Core Insights - Artificial intelligence (AI) is identified as the greatest investment opportunity of the current era, with a strong emphasis on the urgent need for energy to support its growth [1][2][3] - A specific company is highlighted as a key player in the AI energy sector, owning critical energy infrastructure assets that are essential for meeting the increasing energy demands of AI technologies [3][7][8] Investment Opportunity - Wall Street is investing heavily in AI, but there is a looming energy crisis as AI technologies require vast amounts of electricity, comparable to the energy consumption of small cities [2][3] - The company in focus is positioned to benefit from the surge in demand for electricity driven by AI data centers, making it a potentially lucrative investment opportunity [3][8] Company Profile - The company owns significant nuclear energy infrastructure assets and is capable of executing large-scale engineering, procurement, and construction projects across various energy sectors [7][8] - It is noted for being debt-free and having a substantial cash reserve, which is nearly one-third of its market capitalization, providing financial stability and growth potential [8][10] Market Position - The company is described as a "toll booth" operator in the AI energy boom, collecting fees from energy exports and benefiting from the onshoring trend driven by tariffs [5][6] - It has an equity stake in another AI-related company, offering investors indirect exposure to multiple growth engines in the AI sector [9][10] Future Outlook - The article emphasizes the importance of investing in AI and energy infrastructure as the future of technology and innovation, with a call to action for investors to seize the opportunity before significant price increases occur [11][12][13] - The potential for substantial returns is highlighted, with projections of over 100% returns within 12 to 24 months for those who invest now [15][19]

Core Insights - The article compares two companies, Epam (EPAM) and CoStar Group (CSGP), to determine which stock is more undervalued for investors in the Computers - IT Services sector [1] Valuation Metrics - EPAM has a Zacks Rank of 2 (Buy), indicating a stronger earnings outlook compared to CSGP, which has a Zacks Rank of 4 (Sell) [3] - EPAM's forward P/E ratio is 13.84, significantly lower than CSGP's forward P/E of 100.94, suggesting EPAM is more attractively priced [5] - The PEG ratio for EPAM is 1.75, while CSGP's PEG ratio is 2.37, indicating that EPAM's valuation is more favorable when considering expected earnings growth [5] - EPAM's P/B ratio is 2.36, compared to CSGP's P/B of 4.25, further supporting the argument that EPAM is undervalued [6] Investment Conclusion - Based on the stronger estimate revision activity and more attractive valuation metrics, EPAM is positioned as the superior option for value investors at this time [7]

Core Insights - Investing in stocks based on valuation metrics, particularly the price-to-sales (P/S) ratio, can identify opportunities with strong upside potential, especially for unprofitable or early-stage companies [1][2][3] Valuation Metrics - The P/S ratio compares a company's market capitalization to its revenues, providing a clearer picture of value when earnings are minimal or volatile [2][5] - A P/S ratio below 1 indicates a good bargain, as investors pay less than a dollar for each dollar of revenue generated [6] - The P/S ratio is preferred over the price-to-earnings (P/E) ratio due to the difficulty of manipulating sales figures compared to earnings [7] Investment Opportunities - Companies like Oshkosh Corporation (OSK), EPAM Systems, Inc. (EPAM), Green Dot (GDOT), The Mosaic Company (MOS), and PagSeguro Digital (PAGS) have low P/S ratios and strong growth drivers, making them attractive for investors [4][10] - Each of these companies combines low P/S ratios with strong fundamentals such as innovation, cost control, or digital expansion [10] Company Profiles - **Oshkosh Corporation (OSK)**: Engaged in designing and manufacturing custom-built vehicles, with a focus on electrification and strategic acquisitions to enhance its market presence. Currently holds a Value Score of B and Zacks Rank 1 [12][13] - **EPAM Systems, Inc. (EPAM)**: Provides software engineering and IT consulting services, benefiting from digital transformation and strategic acquisitions. Holds a Value Score of B and Zacks Rank 2 [14][15] - **Green Dot (GDOT)**: A leader in prepaid cards and Banking-as-a-Service, with a strong balance sheet and significant cash reserves. Holds a Value Score of A and Zacks Rank 1 [16][17] - **The Mosaic Company (MOS)**: A major producer of phosphate and potash, benefiting from strong demand in agriculture and cost transformation efforts. Holds a Value Score of A and Zacks Rank 2 [18][20] - **PagSeguro Digital (PAGS)**: Offers a suite of financial solutions in Brazil, focusing on digital banking and sustainable growth. Holds a Value Score of A and Zacks Rank 2 [21][22]

Core Viewpoint - EPAM (EPAM) has shown a 7.3% gain over the past four weeks, with a mean price target of $214.14 indicating a potential upside of 26.4% from the current price of $169.46 [1] Price Target Analysis - The mean estimate consists of 14 short-term price targets with a standard deviation of $20.95, suggesting variability in analyst predictions. The lowest estimate is $171.00 (0.9% increase), while the highest is $246.00 (45.2% increase) [2] - A low standard deviation among price targets indicates strong agreement among analysts regarding the stock's price movement direction, which can serve as a starting point for further research [7] Earnings Estimates and Analyst Sentiment - There is increasing optimism among analysts about EPAM's earnings prospects, as evidenced by a positive trend in earnings estimate revisions. This trend has shown a strong correlation with near-term stock price movements [9] - Over the last 30 days, the Zacks Consensus Estimate for the current year has increased by 2.8%, with six estimates moving higher and no negative revisions [10] Zacks Rank and Investment Potential - EPAM currently holds a Zacks Rank 2 (Buy), placing it in the top 20% of over 4,000 ranked stocks based on earnings estimates, indicating a strong potential for upside in the near term [11] - While the consensus price target may not be a reliable indicator of the extent of potential gains, it does provide a useful guide for the direction of price movement [12]

Company Performance - EPAM Systems, Inc. reported strong Q2 results on August 7, indicating a growth recovery with significant organic acceleration across various verticals and geographies [1] - Despite an uncertain macroeconomic backdrop, EPAM's investments are contributing positively to its performance [1] Investment Strategy - The investment philosophy focuses on identifying mispriced securities by understanding the drivers behind a company's financials, often revealed through a DCF model valuation [1]

Core Insights - EPAM Systems reported Q2 2025 earnings of $2.77 per share, exceeding the Zacks Consensus Estimate by 6.1%, and up from $2.45 per share a year ago [1][8] - The company's revenues for Q2 2025 reached $1.35 billion, surpassing the consensus mark by 1.37%, reflecting an 18% year-over-year growth [2][8] - EPAM's shares increased by 6% following the strong earnings results and positive guidance for the full year [2] Financial Performance - The year-over-year revenue growth was driven by strong performance in various industry verticals, particularly Financial Services, which saw a 34.4% increase [3][8] - Revenues from Financial Services accounted for 24.3% of total revenues, amounting to $328.3 million [3] - Other segments also showed growth: Consumer Goods, Retail & Travel revenues increased by 6.2% to $268 million; Software & Hi-Tech revenues rose by 21.2% to $204.7 million; Life Sciences & Healthcare revenues grew by 11.7% to $156.5 million; Business Information & Media revenues increased by 2.8% to $170.4 million; Emerging revenues surged by 28.7% to $225.5 million [4][8] Profitability Metrics - Non-GAAP gross profit increased by 9% year over year to $407.7 million, with a gross margin expansion of 140 basis points to 30.1% [5] - Non-GAAP operating income rose by 16.3% year over year to $202.9 million, with an operating margin expansion of 20 basis points to 15.0% [5] Balance Sheet and Cash Flow - As of June 30, 2025, EPAM had cash and cash equivalents of $1.05 billion, down from $1.18 billion as of March 31, 2025 [6] - Long-term debt slightly decreased to $25 million [6] - Cash flow from operations was reported at $53.2 million, with free cash flow at $43.4 million [6] Future Guidance - For Q3 2025, EPAM expects revenues between $1.365 billion and $1.380 billion, indicating a year-over-year growth of 17.6% at the midpoint [9] - Full-year 2025 revenue growth is projected to be between 13.0% and 15.0%, with organic constant currency growth expected between 3.0% and 5.0% [11] - GAAP diluted EPS for Q3 is anticipated to be between $1.89 and $1.97, while non-GAAP diluted EPS is projected between $2.98 and $3.06 [10]

Core Insights - Epam reported revenue of $1.35 billion for the quarter ended June 2025, reflecting an 18% increase year-over-year and a surprise of +1.53% over the Zacks Consensus Estimate of $1.33 billion [1] - The earnings per share (EPS) was $2.45, unchanged from the same quarter last year, but fell short of the consensus estimate of $2.61, resulting in an EPS surprise of -6.13% [1] Revenue Performance by Geography - Americas revenue reached $801.43 million, exceeding the average estimate of $799.89 million, with a year-over-year increase of +16% [4] - APAC revenue was $27.2 million, slightly above the average estimate of $27.19 million, marking a +13% year-over-year change [4] - EMEA revenue totaled $524.81 million, surpassing the average estimate of $498.6 million, with a significant year-over-year increase of +21.7% [4] Revenue Performance by Industry Verticals - Financial Services generated $328.31 million, exceeding the estimated $312.51 million, representing a robust +34.4% year-over-year growth [4] - Software & Hi-Tech revenue was $204.67 million, above the estimated $189.86 million, reflecting a +21.2% increase year-over-year [4] - Life Sciences & Healthcare revenue was $156.51 million, slightly below the estimated $162.54 million, with a +11.7% year-over-year change [4] - Emerging Verticals achieved $225.51 million, surpassing the estimated $215.24 million, indicating a +28.7% year-over-year growth [4] - Consumer Goods, Retail & Travel revenue was $268.05 million, slightly below the estimated $269.77 million, with a +6.2% year-over-year increase [4] Revenue Performance by Contract Type - Time-and-material contracts generated $1.09 billion, below the estimated $1.12 billion, with a +15.2% year-over-year increase [4] - Fixed-price contracts reached $258 million, exceeding the estimated $205.76 million, representing a +31.9% year-over-year growth [4] - Licensing and other revenues were $8.05 million, below the estimated $10.78 million, with a +9.9% year-over-year change [4] Stock Performance - Epam's shares have returned -11.3% over the past month, contrasting with the Zacks S&P 500 composite's +1.9% change, indicating underperformance relative to the broader market [3] - The stock currently holds a Zacks Rank 3 (Hold), suggesting it may perform in line with the market in the near term [3]

[PART I. FINANCIAL INFORMATION](index=4&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) [Item 1. Financial Statements (Unaudited)](index=4&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) This section presents the unaudited condensed consolidated financial statements for EPAM Systems, Inc. and its subsidiaries, including balance sheets, statements of income, comprehensive income, changes in equity, and cash flows, along with detailed notes explaining significant accounting policies, impacts of the Ukraine conflict, acquisitions, goodwill, fair value measurements, derivatives, leases, debt, cost optimization programs, revenues, R&D incentives, stockholders' equity, income taxes, earnings per share, commitments, contingencies, segment information, and accumulated other comprehensive income/(loss) [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Metric (in thousands) | Metric | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | Change (in thousands) | % Change | | :-------------------------------- | :----------------------------- | :------------------------------- | :-------------------- | :------- | | Total assets | $4,710,696 | $4,750,473 | $(39,777) | -0.84% | | Total liabilities | $1,042,334 | $1,119,322 | $(76,988) | -6.88% | | Total equity | $3,668,362 | $3,631,151 | $37,211 | 1.02% | | Cash and cash equivalents | $1,041,344 | $1,286,267 | $(244,923) | -19.04% | | Trade receivables & contract assets | $1,158,956 | $1,002,175 | $156,781 | 15.64% | [Condensed Consolidated Statements of Income](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Income) Metric (in thousands, except per share) | Metric (in thousands, except per share) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Revenues | $1,353,443 | $1,146,597 | $2,655,135 | $2,312,062 | | Income from operations | $126,476 | $120,561 | $225,806 | $231,093 | | Net income | $88,026 | $98,645 | $161,508 | $214,888 | | Basic EPS | $1.56 | $1.71 | $2.86 | $3.72 | | Diluted EPS | $1.56 | $1.70 | $2.84 | $3.67 | - For the three months ended June 30, 2025, revenues increased by **18.0% YoY**, while net income decreased by **10.8%** and diluted EPS decreased by **8.2%** For the six months ended June 30, 2025, revenues increased by **14.8% YoY**, while net income decreased by **24.9%** and diluted EPS decreased by **22.7%**[12](index=12&type=chunk) [Condensed Consolidated Statements of Comprehensive Income](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income) Metric (in thousands) | Metric (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net income | $88,026 | $98,645 | $161,508 | $214,888 | | Other comprehensive income/(loss) | $83,167 | $(8,071) | $138,178 | $(30,383) | | Comprehensive income | $171,193 | $90,574 | $299,686 | $184,505 | - Other comprehensive income significantly improved, moving from a loss of **$8.071 million** in Q2 2024 to a gain of **$83.167 million** in Q2 2025, primarily driven by foreign currency translation adjustments[14](index=14&type=chunk) [Condensed Consolidated Statements of Changes in Equity](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Changes%20in%20Equity) - Total equity increased from **$3.63 billion** at January 1, 2025, to **$3.67 billion** at June 30, 2025 Key activities included **$160.3 million** in common stock repurchases in Q1 2025 and **$196.6 million** in Q2 2025, offset by net income and other comprehensive income[16](index=16&type=chunk) - Stock-based compensation expense contributed **$46.9 million** in Q1 2025 and **$37.9 million** in Q2 2025 to additional paid-in capital[16](index=16&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Cash Flow Activity (in thousands) | Cash Flow Activity (in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------- | :----------------------------- | :----------------------------- | | Net cash provided by operating activities | $77,360 | $186,947 | | Net cash used in investing activities | $(23,522) | $(73,836) | | Net cash used in financing activities | $(353,569) | $(338,161) | | Effect of exchange rate changes | $55,820 | $(26,447) | | Net decrease in cash, cash equivalents and restricted cash | $(243,911) | $(251,497) | - Operating cash flow decreased significantly from **$186.9 million** in H1 2024 to **$77.4 million** in H1 2025, primarily due to a larger increase in days sales outstanding and higher variable compensation payments[21](index=21&type=chunk)[167](index=167&type=chunk) - Investing activities used less cash in H1 2025 (**$23.5 million**) compared to H1 2024 (**$73.8 million**), mainly due to lower cash used for business acquisitions[21](index=21&type=chunk)[168](index=168&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=11&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) [1. Organization and Summary of Significant Accounting Policies](index=11&type=section&id=1.%20Organization%20and%20Summary%20of%20Significant%20Accounting%20Policies) - EPAM Systems, Inc. is a global provider of digital engineering, cloud, and AI-enabled transformation services, leveraging AI and GenAI to accelerate clients' digital innovation[26](index=26&type=chunk) - The company holds **$39.1 million** in cash and cash equivalents in Ukraine and **$37.2 million** in Belarus as of June 30, 2025, in banking sectors subject to instability and new restrictions on dividend distribution from Belarus[31](index=31&type=chunk) - The company uses foreign exchange forward contracts as cash flow hedges for forecasted Polish zloty, Indian rupee, Hungarian forint, and Mexican peso transactions to manage foreign currency risk[33](index=33&type=chunk) [2. Impact of the Invasion of Ukraine](index=12&type=section&id=2.%20Impact%20of%20the%20Invasion%20of%20Ukraine) - As of June 30, 2025, EPAM had **$58.4 million** in Property and equipment, net, and **$2.6 million** in Operating lease right-of-use assets in Ukraine, with no significant damage reported[38](index=38&type=chunk) - The company expensed **$3.9 million** and **$8.2 million** during the three and six months ended June 30, 2025, respectively, related to its **$100.0 million** humanitarian commitment for Ukraine, with **$16.4 million** remaining to be expensed[39](index=39&type=chunk) [3. Acquisitions](index=13&type=section&id=3.%20Acquisitions) - During the six months ended June 30, 2025, EPAM completed one acquisition for **$8.8 million**, expanding its AI-enabled business operations and adding **$4.0 million** in intangible assets[40](index=40&type=chunk) - In late 2024, EPAM acquired First Derivative for **$300.7 million** and NEORIS for **$626.3 million** (99.7% initially), significantly expanding capabilities in capital markets and Latin America/Europe, respectively[41](index=41&type=chunk)[42](index=42&type=chunk) Acquired Company (in thousands) | Acquired Company | Goodwill (in thousands) | Intangible Assets (in thousands) | | :--------------- | :---------------------- | :------------------------------- | | First Derivative | $171,368 | $124,809 | | NEORIS | $400,883 | $259,000 | [4. Goodwill](index=14&type=section&id=4.%20Goodwill) Segment (in thousands) | Segment | Balance as of Jan 1, 2025 (in thousands) | Balance as of June 30, 2025 (in thousands) | Change (in thousands) | | :------- | :--------------------------------------- | :--------------------------------------- | :-------------------- | | Americas | $652,066 | $651,933 | $(133) | | Europe | $529,509 | $557,530 | $28,021 | | Total | $1,181,575 | $1,209,463 | $27,888 | - Goodwill increased by **$27.9 million** from January 1, 2025, to June 30, 2025, primarily due to the effect of net foreign currency exchange rate changes (**$28.9 million**) and the 2025 acquisition (**$3.2 million**), partially offset by purchase accounting adjustments for NEORIS[47](index=47&type=chunk) [5. Fair Value Measurements](index=15&type=section&id=5.%20Fair%20Value%20Measurements) Financial Instrument (in thousands) | Financial Instrument | As of June 30, 2025 (in thousands) | As of December 31, 2024 (in thousands) | | :------------------- | :--------------------------------- | :----------------------------------- | | FX derivative assets | $17,908 | $0 | | FX derivative liabilities | $223 | $14,650 | | Contingent consideration liabilities | $22,881 | $32,978 | - Contingent consideration liabilities decreased from **$33.0 million** at January 1, 2025, to **$22.9 million** at June 30, 2025, due to payments for previously acquired businesses and changes in fair value[50](index=50&type=chunk) [6. Derivative Financial Instruments](index=17&type=section&id=6.%20Derivative%20Financial%20Instruments) - EPAM uses foreign exchange forward contracts, designated as cash flow hedges, to manage risk from fluctuations in Polish zloty, Indian rupee, Hungarian forint, and Mexican peso transactions[53](index=53&type=chunk) Derivative Type (in thousands) | Derivative Type | Balance Sheet Classification | As of June 30, 2025 (in thousands) | As of December 31, 2024 (in thousands) | | :-------------- | :--------------------------- | :--------------------------------- | :----------------------------------- | | FX forward contracts (Asset) | Prepaid expenses and other current assets | $17,908 | $0 | | FX forward contracts (Liability) | Accrued expenses and other current liabilities | $223 | $14,650 | [7. Leases](index=17&type=section&id=7.%20Leases) Lease Cost Component (in thousands) | Lease Cost Component (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :---------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Operating lease cost | $12,158 | $10,833 | $23,484 | $21,686 | | Variable lease cost | $2,938 | $2,439 | $6,175 | $5,068 | | Short-term lease cost | $1,170 | $947 | $2,208 | $1,906 | | Total lease cost | $16,266 | $14,219 | $31,867 | $28,660 | - The weighted average remaining lease term for operating leases was **4.1 years** as of June 30, 2025, with a weighted average discount rate of **4.7%**[57](index=57&type=chunk) [8. Debt](index=18&type=section&id=8.%20Debt) - EPAM has a **$700.0 million** revolving credit facility (2021 Credit Agreement) maturing on October 21, 2026, with **$25.0 million** outstanding debt as of June 30, 2025, at an interest rate of **5.3%**[58](index=58&type=chunk)[61](index=61&type=chunk) - The company was in compliance with all covenants of the 2021 Credit Agreement as of June 30, 2025[60](index=60&type=chunk) [9. Cost Optimization Programs](index=19&type=section&id=9.%20Cost%20Optimization%20Programs) - EPAM initiated the 2025 Cost Optimization Program in Q2 2025, expecting to incur approximately **$17.0 million** in additional charges, primarily for workforce reductions, to be completed by Q1 2026[62](index=62&type=chunk) Program (in thousands) | Program | Balance at Dec 31, 2024 (in thousands) | Charges (in thousands) | Payments Made (in thousands) | Balance at June 30, 2025 (in thousands) | | :------ | :------------------------------------- | :--------------------- | :--------------------------- | :-------------------------------------- | | 2025 Cost Optimization Program (Employee separation costs) | $0 | $15,698 | $(11,394) | $4,304 | | 2024 Cost Optimization Program (Employee separation costs) | $1,763 | $6,057 | $(6,731) | $1,089 | | Total | $1,763 | $21,755 | $(18,125) | $5,393 | [10. Revenues](index=20&type=section&id=10.%20Revenues) Client Location (in thousands) | Client Location | Three Months Ended June 30, 2025 (in thousands) | Three Months Ended June 30, 2024 (in thousands) | Six Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2024 (in thousands) | | :-------------- | :---------------------------------------------- | :---------------------------------------------- | :-------------------------------------------- | :-------------------------------------------- | | Americas | $801,433 | $691,199 | $1,581,718 | $1,384,119 | | EMEA | $524,809 | $431,321 | $1,021,924 | $880,568 | | APAC | $27,201 | $24,077 | $51,493 | $47,375 | | Total Revenues | $1,353,443 | $1,146,597 | $2,655,135 | $2,312,062 | Industry Vertical (in thousands) | Industry Vertical | Three Months Ended June 30, 2025 (in thousands) | Three Months Ended June 30, 2024 (in thousands) | Six Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2024 (in thousands) | | :---------------- | :---------------------------------------------- | :---------------------------------------------- | :-------------------------------------------- | :-------------------------------------------- | | Financial Services | $328,313 | $244,369 | $642,278 | $487,105 | | Consumer Goods, Retail & Travel | $268,050 | $252,327 | $523,562 | $511,457 | | Software & Hi-Tech | $204,671 | $168,822 | $394,744 | $342,254 | | Business Information & Media | $170,393 | $165,762 | $336,940 | $336,080 | | Life Sciences & Healthcare | $156,505 | $140,084 | $311,459 | $280,293 | | Emerging Verticals | $225,511 | $175,233 | $446,152 | $354,873 | | Total Revenues | $1,353,443 | $1,146,597 | $2,655,135 | $2,312,062 | - Contract assets increased from **$52.897 million** at December 31, 2024, to **$75.599 million** at June 30, 2025, primarily due to achieving contractual milestones Contract liabilities decreased from **$59.321 million** to **$51.767 million** in the same period due to lower advance collections[74](index=74&type=chunk) [11. Poland Research and Development Incentives](index=24&type=section&id=11.%20Poland%20Research%20and%20Development%20Incentives) - EPAM recognized **$13.0 million** and **$25.0 million** in R&D tax relief benefits in Poland during the three and six months ended June 30, 2025, respectively, recorded as a reduction to Cost of revenues[77](index=77&type=chunk) - As of June 30, 2025, **$15.4 million** of these benefits were classified as Prepaid and other current assets, and **$59.9 million** as Other noncurrent assets[77](index=77&type=chunk) [12. Stockholders' Equity](index=25&type=section&id=12.%20Stockholders'%20Equity) - Stockholders approved the 2025 Long Term Incentive Plan, reserving up to **1,585,970 shares** for equity grants[78](index=78&type=chunk) Stock-Based Compensation (in thousands) | Stock-Based Compensation (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Cost of revenues | $18,161 | $16,937 | $42,084 | $39,294 | | Selling, general and administrative expenses | $20,397 | $18,747 | $44,930 | $41,181 | | Total | $38,558 | $35,684 | $87,014 | $80,475 | - EPAM repurchased **1,087 thousand shares** for **$194.9 million** in Q2 2025 and **1,883 thousand shares** for **$354.9 million** in H1 2025 A remaining balance of **$82.1 million** was available under the 2024 Repurchase Program as of June 30, 2025[90](index=90&type=chunk) [13. Income Taxes](index=27&type=section&id=13.%20Income%20Taxes) Metric | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :----- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Effective tax rate | 28.9% | 26.3% | 26.0% | 16.5% | - The effective tax rate increased significantly for the six months ended June 30, 2025, to **26.0%** from **16.5%** in the prior year, partly due to a tax shortfall from stock awards in 2025 compared to an excess tax benefit in 2024[92](index=92&type=chunk) [14. Earnings Per Share](index=28&type=section&id=14.%20Earnings%20Per%20Share) Metric | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :----- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Basic EPS | $1.56 | $1.71 | $2.86 | $3.72 | | Diluted EPS | $1.56 | $1.70 | $2.84 | $3.67 | | Weighted average common shares for diluted EPS (in thousands) | 56,536 | 58,149 | 56,898 | 58,540 | - The number of shares underlying anti-dilutive equity-based awards excluded from diluted EPS calculation was **1,409 thousand** for Q2 2025 and **1,199 thousand** for H1 2025[95](index=95&type=chunk) [15. Commitments and Contingencies](index=28&type=section&id=15.%20Commitments%20and%20Contingencies) - EPAM has a remaining **$16.4 million** commitment for humanitarian aid in Ukraine as of June 30, 2025[100](index=100&type=chunk) - Deferred consideration for asset acquisition totals **$35.1 million**, with **$17.1 million** due in the remainder of 2025 and **$18.0 million** in 2026[101](index=101&type=chunk) - A 5-year cloud services agreement has **$56.7 million** remaining to be spent as of June 30, 2025, with a **20%** cancellation penalty[102](index=102&type=chunk) [16. Segment Information](index=29&type=section&id=16.%20Segment%20Information) - The 'North America' segment was renamed 'Americas' in 2025 to reflect evolving geographic footprint and growth, particularly in Latin America[104](index=104&type=chunk) Segment (in thousands) | Segment | Three Months Ended June 30, 2025 (in thousands) | Three Months Ended June 30, 2024 (in thousands) | Six Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2024 (in thousands) | | :------ | :---------------------------------------------- | :---------------------------------------------- | :-------------------------------------------- | :-------------------------------------------- | | Americas Segment Revenues | $787,400 | $698,629 | $1,564,568 | $1,403,358 | | Americas Segment Operating Profit | $129,490 | $122,069 | $244,718 | $242,211 | | Europe Segment Revenues | $566,043 | $447,968 | $1,090,567 | $908,704 | | Europe Segment Operating Profit | $80,766 | $53,452 | $152,103 | $113,118 | - Europe segment operating profit as a percentage of revenues increased to **14.3%** in Q2 2025 from **11.9%** in Q2 2024, positively impacted by Poland R&D incentives, FX rates, and cost optimization[160](index=160&type=chunk) [17. Accumulated Other Comprehensive Income/(Loss)](index=33&type=section&id=17.%20Accumulated%20Other%20Comprehensive%20Income/(Loss)) Component (in thousands) | Component (in thousands) | Beginning Balance (Jan 1, 2025) | Ending Balance (June 30, 2025) | | :----------------------- | :------------------------------ | :----------------------------- | | Foreign currency translation | $(103,975) | $8,796 | | Cash flow hedging instruments | $(11,265) | $13,600 | | Defined benefit plans | $(1,624) | $(1,082) | | Total | $(116,864) | $21,314 | - Accumulated other comprehensive income shifted from a loss of **$116.864 million** at January 1, 2025, to a gain of **$21.314 million** at June 30, 2025, primarily driven by positive foreign currency translation adjustments and unrealized gains on hedging instruments[112](index=112&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=34&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on EPAM's financial condition and operational results for the three and six months ended June 30, 2025, compared to the prior year, highlighting revenue growth driven by demand and acquisitions, discussing the impact of the Ukraine war, analyzing changes in operating expenses, interest income, and tax rates, and reviewing segment performance, while maintaining a focus on AI and GenAI, strategic partnerships, and global delivery amidst geopolitical risks and cost optimization programs - EPAM is a leading global provider of digital engineering, cloud, and AI-enabled transformation services, leveraging AI and GenAI to accelerate clients' digital innovation[115](index=115&type=chunk)[116](index=116&type=chunk) - For the first six months of 2025, revenues increased by **14.8%** to **$2.655 billion**, positively impacted by improving demand, 2024 acquisitions, and foreign exchange fluctuations However, diluted EPS decreased to **$2.84** from **$3.67**, mainly due to lower income from operations and reduced excess tax benefits[125](index=125&type=chunk) - The war in Ukraine continues to impact operations, leading to increased expenses for business continuity, employee relocation, and humanitarian aid, with **$16.4 million** remaining from the **$100 million** commitment[120](index=120&type=chunk)[123](index=123&type=chunk)[124](index=124&type=chunk) Consolidated Results Summary (in thousands, except percentages and per share data) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Revenues | $1,353,443 (100.0%) | $1,146,597 (100.0%) | $2,655,135 (100.0%) | $2,312,062 (100.0%) | | Cost of revenues (excl. D&A) | $964,012 (71.2%) | $810,857 (70.7%) | $1,916,020 (72.2%) | $1,645,191 (71.2%) | | Selling, general and administrative expenses | $231,681 (17.1%) | $194,058 (16.9%) | $450,598 (16.9%) | $392,511 (16.9%) | | Depreciation and amortization expense | $31,274 (2.4%) | $21,121 (1.9%) | $62,711 (2.4%) | $43,267 (1.9%) | | Income from operations | $126,476 (9.3%) | $120,561 (10.5%) | $225,806 (8.5%) | $231,093 (10.0%) | | Net income | $88,026 (6.5%) | $98,645 (8.6%) | $161,508 (6.1%) | $214,888 (9.3%) | | Diluted earnings per share | $1.56 | $1.70 | $2.84 | $3.67 | [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=45&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section details EPAM's exposure to market risks, including concentration of credit risk, interest rate risk, and foreign exchange risk, highlighting the company's cash holdings in Ukraine and Belarus, the impact of foreign currency fluctuations on revenues and operating expenses, and the use of hedging programs to mitigate these risks - EPAM holds **$39.1 million** in cash and cash equivalents in Ukraine and **$37.2 million** in Belarus as of June 30, 2025, in banking sectors subject to instability and new restrictions on dividend distribution from Belarus[179](index=179&type=chunk) - Approximately **39.7%** of consolidated revenues and **63.0%** of consolidated operating expenses were denominated in non-U.S. dollar currencies during Q2 2025, exposing the company to foreign exchange rate fluctuations[183](index=183&type=chunk) - Foreign exchange loss was **$6.2 million** in Q2 2025, compared to a gain of **$1.2 million** in Q2 2024, primarily due to fluctuations impacting foreign currency-denominated assets and liabilities[185](index=185&type=chunk) - EPAM uses a hedging program with foreign exchange forward contracts to manage forecasted operating expenses in Polish zloty, Indian rupee, Hungarian forint, and Mexican peso[184](index=184&type=chunk) [Item 4. Controls and Procedures](index=48&type=section&id=Item%204.%20Controls%20and%20Procedures) Management, including the CEO and CFO, concluded that EPAM's disclosure controls and procedures were effective as of June 30, 2025, with no material changes in internal control over financial reporting during the quarter - Disclosure controls and procedures were deemed effective as of June 30, 2025, providing reasonable assurance for timely and accurate reporting[188](index=188&type=chunk) - No material changes in internal control over financial reporting occurred during the quarter ended June 30, 2025[189](index=189&type=chunk) [PART II. OTHER INFORMATION](index=48&type=section&id=PART%20II.%20OTHER%20INFORMATION) [Item 1. Legal Proceedings](index=48&type=section&id=Item%201.%20Legal%20Proceedings) EPAM is not currently a party to any material legal proceedings, nor is it aware of any pending or contemplated material legal or governmental proceedings - The company is not involved in any material legal or governmental proceedings[191](index=191&type=chunk) [Item 1A. Risk Factors](index=48&type=section&id=Item%201A.%20Risk%20Factors) This section refers readers to the risk factors disclosed in the Annual Report on Form 10-K for the year ended December 31, 2024, particularly regarding significant operations in Belarus and Ukraine and the adverse effects of the invasion of Ukraine, also noting that additional, currently unknown or immaterial risks may emerge - Readers are directed to the Annual Report on Form 10-K for a discussion of potential risks and uncertainties, including those related to operations in Belarus and Ukraine and the impact of the invasion of Ukraine[192](index=192&type=chunk) - The company acknowledges that the listed risks are not exhaustive, and other unknown or currently immaterial risks could adversely affect the business[193](index=193&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=48&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) EPAM's Board of Directors authorized a new $500.0 million share repurchase program in August 2024, and during the three months ended June 30, 2025, the company repurchased 1,087 thousand shares for $194.9 million, with $82.1 million remaining available under the program - A new **$500.0 million** share repurchase program (2024 Repurchase Program) was authorized on August 1, 2024, with a 24-month term[194](index=194&type=chunk) Period (in thousands) | Period | Total Number of Shares Purchased (in thousands) | Average Price Paid per Share | Approximate Dollar Value of Shares that May Yet Be Purchased (in thousands) | | :----- | :-------------------------------------------- | :--------------------------- | :------------------------------------------------------------------------ | | April 1 to April 30, 2025 | — | $— | $277,045 | | May 1 to May 31, 2025 | 913 | $180.49 | $112,196 | | June 1 to June 30, 2025 | 174 | $172.65 | $82,104 | | Total | 1,087 | | | [Item 3. Defaults Upon Senior Securities](index=49&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) There were no defaults upon senior securities during the reported period - No defaults upon senior securities occurred[196](index=196&type=chunk) [Item 4. Mine Safety Disclosures](index=49&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to EPAM Systems, Inc - Mine Safety Disclosures are not applicable to the company[197](index=197&type=chunk) [Item 5. Other Information](index=49&type=section&id=Item%205.%20Other%20Information) No directors or officers adopted or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the quarter ended June 30, 2025 - No insider adoption or termination of Rule 10b5-1 or non-Rule 10b5-1 trading arrangements occurred during the quarter[198](index=198&type=chunk) [Item 6. Exhibits](index=50&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with the Form 10-Q, including certifications from the CEO and CFO, XBRL instance documents, and other related taxonomy documents - The report includes certifications from the Chief Executive Officer and Chief Financial Officer (Exhibits 31.1, 31.2, 32.1, 32.2) and various XBRL taxonomy documents (Exhibits 101.INS, 101.SCH, 101.CAL, 101.DEF, 101.LAB, 101.PRE, 104)[200](index=200&type=chunk) [SIGNATURES](index=51&type=section&id=SIGNATURES) [Signatures](index=51&type=section&id=SIGNATURES) The report is duly signed on behalf of EPAM Systems, Inc. by Arkadiy Dobkin, Chairman, Chief Executive Officer and President, and Jason Peterson, Senior Vice President, Chief Financial Officer and Treasurer, on August 7, 2025 - The report was signed by Arkadiy Dobkin (Chairman, CEO, and President) and Jason Peterson (SVP, CFO, and Treasurer) on August 7, 2025[203](index=203&type=chunk)

分组1 - Epam reported quarterly earnings of $2.77 per share, missing the Zacks Consensus Estimate of $2.61 per share, but showing an increase from $2.45 per share a year ago, representing an earnings surprise of 6.13% [1] - The company posted revenues of $1.35 billion for the quarter ended June 2025, surpassing the Zacks Consensus Estimate by 1.53%, and an increase from $1.15 billion year-over-year [2] - Epam has surpassed consensus EPS estimates four times over the last four quarters and has also topped consensus revenue estimates four times during the same period [2] 分组2 - The stock has underperformed, losing about 35.3% since the beginning of the year, while the S&P 500 has gained 7.9% [3] - The current consensus EPS estimate for the coming quarter is $2.88 on revenues of $1.35 billion, and for the current fiscal year, it is $10.89 on revenues of $5.37 billion [7] - The Computers - IT Services industry is currently in the bottom 40% of the Zacks industries, which may impact the stock's performance [8]

Financial Data and Key Metrics Changes - In Q2 2025, the company generated revenue of $1.353 billion, representing an 18% year-over-year increase on a reported basis, surpassing the upper end of the revenue outlook [32] - Organic constant currency revenue growth was 5.3%, marking the third consecutive quarter of positive organic growth [32][34] - GAAP gross margin for the quarter was 28.8%, down from 29.3% in Q2 of the previous year, while non-GAAP gross margin was 30.1%, compared to 30.8% [37] - GAAP income from operations was $126 million, or 9.3% of revenue, compared to $121 million, or 10.5% of revenue in Q2 of the previous year [38] - Non-GAAP diluted EPS was $2.77, reflecting a $0.32 increase year-over-year [38] Business Line Data and Key Metrics Changes - Financial Services vertical grew 34.4% year-over-year, with 6.5% organic growth in constant currency, driven by strength in banking and insurance [34] - Software and high-tech vertical increased by 21.2% year-over-year, supported by strong execution and improvements across existing clients [34] - Life Sciences and Healthcare vertical saw an 11.7% year-over-year increase, primarily driven by clients in life sciences and med tech [34] - Emerging verticals delivered strong growth of 28.7%, positively impacted by recent acquisitions [35] Market Data and Key Metrics Changes - The Americas, representing 59% of Q2 revenues, grew 15.9% year-over-year, with 3.8% organic growth in constant currency [36] - EMEA, comprising 39% of Q2 revenues, increased 21.7% year-over-year, reflecting 7.6% organic growth [36] - APAC, making up 2% of revenues, grew 13% year-over-year, with 8.3% organic growth [36] Company Strategy and Development Direction - The company is focused on AI-native services, combining engineering and consulting strengths to drive sustainable growth [5][11] - Investments in domain expertise and AI-enabled delivery are aimed at retaining and expanding client relationships [11][17] - The company is scaling and optimizing global delivery hubs to enhance talent and operational efficiency [17][18] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about stabilizing demand conditions and improving growth trends, despite a complex macroeconomic environment [9][10] - The company anticipates continued differentiation in AI-native services and cloud modernization as key growth drivers [30] - Management is raising the bottom end of the range for full-year organic constant currency revenue growth due to strong H1 performance [44] Other Important Information - The CEO transition plan is on track, with the current CEO transitioning to the role of executive chairman [20] - The company has made strategic investments in key solution areas, including generative AI and cybersecurity [27] Q&A Session Summary Question: Workforce and Talent Addition - The company continues to hire to support revenue growth while being more thoughtful about bench optimization, leading to improved utilization [56] Question: Discretionary Spending Recovery - Clients are returning to discretionary spending due to regulatory requirements and the need for AI adoption, which aligns with the company's strengths [60] Question: Q4 Activity and Assumptions - The midpoint of the revenue growth range requires achieving the midpoint of the Q3 guide, with potential for sequential growth depending on demand [64][66] Question: New Discretionary Transformation Programs - The company is seeing incremental increases in discretionary spending, particularly in AI-driven projects, which is different from peers facing challenges [68] Question: Employee Upskilling Progress - The company launched an AI upskilling program with over 80% employee participation, focusing on continuous improvement and certification [73] Question: Margin and Profitability Outlook - The company aims to exit the year with improved utilization and profitability, focusing on appropriate pricing and deal selection [82]