Market Overview - U.S. stock markets have experienced a significant bull run in 2023, with the Dow, S&P 500, and Nasdaq Composite increasing by 9.1%, 12.5%, and 15.5% respectively, while the S&P 400 index is up 2.2% year to date [1] Mid-Cap Stocks - Investment in mid-cap stocks is recognized as a strong portfolio diversification strategy, combining attributes of both small and large-cap stocks, with high potential for profitability and market share growth [2] - Mid-cap stocks are less susceptible to losses compared to large-cap stocks during economic slowdowns due to lower international exposure, and they can outperform small caps in a thriving economy due to established management and access to capital [3] Recommended Mid-Cap Technology Stocks - Five mid-cap technology stocks with favorable Zacks Rank and short-term price upside potential are Lyft Inc. (LYFT), GitLab Inc. (GTLB), EPAM Systems Inc. (EPAM), Onto Innovation Inc. (ONTO), and Semtech Corp. (SMTC), all carrying a Zacks Rank 2 (Buy) [4][8] Lyft Inc. (LYFT) - Lyft operates a ridesharing marketplace in the U.S. and Canada, benefiting from strong rider and driver growth, and aims to enter the robotaxi market through strategic partnerships [5][6] - Expected revenue and earnings growth rates for LYFT are 14.6% and 25.9% respectively for next year, with a short-term average price target indicating an 18.6% increase from the last closing price of $19.78, suggesting a maximum upside of 61.8% [9] GitLab Inc. (GTLB) - GitLab offers a DevOps platform that enhances software development efficiency, with strong enterprise demand for its AI-native solutions driving growth [10][11] - Expected revenue and earnings growth rates for GTLB are 19.7% and 16.7% respectively for next year, with a short-term average price target suggesting a 38.8% increase from the last closing price of $41.49, indicating a maximum upside of 73.5% [12] EPAM Systems Inc. (EPAM) - EPAM is benefiting from digital transformation trends and strategic acquisitions, with a focus on Gen AI capabilities expected to boost growth [13][14] - Expected revenue and earnings growth rates for EPAM are 6.9% and 9.9% respectively for next year, with a short-term average price target indicating a 15.7% increase from the last closing price of $180.98, suggesting a maximum upside of 40.9% [15] Onto Innovation Inc. (ONTO) - Onto Innovation is leveraging its diversified portfolio and AI-driven advanced packaging, with strong sales growth expected in the fourth quarter [16][17] - Expected revenue and earnings growth rates for ONTO are 14.8% and 19.9% respectively for next year, with a short-term average price target suggesting a 23.4% increase from the last closing price of $127.18, indicating a maximum upside of 41.5% [18] Semtech Corp. (SMTC) - Semtech is experiencing strong demand in industrial and datacenter markets, particularly for its connectivity solutions [19][20] - Expected revenue and earnings growth rates for SMTC are 10.1% and 24.5% respectively for next year, with a short-term average price target indicating a 15.3% increase from the last closing price of $63.85, suggesting a maximum upside of 41% [21]

Company Overview - EPAM Systems, Inc. is valued at a market cap of around $10 billion and is a global provider of digital platform engineering and software development services, offering solutions in cloud and data services, customer experience design, cybersecurity, and full-cycle product development across various industries including financial services, retail, technology, healthcare, and media [1] Stock Performance - Over the past 52 weeks, EPAM shares have declined by 26.2%, while the S&P 500 Index has increased by 11%. Year-to-date, EPAM shares have dipped 22.6%, compared to the S&P 500's 12.3% return [2] - EPAM's stock has underperformed the Technology Select Sector SPDR Fund, which has seen over a 17% increase in the same period [3] Recent Financial Results - On November 6, EPAM reported stronger-than-expected Q3 2025 adjusted EPS of $3.08 and revenue of $1.39 billion. The company raised its full-year adjusted EPS forecast to between $11.36 and $11.44 and increased its expected revenue growth for 2025 to 14.8% - 15.2%, driven by strong demand in AI, cloud, automation, and modernization spending [4] Analyst Expectations - For the fiscal year ending in December 2025, analysts expect EPAM's EPS to rise 1.9% year-over-year to $9.04. The company has a promising earnings surprise history, having beaten consensus estimates in the last four quarters. Among 17 analysts covering the stock, the consensus rating is a "Moderate Buy," with 10 "Strong Buy" ratings, one "Moderate Buy," and six "Holds" [5] Price Target and Analyst Ratings - Mizuho analyst Sean Kennedy increased EPAM's price target to $228 while maintaining an Outperform rating. The mean price target of $209.40 represents a 15.7% premium to EPAM's current price levels, and the Street-high price target of $255 suggests a potential upside of 40.9% [6]

Core Insights - EPAM Systems, Inc. is recognized as a leader in digital platform engineering and software development, particularly in AI and cloud computing, highlighted by the 2025 Microsoft Innovate with Azure AI Platform Partner of the Year Award [1] Financial Metrics - The company has a price-to-earnings (P/E) ratio of 26.58, indicating investor confidence in its profitability [3] - EPAM's price-to-sales ratio stands at 1.85 and its enterprise value to sales ratio is 1.65, reflecting strong revenue generation capabilities [3] - An enterprise value to operating cash flow ratio of 17.39 suggests efficient cash flow management, essential for sustaining operations and growth [4] - The earnings yield is 3.76%, indicating the company's ability to generate earnings relative to its share price [4] Financial Strengths - EPAM maintains a low debt-to-equity ratio of 0.042, showing minimal reliance on debt financing [5] - A current ratio of 3.02 demonstrates robust liquidity, ensuring the company can comfortably meet short-term obligations [5] Insider Transactions - On November 17, 2025, Vice President Gary C. Abrahams sold 600 shares at $179.29 each, which may provide insights into the executive's perspective on the company's stock value and future direction [2][6]

Group 1 - The Magnificent Seven, a group of tech-focused firms, dominate the S&P 500, accounting for one-third of its total market capitalization [2] - The Roundhill Magnificent Seven ETF (BATS: MAGS) has returned nearly 20% year-to-date, outperforming the broader market despite early 2025 volatility [2] - Investors may overlook promising opportunities in tech-adjacent companies with strong fundamentals, such as Align Technology, Marvell Technology, and EPAM Systems [3] Group 2 - Align Technology, known for its Invisalign system, leverages AI to enhance efficiency in the orthodontic market, positioning itself as a tech-focused option in the medical device sector [4] - In Q3, Align Technology reported a revenue increase of approximately 2% year-over-year, reaching nearly $1 billion, with earnings per share exceeding analyst expectations by 23 cents [5] - The growth of Align Technology is driven by increased adoption rates among teens and children, aided by AI in treatment planning [5]

Core Insights - EPAM Systems, Inc. has been awarded the Innovate with Azure AI Platform 2025 Microsoft Partner of the Year Award for its leadership in developing AI solutions on Azure [1][2][4] - The award recognizes EPAM's innovation in creating AI solutions that demonstrate significant impact through specific customer use cases, particularly in collaboration with Albert Heijn [3][4] Company Achievements - EPAM's winning project involved the development of a scalable GenAI platform for Albert Heijn, enhancing operational efficiency through an AI-powered virtual assistant [4][5] - The company has also been recognized as a finalist in three other competitive categories, showcasing its broad capabilities in AI and digital transformation [5][6] Partnership with Microsoft - EPAM's status as a Microsoft Global Systems Integrator (GSI) reflects its deepening collaboration with Microsoft and commitment to delivering innovative solutions [7][8] - The partnership enables EPAM to leverage Microsoft's Cloud and AI platforms to drive transformative outcomes for clients [8] Industry Impact - EPAM integrates advanced AI technologies into tailored business strategies, enhancing clients' competitive edge and driving significant industry impact [9] - The company has been recognized for its engineering excellence and cloud expertise, underscoring its role in enterprise-scale transformation across various industries [7][11]

Core Insights - Zacks Premium offers various tools for investors to enhance their stock market strategies and confidence [1] - The Zacks Style Scores provide a framework for evaluating stocks based on value, growth, and momentum [2][3][4][5][6] Zacks Style Scores - Stocks are rated A, B, C, D, or F based on their value, growth, and momentum characteristics, with higher scores indicating better performance potential [3] - The Value Score focuses on identifying undervalued stocks using financial ratios like P/E and Price/Sales [3] - The Growth Score emphasizes a company's financial health and future growth potential, analyzing earnings and sales projections [4] - The Momentum Score assesses stocks based on price trends and earnings estimate changes to identify favorable buying opportunities [5] - The VGM Score combines all three Style Scores to highlight stocks with the best value, growth, and momentum characteristics [6] Zacks Rank Integration - The Zacks Rank is a proprietary model that uses earnings estimate revisions to identify stocks with high potential, with 1 (Strong Buy) stocks historically returning an average of +23.93% annually since 1988 [7][9] - Investors are encouraged to select stocks with a Zacks Rank of 1 or 2 and Style Scores of A or B for optimal returns [9][10] Company Spotlight: EPAM Systems, Inc. - EPAM Systems, Inc. is rated 2 (Buy) on the Zacks Rank and has a VGM Score of A, making it a strong candidate for growth investors [11] - The company is projected to achieve year-over-year earnings growth of 2.7% for the current fiscal year, with an upward revision in earnings estimates for fiscal 2025 [12] - The Zacks Consensus Estimate for EPAM's earnings has increased by $0.07 to $11.15 per share, with an average earnings surprise of +4.4% [12]

Core Insights - Zacks Premium offers tools for investors to enhance their stock market strategies and confidence [1] - The Zacks Style Scores are designed to help investors identify stocks with the potential to outperform the market in the short term [2] Zacks Style Scores Overview - The Style Scores categorize stocks into four types: Value Score, Growth Score, Momentum Score, and VGM Score, each focusing on different investment strategies [3][4][5][6] - Value Score emphasizes finding undervalued stocks using financial ratios [3] - Growth Score focuses on a company's financial health and future growth potential [4] - Momentum Score identifies trends in stock prices and earnings estimates to optimize entry points [5] - VGM Score combines the three styles to highlight stocks with the best overall characteristics [6] Zacks Rank and Performance - The Zacks Rank is a proprietary model that uses earnings estimate revisions to guide investment decisions [7] - Stocks rated 1 (Strong Buy) have historically achieved an average annual return of +23.93%, significantly outperforming the S&P 500 [8] - There are over 800 top-rated stocks available, making it essential to utilize Style Scores for effective selection [9] Investment Strategy - To maximize returns, investors should target stocks with a Zacks Rank of 1 or 2 and Style Scores of A or B [10] - Stocks with lower ranks but high Style Scores may still carry risks due to downward earnings forecasts [11] Company Spotlight: EPAM Systems, Inc. - EPAM Systems, Inc. is rated 2 (Buy) with a VGM Score of B, indicating strong potential [12] - The company has shown a Momentum Style Score of B, with shares increasing by 24.3% in the past four weeks [12] - Recent earnings estimates for fiscal 2025 have been revised upward, with the Zacks Consensus Estimate rising by $0.07 to $11.15 per share [13] - EPAM has an average earnings surprise of +4.4%, making it a strong candidate for investors [13]

Core Insights - EPAM Systems, Inc. (EPAM) shares increased by 4.4% following the release of better-than-expected third-quarter 2025 results, with earnings of $3.08 per share, surpassing the Zacks Consensus Estimate by 1.99% but down from $3.12 in the same quarter last year [1][8] Financial Performance - EPAM reported third-quarter revenues of $1.39 billion, exceeding the consensus estimate of $1.37 billion, and reflecting a year-over-year growth of 19.4%, driven by advancements in artificial intelligence [2][8] - Revenue breakdown includes: - Financial Services: $337.8 million (24.2% of total revenues), up 32.7% year over year [3] - Consumer Goods, Retail & Travel: $276 million (19.8% of total revenues), up 9.9% year over year [3] - Software & Hi-Tech: $212.2 million (15.2% of total revenues), up 19.1% year over year [4] - Life Sciences & Healthcare: $159.2 million (11.4% of total revenues), up 11.8% year over year [4] - Business Information & Media: $167.6 million (12% of total revenues), up 0.1% year over year [4] - Emerging revenues: $241.6 million (17.4% of total revenues), up 38.9% year over year [4] Profitability Metrics - Non-GAAP gross profit increased by 8% year over year to $432.9 million, with a gross margin contraction of 330 basis points to 31% [5] - Non-GAAP operating income remained flat at $222.8 million year over year, with an operating margin contraction of 310 basis points to 16% [5] Balance Sheet and Cash Flow - As of September 30, 2025, EPAM had cash and cash equivalents of $1.24 billion, up from $1.05 billion as of June 30, 2025 [6] - Long-term debt stood at $25 million [6] - Generated operating cash flow of $294.7 million and free cash flow of $286.4 million during the third quarter [6] Future Guidance - For Q4 2025, EPAM expects revenues between $1.380 billion and $1.395 billion, indicating a year-over-year growth of 11.1% at the midpoint [7] - Full-year 2025 revenue guidance has been raised to a range of $5.430 billion to $5.445 billion, reflecting a 15% year-over-year growth at the midpoint [10] - GAAP diluted EPS is projected between $6.75 and $6.83, while non-GAAP diluted EPS is forecasted in the range of $11.36 to $11.44 [11]

Revenue Performance - For the first nine months of 2025, revenues reached $4.050 billion, a 16.4% increase from $3.480 billion in the same period of 2024[133] - During Q3 2025, total revenues increased by 19.4% to $1.394 billion compared to Q3 2024, driven by improving demand, acquisitions contributing 10.5%, and foreign exchange fluctuations adding 1.8%[139] - For the three months ended September 30, 2025, total revenues were $1,394.4 million, a 19.4% increase from $1,167.5 million in the same period of 2024[140] - Revenues from the Americas accounted for 58.0% of total revenues, increasing to $808.6 million from $697.2 million, while EMEA contributed 39.9% with revenues of $555.7 million, up from $444.9 million[140] - Revenues in the United States increased by 7.4% to $716.2 million compared to $666.9 million in Q3 2024, driven by increased spending at large accounts and contributions from 2024 acquisitions[142] - EMEA's top revenue-generating countries included the United Kingdom ($153.4 million), Switzerland ($113.3 million), and Netherlands ($60.7 million), showing significant growth from the previous year[143] - APAC revenues rose by 17.7% to $30.0 million for Q3 2025, primarily due to growth in the Consumer Goods, Retail & Travel vertical[144] Operating Performance - Income from operations as a percentage of revenues decreased to 9.2% for the nine months ended September 30, 2025, down from 11.7% for the same period in 2024[133] - Diluted earnings per share decreased to $4.75 for the nine months ended September 30, 2025, from $6.04 for the same period in 2024[133] - Operating expenses for Q3 2025 included cost of revenues at $983.2 million (70.5% of revenues), up from $764.0 million (65.4%) in Q3 2024[137] - Selling, general, and administrative expenses for Q3 2025 were $234.9 million, representing 16.8% of revenues, compared to $206.8 million (17.7%) in Q3 2024[137] - The effective tax rate for Q3 2025 was 25.6%, compared to 28.1% in Q3 2024[137] - The company reported a decrease in operating profit margins in both segments due to lower government incentives and increased variable compensation expenses[167][171] Cash Flow and Financial Position - As of September 30, 2025, the company had cash and cash equivalents totaling $1.239 billion[172] - Net cash provided by operating activities for the nine months ended September 30, 2025, was $372.0 million, a decrease of 13.2% from $428.9 million in 2024[173] - Cash used in investing activities included $27.5 million for capital expenditures in 2025, up from $16.4 million in 2024, and $3.3 million for business acquisitions, down from $57.1 million in 2024[175] - Cash used in financing activities totaled $438.6 million for share repurchases in 2025, compared to $385.0 million in 2024, with $35.0 million received from stock option exercises and ESPP purchases[176] - The company recorded a tax shortfall of $0.8 million for stock awards during the nine months ended September 30, 2025, compared to an excess tax benefit of $20.5 million in 2024[155] - Cash, cash equivalents, and restricted cash at the end of the period were $1.24 billion in 2025, down from $2.04 billion in 2024[173] - The company experienced a net decrease in cash of $46.9 million in 2025, compared to a decrease of $2.4 million in 2024[173] - The company anticipates that existing cash and expected cash flow from operations will be sufficient to meet projected operating and capital expenditure requirements for at least the next twelve months[177] Geopolitical Impact - The company continues to adapt its business continuity plans in response to the ongoing war in Ukraine, reallocating work to other geographies[130] - The impact of the war in Ukraine has led to increased expenses related to business continuity and humanitarian commitments, which are expected to persist in future quarters[131] - The ongoing geopolitical events, including the invasion of Ukraine, may continue to disrupt financial markets and impact the company's business operations[178] - Forward-looking statements indicate potential impacts from geopolitical events and economic conditions on client demand and profitability[182] Segment Performance - Americas segment revenues for Q3 2025 increased by $95.3 million, or 13.5%, to $799.9 million compared to Q3 2024[163] - Americas segment operating profit for Q3 2025 decreased by $20.4 million, or 13.0%, to $136.3 million compared to Q3 2024[163] - Acquisitions contributed $66.3 million to Americas segment revenues in Q3 2025[163] - Europe segment revenues for Q3 2025 increased by $131.6 million, or 28.4%, to $594.5 million compared to Q3 2024[167] - Europe segment operating profit for Q3 2025 decreased by 3.3% to $88.9 million compared to Q3 2024[167] - Acquisitions contributed $55.8 million to Europe segment revenues in Q3 2025[167] - Financial Services in the Americas segment grew by 16.4% in Q3 2025 compared to Q3 2024, driven by new client revenues from acquisitions[165] - Financial Services in the Europe segment grew by 49.4% in Q3 2025 compared to Q3 2024, benefiting from new client revenues from acquisitions[170] Miscellaneous - The company maintained a $100 million humanitarian aid commitment to employees in Ukraine, with $12.5 million remaining to be expensed as of September 30, 2025[128] - The effective tax rate for the nine months ended September 30, 2025, was 25.8%, down from 21.4% in 2024, influenced by government incentives related to R&D in Poland[155] - The company may require additional cash resources for future investments or acquisitions, which could lead to dilution for existing shareholders if equity is issued[178] - The company has not entered into any material off-balance sheet commitments or arrangements that expose it to significant risks[180]

Financial Data and Key Metrics Changes - In Q3 2025, EPAM generated revenue of $1.394 billion, a year-over-year increase of 19.4% on a reported basis, exceeding the high end of revenue guidance [24] - Organic constant currency revenue grew 7.1% compared to Q3 2024, marking the fourth consecutive quarter of positive year-over-year organic growth [10][24] - GAAP gross margin for the quarter was 29.5%, down from 34.6% in Q3 of the previous year, while non-GAAP gross margin was 31% compared to 34.3% [27] - GAAP income from operations was $145 million, or 10.4% of revenue, compared to $177 million, or 15.2% of revenue in Q3 of last year [28] - Non-GAAP diluted EPS was $3.08, reflecting a 4-cent decrease year-over-year [29] Business Line Data and Key Metrics Changes - Five out of six industry verticals posted year-over-year growth, with financial services growing 32.7% and software and high-tech growing 19.1% [25][26] - Life sciences and healthcare increased 11.8%, while consumer goods, retail, and travel delivered 9.9% growth [26] - Emerging verticals grew 38.9% year-over-year, with Neoris contributing significantly [26] Market Data and Key Metrics Changes - The Americas, representing 58% of Q3 revenues, grew 16% year-over-year, while AMEA increased 24.9% [26] - APAC, making up 2% of revenues, increased 17.7% year-over-year [26] - Revenues from the top 20 clients grew 10.2% year-over-year, while revenues from clients outside the top 20 increased 24.4% [27] Company Strategy and Development Direction - The company is focused on AI and AI-native services, with a strategy to enhance engineering skills and invest in advanced AI playbooks [5][10] - EPAM aims to lead foundational and transformational programs demanded by AI, emphasizing the importance of engineering expertise and risk management [9] - The launch of AI Run Transform strategy is expected to complement growth momentum and capture demand [24] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the demand environment, noting that AI is driving incremental demand and improving the pipeline globally [11] - The company anticipates a strong Q4 exit, with higher organic constant currency growth rates than previously forecasted [33] - Management highlighted the importance of maintaining pricing integrity and the competitive advantage derived from trusted quality and execution [12] Other Important Information - The company announced a new $1 billion share repurchase program, reflecting confidence in its underlying business strength [24] - Cash flow from operations for Q3 was $295 million, the highest level in EPAM's history [30] Q&A Session Summary Question: Plans for entering the Agentic BPO space - Management indicated that they are experimenting with automation using EPAM's build platforms and emphasized the differences from previous RPA efforts [38][39] Question: Considerations for Q4 exit rate and growth potential for 2026 - Management noted that seasonality will negatively impact Q4 due to fewer build days and more vacations, but they expect continued investment from clients [40][41] Question: Competitive advantage and market share gains - Management acknowledged that clients are redirecting work from competitors who fail to deliver, highlighting EPAM's engineering capabilities as a key differentiator [46][47] Question: Focus on cost management and profitability - Management discussed efforts to balance the workforce pyramid and emphasized a focus on profitable projects and selective client engagements [48][49] Question: Size and growth of AI projects - Management noted that AI projects are evolving from proof of concepts to larger engagements, with potential revenue growth from these initiatives in the coming years [51][52]