial transformation in North America to shift from an engineering-fulfillment focus to a domain-led, business-case-driven sales motion. AI-native revenues reached $160 million, representing 11% of total business and marking the sixth consecutive quarter of sequential double-digit growth. The company is aggressively building a multimodal bench through elite partnerships with OpenAI, Google, and Anthropic to address the increasing complexity AI adds to enterprise architecture. Management attributes the North American underperformance to idiosyncratic go-to-market execution issues rather than broad macro deterioration. Full-year revenue guidance was lowered to 3.2% to 4.2% growth, assuming flattish sequential revenue from Q3 to Q4 due to slow recovery in North America. Meaningful revenue contribution from a growing pipeline of large, multiyear AI-led deals is now expected in the first half of 2027 rather than late 2026. Management maintains a target of $600 million in pure AI-native revenues for the full year 2026. Profitability expectations were raised to the high end of the 15% to 16% adjusted income from operations range due to first-half performance and cost discipline. Free cash flow conversion for 2026 is projected at approximately 70%, below the typical 80% to 90% range, due to timing of client payments and higher variable compensation. The 2025 cost optimization program was completed in Q2; subsequent severance-related expenses will no longer be adjusted out of non-GAAP results. DSO increased to 82 days in Q2, partly due to specific client payment delays occurring in the final days of the quarter. Geopolitical volatility, specifically the persistent war in the Middle East, continues to contribute to prolonged client decision-making cycles. The transition to AI-native services is noted as non-linear, with some legacy programs stopping faster than new AI-led work can ramp. One stock. Nvidia-level potential. 30M+ investors trust Moby to find it first. Get the pick. Tap here. The weakness is concentrated in the SaaS client base within the Software & Hi-Tech sector, where spend is shifting toward GPUs and tokens. Recovery depends on a 'capability gap' fix in business development, moving beyond pure engineering excellence to selling business outcomes. Management noted that the EMEA region's double-digit growth serves as a proven model for this domain-led sales approach. Gross margins improved despite negative FX headwinds from appreciating currencies in Poland, Hungary, and Mexico. Profitability was supported by price increases achieved earlier in the year and improved efficiency in fixed-fee projects. Management expects to maintain gross margins in excess of 32% for the remainder of the year. The pipeline includes significant opportunities in regulated industries like banking and insurance, focusing on agentic managed services and mainframe transformation. While these deals are progressing and the pipeline is growing, management is excluding them from current guidance until closing and ramp timing are certain. These deals represent 'complementary growth' in areas where EPAM has not historically competed, such as BPO-style managed services.

Epam (EPAM) came out with quarterly earnings of $3.38 per share, beating the Zacks Consensus Estimate of $3.14 per share. This compares to earnings of $2.77 per share a year ago. These figures are adjusted for non-recurring items. This quarterly report represents an earnings surprise of +7.64%. A quarter ago, it was expected that this information technology services provider would post earnings of $2.75 per share when it actually produced earnings of $2.86, delivering a surprise of +4%. Over the last four quarters, the company has surpassed consensus EPS estimates four times. Epam, which belongs to the Zacks Computers - IT Services industry, posted revenues of $1.41 billion for the quarter ended June 2026, surpassing the Zacks Consensus Estimate by 0.52%. This compares to year-ago revenues of $1.35 billion. The company has topped consensus revenue estimates four times over the last four quarters. The sustainability of the stock's immediate price movement based on the recently-released numbers and future earnings expectations will mostly depend on management's commentary on the earnings call. Epam shares have lost about 46.4% since the beginning of the year versus the S&P 500's gain of 12.8%. While Epam has underperformed the market so far this year, the question that comes to investors' minds is: what's next for the stock? There are no easy answers to this key question, but one reliable measure that can help investors address this is the company's earnings outlook. Not only does this include current consensus earnings expectations for the coming quarter(s), but also how these expectations have changed lately. Empirical research shows a strong correlation between near-term stock movements and trends in earnings estimate revisions. Investors can track such revisions by themselves or rely on a tried-and-tested rating tool like the Zacks Rank, which has an impressive track record of harnessing the power of earnings estimate revisions. Ahead of this earnings release, the estimate revisions trend for Epam was unfavorable. While the magnitude and direction of estimate revisions could change following the company's just-released earnings report, the current status translates into a Zacks Rank #4 (Sell) for the stock. So, the shares are expected to underperform the market in the near future. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here. It will be interesting to see how estimates for the coming quarters and the current fiscal year change in the days ahead. The current consensus EPS estimate is $3.46 on $1.45 billion in revenues for the coming quarter and $13.08 on $5.73 billion in revenues for the current fiscal year. Investors should be mindful of the fact that the outlook for the industry can have a material impact on the performance of the stock as well. In terms of the Zacks Industry Rank, Computers - IT Services is currently in the bottom 40% of the 250 plus Zacks industries. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1. Another stock from the same industry, AIB Data Centers Inc. (AIB), has yet to report results for the quarter ended June 2026. This company is expected to post quarterly loss of $0.01 per share in its upcoming report, which represents a year-over-year change of +99.8%. The consensus EPS estimate for the quarter has remained unchanged over the last 30 days. AIB Data Centers Inc.'s revenues are expected to be $3.56 million, up 4985.7% from the year-ago quarter. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report EPAM Systems, Inc. (EPAM) : Free Stock Analysis Report AIB Data Centers Inc. (AIB) : Free Stock Analysis Report This article originally published on Zacks Investment Research (zacks.com). Zacks Investment Research

This article first appeared on GuruFocus. Revenue: $1.415 billion, up 4.5% year-over-year; organic constant currency growth of 3.4%. AI Native Revenue: Exceeded $160 million in Q2, marking the sixth consecutive quarter of double-digit sequential growth; now represents over 11% of business. Gross Margin: GAAP gross margin was 30.4% (vs. 28.8% in Q2 2025); non-GAAP gross margin was 32% (vs. 30.1% in Q2 2025). Income from Operations: GAAP income from operations grew 20.4% to $152 million (10.8% of revenue); non-GAAP income from operations grew 14.7% to $233 million (16.4% of revenue). Earnings Per Share: GAAP diluted EPS grew 26.3% to $1.97; non-GAAP diluted EPS grew 22% to $3.38. Cash Flow: Q2 cash flow from operations was negative $2 million (vs. positive $53 million in Q2 2025); free cash flow was negative $18 million (vs. positive $43 million in Q2 2025). Segment Performance: Financial Services grew 11.5% year-over-year (fastest-growing vertical); Life Sciences and Healthcare grew 8%; Consumer Goods, Retail and Travel grew 2.3%; Software and High Tech declined 1.3%; Business Information and Media declined 2.1%; Emerging Verticals grew 4.9%. Geographic Performance: Americas (57% of revenue) grew 0.5%; EMEA (41% of revenue) grew 10.9% (9.4% constant currency); APAC (2% of revenue) decreased 0.3%. Headcount: Ended Q2 with more than 56,650 delivery professionals (up 1.5% year-over-year); total headcount exceeded 62,850 employees. Utilization: 78.3% in Q2, compared to 78.1% in Q2 2025 and 77% in Q1 2026. Full-Year 2026 Guidance: Revenue growth expected at 3.2% to 4.2%; organic constant currency growth of 2% to 3%; non-GAAP income from operations margin of 15.5% to 16%; non-GAAP diluted EPS of $13.08 to $13.24. Q3 2026 Guidance: Revenue expected between $1.410 billion and $1.425 billion; non-GAAP diluted EPS of $3.38 to $3.46. Warning! GuruFocus has detected 3 Warning Signs with EPAM. Is EPAM fairly valued? Test your thesis with our free DCF calculator. Release Date: August 06, 2026 For the complete transcript of the earnings call, please refer to the full earnings call transcript. EPAM Systems Inc (NYSE:EPAM) delivered strong Q2 results, with revenue growth of 4.5% year-over-year and non-GAAP EPS growth of 22%, outperforming the high end of guidance. AI-native revenues accelerated to over $160 million in Q2, marking the sixth consecutive quarter of double-digit sequential growth and representing over 11% of total business. Financial Services was the fastest-growing vertical, up 11.5% year-over-year, driven by AI-led modernization and mainframe transformation programs. EMEA continued to deliver strong double-digit growth (10.9% year-over-year), supported by proactive go-to-market sales motions and a robust pipeline. Strategic partnerships with OpenAI, Google, and Anthropic are expanding, with certifications on track to build a multimodal bench and feed the pipeline for larger multi-year deals. North America revenue growth was significantly below expectations, growing only 0.5% year-over-year, with a projected slowdown in the second half of 2026. The company lowered its full-year 2026 revenue guidance to 3.2%-4.2% growth (organic constant currency growth of 2%-3%), citing a faster-than-expected shift away from task-based services. Software and high-tech vertical declined 1.3% year-over-year due to project ramp-downs in non-AI services, which outweighed growth in AI, cloud, and cybersecurity. Free cash flow was negative $18 million in Q2, impacted by higher variable compensation payments and an increase in DSO to 82 days, leading to a lower full-year free cash flow conversion rate of around 70%. The company acknowledged a go-to-market capability gap in North America, with a multi-quarter commercial transformation needed to address the growth gap, and expects meaningful revenue contribution from large deals only in early 2027. Q: Can you unpack the primary headwinds in the reduced fiscal 2026 outlook, specifically the slowdown in North America and the shift in client demand?A: Balazs Fejes (CEO): The macro environment hasn't materially changed, but we are seeing clients prioritize AI budgets and reprioritize away from task-based services like manual testing and front-end engineering. This shift is happening faster than the replacement AI-native work is ramping, creating a growth gap. This is most pronounced in our North American SaaS client base. We own the go-to-market issue and are implementing a multi-quarter commercial transformation to address it, focusing on business development and sales capabilities. Q: What is driving the lower free cash flow in Q2, and what is your confidence in the second-half improvement?A: Jason Peterson (CFO): Q2 cash flow was negatively impacted by clients delaying payments until the first days of Q3, higher variable compensation payments, and an increase in DSO. We expect DSO to remain somewhat elevated for the year. However, we have high confidence in generating significant free cash flow in the second half, with a conversion rate above 100% in Q3 and Q4, though the full-year conversion is now expected to be around 70%. Q: Is the North American go-to-market issue a capability gap or a messaging/positioning problem, and how does it compare to your success in EMEA?A: Balazs Fejes (CEO): It is a capability gap in business development, not in delivery. We have proven in EMEA that with a different go-to-market motion and stronger business development, we can deliver double-digit growth. We are now bringing that same investment and approach to North America, focusing on domain-led go-to-market, larger seller capabilities, and pairing engineering excellence with business development excellence. It is taking longer than anticipated, but we are making strides. Q: What is driving the strong double-digit growth in the Financial Services vertical, and can it be a precursor for the rest of the business?A: Balazs Fejes (CEO): In Financial Services, we successfully combined our domain knowledge with AI-native capabilities to drive large transformation programs, such as mainframe modernization using our IP. Clients with large legacy estates are responding well to these AI-foundational elements and data platform builds. This success is a precursor for what we can achieve elsewhere by packaging our AI capabilities effectively. Q: Given the demand shift occurred in July, what gives you confidence in the durability of the revised 2026 outlook?A: Jason Peterson (CFO): The revised guidance is derisked. The midpoint requires us to remain flat sequentially from Q3 to Q4. We continue to see growth in Europe, financial services, and life sciences, which will offset ongoing underperformance in North America and high-tech. A material sequential decline would be needed to hit the low end of the range, which we do not expect. Q: Is the growth gap in North America due to clients moving to competitors who can bundle AI-led savings, and how are you responding?A: Balazs Fejes (CEO): We have not seen demand migrate to competitors. Instead, we see spend shifting to tokens and GPUs, which clients often buy directly. Our larger go-to-market motion aims to transform the savings clients achieve from AI-driven services into reinvestment for growth. We are not losing deals to competitors on this basis. Q: Can you provide an update on the pricing environment and competitive dynamics?A: Jason Peterson (CFO): We saw price improvement at the beginning of the year. We are seeing vendor consolidation exercises where clients expect economic advantages. For our larger agentic managed services deals, we are offering cost-effective solutions. Since we don't currently participate in that market, it represents an incremental revenue opportunity at solid profitability, rather than a price reduction on existing work. Q: With AI-native revenue at 11% of the business, when will it lift total company growth, and are you still on track for the $600 million target?A: Balazs Fejes (CEO) & Jason Peterson (CFO): AI-native revenue is over 11% of our business and growing with double-digit sequential growth. We expect it to start leading overall growth once it crosses a certain threshold. We are absolutely on track to meet our declared goal of $600 million in AI-native revenue for 2026. Q: How are the larger deals in your pipeline progressing, and what is their vertical composition?A: Balazs Fejes (CEO) & Jason Peterson (CFO): The deals are progressing and we are not losing them. A large portion is from regulated industries like financial services and insurance. We are seeing wins in AI-specific deals and some vendor consolidation exercises. We expect more meaningful revenue contribution from these larger deals to start in the first half of 2027. Q: How are you developing full-stack agentic engineers, and will it be through internal training or external hiring?A: Balazs Fejes (CEO): We are building this capability internally through deliberate training programs and academies. We are partnering with AI partners and hyperscalers to certify thousands of engineers. Our aim is to have the largest concentration of certified engineering professionals in the industry and to be the primary source for our partners' forward-deployed engineering needs. For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Second quarter revenues of $1.415 billion, up 4.5% year-over-year Second quarter GAAP income from operations increased to 10.8% of revenues from 9.3%, and non-GAAP income from operations increased to 16.4% of revenues from 15.0%, on a year-over-year basis Second quarter GAAP diluted EPS of $1.97, an increase of $0.41, or 26.3%, and non-GAAP diluted EPS of $3.38, an increase of $0.61, or 22.0%, on a year-over-year basis Continued to return capital to shareholders, spending $85 million in the second quarter on share repurchases and $409 million since the beginning of the year For the full year, EPAM now expects the year-over-year revenue growth rate to be in the range of 3.2% to 4.2% and now expects the year-over-year revenue growth rate on an organic constant currency basis to be in the range of 2.0% to 3.0% For the full year, EPAM now expects its GAAP diluted EPS to be in the range of $8.22 to $8.38, and non-GAAP diluted EPS to be in the range of $13.08 to $13.24 NEWTOWN, Pa., Aug. 6, 2026 /PRNewswire/ -- EPAM Systems, Inc. (NYSE: EPAM), a leading digital and AI transformation company, today announced results for its second quarter ended June 30, 2026. "Our second quarter results came in better than expected with continued AI-native momentum and ongoing profitability improvement, reflecting solid execution against our multi-year strategy," said Balazs Fejes, CEO & President, EPAM. "As we continue to expand our strategic partnerships and leverage our 30+ years of engineering DNA to build the next generation forward-deployed engineering organization, our conviction in the strategy, the team and our commercial transformation is high." Second Quarter 2026 Highlights Revenues increased to $1.415 billion, a year-over-year increase of $61.3 million, or 4.5%. On an organic constant currency basis, revenues were up 3.4% compared to the second quarter of 2025; GAAP income from operations was $152.2 million, an increase of $25.7 million, or 20.4%, compared to $126.5 million in the second quarter of 2025; Non-GAAP income from operations was $232.7 million, an increase of $29.8 million, or 14.7%, compared to $202.9 million in the second quarter of 2025; Diluted earnings per share ("EPS") on a GAAP basis was $1.97, an increase of $0.41, or 26.3%, compared to $1.56 in the second quarter of 2025; and Non-GAAP diluted EPS was $3.38, an increase of $0.61, or 22.0%, compared to $2.77 in the second quarter of 2025. Cash Flow and Other Metrics Cash used in operating activities was $38.8 million for the first six months of 2026, compared to cash provided by operating activities of $77.4 million for the first six months of 2025; Cash, cash equivalents and restricted cash totaled $794.3 million as of June 30, 2026, a decrease of $507.1 million, or 39.0%, from $1.301 billion as of December 31, 2025; The Company spent $409.0 million on share repurchases during the first six months of 2026 under its share repurchase program, which included $85.0 million during the second quarter; and Total headcount was approximately 62,850 as of June 30, 2026. Included in this number were approximately 56,650 delivery professionals, an increase of 0.3% from March 31, 2026. 2026 Outlook - Full Year and Third Quarter Full Year EPAM expects the following for the full year: The Company now expects the year-over-year revenue growth rate to be in the range of 3.2% to 4.2% for 2026 and now expects the year-over-year revenue growth rate on an organic constant currency basis to be in the range of 2.0% to 3.0%; For the full year, EPAM now expects GAAP income from operations to be in the range of 10.5% to 11.0% of revenues and non-GAAP income from operations to be in the range of 15.5% to 16.0% of revenues; The Company continues to expect its GAAP effective tax rate to be approximately 27% and its non-GAAP effective tax rate to be approximately 24%; and EPAM now expects GAAP diluted EPS to be in the range of $8.22 to $8.38 and non-GAAP diluted EPS to be in the range of $13.08 to $13.24. The Company now expects weighted average diluted shares outstanding for the year to be 52.2 million. Third Quarter EPAM expects the following for the third quarter: The Company expects revenues will be in the range of $1.410 billion to $1.425 billion for the third quarter, reflecting year-over-year growth of 1.7% at the midpoint of the range. The Company expects the year-over-year revenue growth rate on an organic constant currency basis to be 1.8% at the midpoint of the range; For the third quarter, EPAM expects GAAP income from operations to be in the range of 11.0% to 12.0% of revenues and non-GAAP income from operations to be in the range of 15.5% to 16.5% of revenues; The Company expects its GAAP effective tax rate to be approximately 25% and its non-GAAP effective tax rate to be approximately 24%; and EPAM expects GAAP diluted EPS will be in the range of $2.33 to $2.41 for the quarter, and non-GAAP diluted EPS will be in the range of $3.38 to $3.46 for the quarter. The Company expects weighted average diluted shares outstanding for the quarter to be 51.4 million. Conference Call Information EPAM will host a conference call to discuss the results on Thursday, August 6, 2026, at 8:00 a.m. ET. The conference call will be available live on the EPAM website at https://investors.epam.com. Please visit the website at least 15 minutes prior to the call to register for the event. For those who cannot access the live webcast, a replay will be available in the Investor Relations section of the website. About EPAM Systems EPAM (NYSE:EPAM) is a global leader in AI transformation engineering and integrated consulting, serving Forbes Global 2000 companies and ambitious startups. With over thirty years of expertise in custom software, product and platform engineering, EPAM empowers organizations to become AI-Native enterprises, driving measurable value from innovation and digital investments. Recognized by industry benchmarks and leading analysts as a leader in AI, EPAM delivers globally while engaging locally, making the future real for clients, partners, and employees. We are proud to be recognized by Forbes, Glassdoor, Newsweek, Time Magazine, Great Place to Work and kununu as a Most Loved Workplace around the world. Learn more at www.epam.com and follow us on LinkedIn. Non-GAAP Financial Measures EPAM supplements results reported in accordance with United States generally accepted accounting principles, referred to as GAAP, with non-GAAP financial measures. Management believes these measures help illustrate underlying trends in EPAM's business and uses the measures to establish budgets and operational goals, communicate internally and externally, for managing EPAM's business and evaluating its performance. Management also believes these measures help investors compare EPAM's operating performance with its results in prior periods. EPAM anticipates that it will continue to report both GAAP and certain non-GAAP financial measures in its financial results, including non-GAAP results that exclude stock-based compensation expenses, acquisition-related costs including amortization of acquired intangible assets, impairment of assets, expenses associated with EPAM's humanitarian commitment to its professionals in Ukraine, employee separation costs incurred in connection with restructuring programs, certain other one-time charges and benefits, changes in fair value of contingent consideration, foreign exchange gains and losses, excess tax benefits and tax shortfalls related to stock-based compensation, and the related effect on income taxes of the pre-tax adjustments. Management also compares revenues on an "organic constant currency basis," which is a non-GAAP financial measure. This measure excludes the effect of acquisitions by removing revenues from an acquired company in the twelve months after completing an acquisition and foreign currency exchange rate fluctuations by translating current period revenues into U.S. dollars at the weighted average exchange rates of the prior period of comparison. Because EPAM's reported non-GAAP financial measures are not calculated in accordance with GAAP, these measures are not comparable to GAAP and may not be comparable to similarly described non-GAAP measures reported by other companies within EPAM's industry. Consequently, EPAM's non-GAAP financial measures should not be evaluated in isolation or supplant comparable GAAP measures, but rather, should be considered together with the information in EPAM's consolidated financial statements, which are prepared in accordance with GAAP. Forward-Looking Statements This press release includes estimates and statements which may constitute forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, the accuracy of which are necessarily subject to risks, uncertainties, and assumptions as to future events that may not prove to be accurate. Our estimates and forward-looking statements are mainly based on our current expectations and estimates of future events and trends, which affect or may affect our business and operations. These statements may include words such as "may," "will," "should," "believe," "expect," "anticipate," "intend," "plan," "estimate"or similar expressions. Those future events and trends may relate to, among other things, developments relating to the war in Ukraine and escalation of the war in the surrounding region, political and civil unrest or military action in the geographies where we conduct business and operate, difficult conditions in global capital markets, foreign exchange markets, global trade and the broader economy, the adoption and implementation of artificial intelligence technologies by EPAM and its clients, and the effect that these events may have on client demand and our revenues, operations, access to capital, and profitability. Other factors that could cause actual results to differ materially from those expressed or implied include general economic conditions, the risk factors discussed in the Company's most recent Annual Report on Form 10-K and the factors discussed in the Company's Quarterly Reports on Form 10-Q, particularly under the headings "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Risk Factors"and other filings with the Securities and Exchange Commission. Although we believe that these estimates and forward-looking statements are based upon reasonable assumptions, they are subject to several risks and uncertainties and are made based on information currently available to us. EPAM undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise, except as may be required under applicable securities law. 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Wall Street analysts expect Epam (EPAM) to post quarterly earnings of $3.14 per share in its upcoming report, which indicates a year-over-year increase of 13.4%. Revenues are expected to be $1.41 billion, up 4% from the year-ago quarter. The current level reflects a downward revision of 0.4% in the consensus EPS estimate for the quarter over the past 30 days. This demonstrates how the analysts covering the stock have collectively reappraised their initial projections over this period. Prior to a company's earnings release, it is of utmost importance to factor in any revisions made to the earnings projections. These revisions serve as a critical gauge for predicting potential investor behaviors with respect to the stock. Empirical studies consistently reveal a strong link between trends in earnings estimate revisions and the short-term price performance of a stock. While investors typically use consensus earnings and revenue estimates as a yardstick to evaluate the company's quarterly performance, scrutinizing analysts' projections for some of the company's key metrics can offer a more comprehensive perspective. With that in mind, let's delve into the average projections of some Epam metrics that are commonly tracked and projected by analysts on Wall Street. Analysts' assessment points toward 'Revenues by Industry Verticals- Financial Services' reaching $344.04 million. The estimate points to a change of +4.8% from the year-ago quarter. Based on the collective assessment of analysts, 'Revenues by Industry Verticals- Software & Hi-Tech' should arrive at $212.19 million. The estimate indicates a year-over-year change of +3.7%. Analysts predict that the 'Revenues by Industry Verticals- Life Sciences & Healthcare' will reach $163.83 million. The estimate indicates a year-over-year change of +4.7%. The combined assessment of analysts suggests that 'Revenues by Industry Verticals- Emerging Verticals' will likely reach $236.08 million. The estimate indicates a year-over-year change of +4.7%. The consensus among analysts is that 'Revenues by Industry Verticals- Consumer Goods, Retail & Travel' will reach $277.49 million. The estimate indicates a year-over-year change of +3.5%. According to the collective judgment of analysts, 'Revenues by Contract Type- Time-and-material' should come in at $1.16 billion. The estimate points to a change of +7.1% from the year-ago quarter. Analysts forecast 'Revenues by Contract Type- Fixed-price' to reach $232.65 million. The estimate indicates a year-over-year change of -9.8%. Analysts expect 'Revenues by Customer Location- Americas' to come in at $830.28 million. The estimate indicates a change of +3.6% from the prior-year quarter. The collective assessment of analysts points to an estimated 'Revenues by Customer Location- APAC' of $27.90 million. The estimate suggests a change of +2.6% year over year. The average prediction of analysts places 'Revenues by Customer Location- EMEA' at $542.34 million. The estimate indicates a year-over-year change of +3.3%. The consensus estimate for 'Headcount' stands at 62,964 . The estimate is in contrast to the year-ago figure of 62,050 . It is projected by analysts that the 'Delivery professionals' will reach 56,854 . The estimate compares to the year-ago value of 55,800 . View all Key Company Metrics for Epam here>>> Epam shares have witnessed a change of +25.1% in the past month, in contrast to the Zacks S&P 500 composite's +3.5% move. With a Zacks Rank #4 (Sell), EPAM is expected underperform the overall market performance in the near term. You can see the complete list of today's Zacks Rank #1 (Strong Buy) stocks here >>>> . Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report EPAM Systems, Inc. (EPAM) : Free Stock Analysis Report This article originally published on Zacks Investment Research (zacks.com). Zacks Investment Research