EPAM(EPAM) - 2025 Q2 - Quarterly Results

Executive Summary EPAM Systems reported strong Q2 2025 results with sequential organic growth, highlighting AI-led solutions and raising its full-year revenue outlook Introduction and CEO Commentary EPAM Systems announced strong second-quarter 2025 results, marking its third consecutive quarter of sequential organic growth. CEO Arkadiy Dobkin emphasized the critical role of deep engineering and technology expertise, particularly in AI-led solutions, and the company's distinct client portfolio. The company also raised its full-year revenue outlook - EPAM achieved its third consecutive quarter of sequential organic growth, indicating a return to greater consistency in performance[3] - CEO Arkadiy Dobkin highlighted the critical importance of deep engineering and technology expertise, especially for AI-led solutions and complex modernization efforts required for AI adoption[3] - Clients are increasingly engaging EPAM to build out their data and AI foundations as they prioritize AI-readiness and preparatory actions[3] Second Quarter 2025 Financial Highlights EPAM reported Q2 2025 revenues of $1.353 billion with 18.0% year-over-year growth, alongside GAAP and non-GAAP operating income and EPS figures Revenue and Profitability Overview EPAM reported Q2 2025 revenues of $1.353 billion, an 18.0% year-over-year increase. On an organic constant currency basis, revenues grew by 5.3%. GAAP income from operations was $126.5 million (9.3% of revenues), and non-GAAP income from operations was $202.9 million (15.0% of revenues) Q2 2025 Revenue and Operating Income Performance | Metric | Q2 2025 | Q2 2024 | YoY Change | YoY % Change | | :-------------------------------- | :---------- | :---------- | :---------- | :----------- | | Revenues ($) | $1.353 billion | $1.147 billion | $206.8 million | +18.0% | | Organic Constant Currency Revenue Growth (%) | +5.3% | N/A | N/A | N/A | | GAAP Income from Operations ($) | $126.5 million | $120.6 million | $5.9 million | +4.9% | | GAAP Operating Margin (%) | 9.3% | 10.5% | N/A | -1.2 pp | | Non-GAAP Income from Operations ($) | $202.9 million | $174.5 million | $28.4 million | +16.3% | | Non-GAAP Operating Margin (%) | 15.0% | 15.2% | N/A | -0.2 pp | Earnings Per Share Performance In Q2 2025, GAAP diluted EPS decreased by $0.14 or 8.2% year-over-year to $1.56. Conversely, non-GAAP diluted EPS increased by $0.32 or 13.1% year-over-year to $2.77 Q2 2025 Diluted EPS Performance | Metric | Q2 2025 | Q2 2024 | YoY Change | YoY % Change | | :------------------ | :------ | :------ | :--------- | :----------- | | GAAP Diluted EPS ($) | $1.56 | $1.70 | -$0.14 | -8.2% | | Non-GAAP Diluted EPS ($) | $2.77 | $2.45 | +$0.32 | +13.1% | Operational and Cash Flow Metrics EPAM's cash provided by operating activities decreased significantly, while total cash and equivalents also declined, alongside share repurchases and a slight headcount increase Cash Flow and Balance Sheet Position For the first six months of 2025, cash provided by operating activities was $77.4 million, a significant decrease from $186.9 million in the prior year. Cash, cash equivalents, and restricted cash totaled $1.046 billion as of June 30, 2025, an 18.9% decrease from December 31, 2024 Cash Flow and Cash Position (First Six Months) | Metric | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | Change | | :-------------------------------- | :----------------------------- | :----------------------------- | :------------- | | Cash provided by operating activities ($) | $77.4 million | $186.9 million | -$109.5 million | | Cash, cash equivalents & restricted cash (as of June 30, 2025) ($) | $1.046 billion | $1.290 billion (Dec 31, 2024) | -$243.9 million (-18.9%) | Headcount and Share Repurchase Activity EPAM repurchased 1.087 million shares of common stock for $194.9 million during Q2 2025, with $82.1 million remaining under its authorization. Total headcount reached approximately 62,050, including 55,800 delivery professionals, showing a slight increase of 0.3% from the previous quarter - The Company repurchased 1.087 million shares of its common stock for $194.9 million during the second quarter of 2025 under its share repurchase program[8] - As of June 30, 2025, the Company had $82.1 million remaining under its share repurchase authorization[8] Headcount as of June 30, 2025 | Metric | Value | | :-------------------- | :------ | | Total Headcount (approximate) | ~62,050 | | Delivery Professionals (approximate) | ~55,800 | | QoQ Change (Delivery Professionals) (%) | +0.3% | 2025 Financial Outlook EPAM raised its full-year 2025 revenue growth guidance and provided detailed financial projections for both the full year and the third quarter of 2025 Full Year 2025 Guidance EPAM raised its full-year 2025 expected year-over-year revenue growth rate to 13.0% to 15.0%, with organic constant currency growth projected at 3.0% to 5.0%. The company updated its GAAP effective tax rate to approximately 26.0% and revised GAAP diluted EPS to $6.48 to $6.64, and non-GAAP diluted EPS to $10.96 to $11.12 Full Year 2025 Outlook | Metric | Range | | :-------------------------------- | :-------------------- | | YoY Revenue Growth Rate (%) | 13.0% to 15.0% | | Organic Constant Currency Revenue Growth Rate (%) | 3.0% to 5.0% | | GAAP Income from Operations (% of revenues) | 9.0% to 10.0% | | Non-GAAP Income from Operations (% of revenues) | 14.5% to 15.5% | | GAAP Effective Tax Rate (approximate %) | ~26.0% | | Non-GAAP Effective Tax Rate (approximate %) | ~24.0% | | GAAP Diluted EPS ($) | $6.48 to $6.64 | | Non-GAAP Diluted EPS ($) | $10.96 to $11.12 | | Weighted Average Diluted Shares Outstanding (millions) | 56.4 million | Third Quarter 2025 Guidance For Q3 2025, EPAM expects revenues between $1.365 billion and $1.380 billion, representing 17.6% year-over-year growth at the midpoint. Organic constant currency revenue growth is projected at 6.2% at the midpoint. Non-GAAP diluted EPS is expected to be in the range of $2.98 to $3.06 Third Quarter 2025 Outlook | Metric | Range | | :-------------------------------- | :-------------------- | | Revenues ($) | $1.365 billion to $1.380 billion | | YoY Revenue Growth Rate (midpoint %) | 17.6% | | Organic Constant Currency Revenue Growth Rate (midpoint %) | 6.2% | | GAAP Income from Operations (% of revenues) | 10.0% to 11.0% | | Non-GAAP Income from Operations (% of revenues) | 15.5% to 16.5% | | GAAP Effective Tax Rate (approximate %) | ~25.0% | | Non-GAAP Effective Tax Rate (approximate %) | ~24.0% | | GAAP Diluted EPS ($) | $1.89 to $1.97 | | Non-GAAP Diluted EPS ($) | $2.98 to $3.06 | | Weighted Average Diluted Shares Outstanding (millions) | 55.9 million | Company Information This section provides details on EPAM's upcoming conference call and an overview of the company's global digital engineering and AI-enabled transformation services Conference Call Details EPAM will host a conference call on Thursday, August 7, 2025, at 8:00 a.m. EDT to discuss the results. The live webcast will be available on the EPAM investor relations website, with a replay also accessible - EPAM will host a conference call on Thursday, August 7, 2025, at 8:00 a.m. EDT to discuss the results[9] - The conference call will be available live on the EPAM website at https://investors.epam.com, with a replay available in the Investor Relations section[9] About EPAM Systems EPAM Systems, founded in 1993, is a leading global provider of digital engineering, cloud, and AI-enabled transformation services. The company focuses on integrated strategy, experience, and technology consulting, leveraging AI and GenAI platforms like EPAM AI/RUN™ to drive client innovation. EPAM is recognized in the S&P 500, Forbes Global 2000, and Fortune 1000 for its IT services - EPAM Systems, Inc. (NYSE: EPAM) is a leading global provider of digital engineering, cloud and AI-enabled transformation services, and a leading business and experience consulting partner for global enterprises and ambitious startups since 1993[10] - The company leverages AI and GenAI to deliver transformative solutions, accelerating clients' digital innovation and enhancing their competitive edge through platforms like EPAM AI/RUN™ and initiatives like DIALX Lab[11] - EPAM was added to the S&P 500 and the Forbes Global 2000 in 2021 and is among the top 15 companies in Information Technology Services in the Fortune 1000[13] Condensed Consolidated Financial Statements This section presents EPAM's unaudited condensed consolidated statements of income and balance sheets for specified periods, detailing financial performance and position Condensed Consolidated Statements of Income The unaudited condensed consolidated statements of income present EPAM's financial performance for the three and six months ended June 30, 2025, compared to the same periods in 2024, detailing revenues, operating expenses, income from operations, and net income Condensed Consolidated Statements of Income (Three Months Ended June 30) | Metric (in thousands of $) | June 30, 2025 | June 30, 2024 | | :-------------------------------- | :-------------- | :-------------- | | Revenues ($) | $1,353,443 | $1,146,597 | | Income from operations ($) | $126,476 | $120,561 | | Net income ($) | $88,026 | $98,645 | | Diluted EPS ($) | $1.56 | $1.70 | Condensed Consolidated Statements of Income (Six Months Ended June 30) | Metric (in thousands of $) | June 30, 2025 | June 30, 2024 | | :-------------------------------- | :-------------- | :-------------- | | Revenues ($) | $2,655,135 | $2,312,062 | | Income from operations ($) | $225,806 | $231,093 | | Net income ($) | $161,508 | $214,888 | | Diluted EPS ($) | $2.84 | $3.67 | Condensed Consolidated Balance Sheets The unaudited condensed consolidated balance sheets provide a snapshot of EPAM's financial position as of June 30, 2025, compared to December 31, 2024, detailing assets, liabilities, and equity Condensed Consolidated Balance Sheets (as of) | Metric (in thousands of $) | June 30, 2025 | December 31, 2024 | | :-------------------------------- | :-------------- | :---------------- | | Total current assets ($) | $2,370,475 | $2,426,248 | | Total assets ($) | $4,710,696 | $4,750,473 | | Total current liabilities ($) | $747,427 | $821,039 | | Total liabilities ($) | $1,042,334 | $1,119,322 | | Total equity ($) | $3,668,362 | $3,631,151 | Non-GAAP Financial Measures and Reconciliations This section explains EPAM's non-GAAP financial measures and provides detailed reconciliations for historical performance and future guidance, enhancing comparability of operating results Explanation of Non-GAAP Measures EPAM uses non-GAAP financial measures to provide a clearer view of underlying business trends, supplementing GAAP results. These measures exclude specific items like stock-based compensation, acquisition-related costs, humanitarian support expenses, and certain one-time charges, aiming to offer better comparability of operating performance - Management believes non-GAAP measures help illustrate underlying trends in EPAM's business and are used for budgeting, operational goals, and performance evaluation[15] - Non-GAAP results exclude items such as stock-based compensation, acquisition-related costs, impairment of assets, humanitarian commitment expenses for Ukraine, geographic repositioning costs, employee separation costs, and certain other one-time charges and benefits[15] - Revenues on an 'organic constant currency basis' exclude the effect of acquisitions (for 12 months post-acquisition) and foreign currency exchange rate fluctuations[15] Historical Non-GAAP Reconciliations This section provides detailed reconciliations of GAAP to non-GAAP financial measures for the three and six months ended June 30, 2025, and 2024, covering cost of revenues, selling, general and administrative expenses, income from operations, and net income, along with specific adjustment details Q2 2025 Non-GAAP Income Statement Reconciliation Highlights | Metric | GAAP (Q2 2025) | Adjustments (Q2 2025) | Non-GAAP (Q2 2025) | | :-------------------------------- | :--------------- | :-------------------- | :----------------- | | Cost of revenues (exclusive of depreciation and amortization) ($) | $964,012 | $(18,232) | $945,780 | | Selling, general and administrative expenses ($) | $231,681 | $(40,349) | $191,332 | | Income from operations ($) | $126,476 | $76,417 | $202,893 | | Operating margin (%) | 9.3% | 5.7% | 15.0% | | Net income ($) | $88,026 | $68,765 | $156,791 | | Diluted earnings per share ($) | $1.56 | N/A | $2.77 | - Adjustments to GAAP cost of revenues and selling, general and administrative expenses primarily include stock-based compensation, humanitarian support in Ukraine, and cost optimization charges[23][24][25] - Total adjustments to GAAP income from operations for Q2 2025 were $76.4 million, and for the six months ended June 30, 2025, were $152.8 million[23] Guidance Non-GAAP Reconciliations This section provides reconciliations for EPAM's forward-looking guidance, converting GAAP projections to non-GAAP for Q3 and Full Year 2025. It details adjustments for revenue growth, income from operations, effective tax rates, and diluted EPS, offering a comprehensive view of expected non-GAAP performance Revenue Growth Reconciliation This section reconciles EPAM's expected revenue growth from reported GAAP figures to an organic constant currency basis for Q3 and Full Year 2025 Expected Revenue Growth Reconciliation (Q3 & Full Year 2025) | Metric | Third Quarter 2025 (at midpoint) | Full Year 2025 | | :-------------------------------- | :------------------------------- | :-------------------- | | Revenue growth as reported (%) | 17.6% | 13.0% to 15.0% | | Foreign exchange rates impact (%) | (1.0)% | (0.9)% | | Inorganic revenue growth (%) | (10.4)% | (9.1)% | | Revenue growth on an organic constant currency basis (%) | 6.2% | 3.0% to 5.0% | Income from Operations Reconciliation This section reconciles GAAP income from operations to non-GAAP for Q3 and Full Year 2025, detailing adjustments for various expenses Expected Income from Operations Reconciliation (Q3 & Full Year 2025) | Metric | Third Quarter 2025 | Full Year 2025 | | :-------------------------------- | :-------------------- | :-------------------- | | GAAP income from operations as a percentage of revenues (%) | 10.0% to 11.0% | 9.0% to 10.0% | | Stock-based compensation expenses (%) | 3.2% | 3.2% | | Humanitarian support in Ukraine (%) | 0.3% | 0.3% | | Cost Optimization charges (%) | 0.7% | 0.7% | | Amortization of acquired intangible assets (%) | 1.3% | 1.3% | | Non-GAAP income from operations as a percentage of revenues (%) | 15.5% to 16.5% | 14.5% to 15.5% | Effective Tax Rate Reconciliation This section reconciles EPAM's GAAP effective tax rate to its non-GAAP effective tax rate for Q3 and Full Year 2025 Expected Effective Tax Rate Reconciliation (Q3 & Full Year 2025) | Metric | Third Quarter 2025 | Full Year 2025 | | :-------------------------------- | :-------------------- | :-------------------- | | GAAP effective tax rate (approximately %) | 25.0% | 26.0% | | Non-GAAP effective tax rate (approximately %) | 24.0% | 24.0% | Diluted EPS Reconciliation This section reconciles GAAP diluted EPS to non-GAAP diluted EPS for Q3 and Full Year 2025, detailing per-share adjustments Expected Diluted EPS Reconciliation (Q3 & Full Year 2025) | Metric | Third Quarter 2025 | Full Year 2025 | | :-------------------------------- | :-------------------- | :-------------------- | | GAAP diluted earnings per share ($) | $1.89 to $1.97 | $6.48 to $6.64 | | Stock-based compensation expenses ($) | 0.79 | 3.13 | | Humanitarian support in Ukraine ($) | 0.07 | 0.28 | | Cost Optimization charges ($) | 0.16 | 0.68 | | Amortization of acquired intangible assets ($) | 0.33 | 1.27 | | Non-GAAP diluted earnings per share ($) | $2.98 to $3.06 | $10.96 to $11.12 | Legal and Investor Information This section includes disclaimers regarding forward-looking statements and provides contact information for investor relations Forward-Looking Statements This section contains a standard disclaimer regarding forward-looking statements, emphasizing that estimates are subject to risks, uncertainties, and assumptions. Factors such as geopolitical events (e.g., war in Ukraine), global economic conditions, and the adoption of AI technologies could cause actual results to differ materially - The press release includes forward-looking statements subject to risks, uncertainties, and assumptions as to future events that may not prove to be accurate[16] - Factors that could cause actual results to differ materially include developments relating to the war in Ukraine, difficult conditions in global capital markets, and the adoption and implementation of artificial intelligence technologies[16] Investor Contact Contact information for EPAM Systems' Head of Investor Relations, Mike Rowshandel, is provided for investor inquiries - For investor inquiries, contact Mike Rowshandel, Head of Investor Relations at EPAM Systems, Inc[17] - Contact details: Phone: +1-267-759-9000 x393336, Email: mike_rowshandel@epam.com[17]