Company Overview and Strategy - Grid Dynamics is a technology consulting, platform & product engineering, AI, and digital engagement services provider for Fortune 1000 corporations[8] - The company's DNA is centered around technology and innovation, positioning it as a strategic partner for global enterprises[18] - Grid Dynamics is pursuing a "GigaCube" strategic initiative to reach $1 billion in annual revenue through geographic scalability, innovation, and industry expansion[52] Financial Performance and Expectations - Q3 2025 revenue reached $104.2 million, representing a 19.1% year-over-year increase[60] - The company's Q4 2025 revenue expectations are between $105 million and $107 million[11] - Non-GAAP EBITDA for Q3 2025 was $12.7 million, which is 12.2% of revenue[60] - Non-GAAP net income for Q3 2025 was $8.2 million, or $0.09 EPS[60] AI and Technology Focus - Grid Dynamics has 9 years of experience in delivering AI solutions for enterprises[29] - The company has over 40 proprietary accelerators that reduce Fortune 1000 implementation time by approximately 50%[40] - The global AI IT consulting services spending is projected to be approximately $48 billion in 2025, growing to approximately $85 billion in 2028[33] Client Base and Growth - The company has a blue-chip client base with high client retention[17] - Revenue growth from mature clients (relationship length > 2 years) accounts for 85% of the company's organic growth[47] - Partner-influenced revenues have increased from less than 1% to 18% over the past 3 years[51]

Financial Performance - Third quarter 2025 revenues reached $104.2 million, reflecting a sequential growth of 3.0% and a year-over-year growth of 19.1%[2] - Revenues for Q3 2025 reached $104,163 thousand, a 19.0% increase from $87,435 thousand in Q3 2024[28] - Gross profit for Q3 2025 was $34,711 thousand, compared to $32,729 thousand in Q3 2024, reflecting a 6.0% increase[28] - Net income for Q3 2025 was $1,177 thousand, down from $4,282 thousand in Q3 2024, indicating a decline of 72.5%[28] - Non-GAAP net income for Q3 2025 was $8,150 thousand, compared to $10,828 thousand in Q3 2024, a decrease of 24.7%[34] - GAAP net income for the third quarter was $1.2 million, or $0.01 per share, compared to $4.3 million, or $0.05 per share, in the same quarter of 2024[8] - Non-GAAP EBITDA for the third quarter was $12.7 million, down from $14.8 million in the third quarter of 2024[9] - The company reported a GAAP diluted EPS of $0.01 for Q3 2025, down from $0.05 in Q3 2024[34] Revenue Breakdown - The Retail vertical contributed 27.8% of total revenues, while the Technology, Media and Telecom (TMT) vertical accounted for 27.4%, marking a 13.5% sequential increase and an 18.2% year-over-year increase[3] - AI revenue grew by 10% sequentially, contributing over 25% of the third quarter's organic revenue[4] - Revenue from the Finance vertical increased significantly to $25,623 thousand in Q3 2025, up 80.5% from $14,158 thousand in Q3 2024[37] Cash Flow and Assets - Cash provided by operating activities for the nine months ended September 30, 2025, was $30.7 million, compared to $23.1 million for the same period in 2024[15] - Cash and cash equivalents stood at $338,553 thousand as of September 30, 2025, slightly up from $334,655 thousand at the end of 2024[30] - Total current assets increased to $440,673 thousand as of September 30, 2025, up from $423,304 thousand at the end of 2024[30] - Total assets grew to $613,169 thousand as of September 30, 2025, compared to $592,192 thousand at the end of 2024[30] Future Outlook - The company expects full-year 2025 revenues to be between $410.7 million and $412.7 million, representing a year-over-year growth of 17.1% to 17.7%[11] - The company anticipates a net-billable engineer increase similar to the third quarter for the fourth quarter[4] - A $50.0 million share repurchase program has been authorized, representing approximately 15% of the company's cash[7] - The company aims to improve its margins by at least 300 basis points over the next 12 months through various operational initiatives[6] Operating Expenses - Operating expenses for Q3 2025 totaled $34,952 thousand, an increase from $30,593 thousand in Q3 2024, reflecting a rise of 14.4%[28]

Core Viewpoint - Grid Dynamics (GDYN) is currently rated as a Zacks Rank 5 (Strong Sell) despite having recently posted earnings that met expectations, indicating underlying issues with earnings estimates and market sentiment [1][6]. Company Overview - Grid Dynamics Holdings, Inc. specializes in technology consulting, platform and product engineering, and advanced analytics services, operating in the United States, United Kingdom, Netherlands, and other regions. The company was founded in 2006 and is headquartered in San Ramon, CA [2]. Earnings History - The company has beaten the Zacks Consensus Estimate in two of the last four quarters, with the other two quarters resulting in meeting earnings estimates. However, this performance alone does not justify a strong buy or sell rating [4][5]. Earnings Estimates - Recent trends show a decline in annual earnings estimates for Grid Dynamics, with the current fiscal year consensus dropping from $0.46 to $0.39 and the next fiscal year estimate decreasing from $0.52 to $0.45 over the past 90 days. This negative movement in earnings estimates is a significant factor contributing to the stock's Zacks Rank of 5 (Strong Sell) [6]. Market Context - A broader trend within the Zacks universe indicates that many stocks are experiencing negative earnings estimate revisions, which is leading to a rise in the number of stocks falling to a Zacks Rank 5 (Strong Sell) [7].

Group 1 - The new temporal agentic AI platform and AI-powered engagement model launched by Grid Dynamics Holdings, Inc. could enhance cash generation [1] - The company has a long-term position in the market, indicating stability and potential for growth [1] Group 2 - The analysis focuses on cash flow statements and unlevered free cash flow figures, which are critical for assessing the company's financial health [1] - The financial models may include various metrics such as cost of capital, cost of debt, WACC, share count, and net debt [1] - The company is not typically associated with growth stocks, suggesting a focus on established financial performance [1]

Core Insights - Grid Dynamics Holdings, Inc. will announce its third quarter 2025 financial results on October 30, 2025, during a video conference call at 4:30 p.m. ET [1] - The company is recognized as a leader in enterprise-level digital transformation services and solutions, with a strong focus on AI and technology consulting [3] Financial Performance - For the second quarter of 2025, Grid Dynamics reported revenues of $101.1 million, slightly exceeding the forecast range of $100.0 million to $102.0 million [6] - Retail was the largest vertical for the company, contributing 29.2% of total revenue in the second quarter of 2025 [6] - In the first quarter of 2025, the company achieved revenues of $100.4 million, also above the expected range of $98.0 million to $100.0 million, with retail accounting for 31.4% of total revenues [8]

Group 1 - The individual has a strong foundation in portfolio construction and capital markets, emphasizing a hybrid investment strategy that combines stable, high-conviction holdings with tactical allocations to dynamic assets [1] - The investment approach reflects a belief that successful investing is about making money rather than merely being right [1] - There is a particular interest in the gaming sector, supported by both professional experience and personal passion [1] Group 2 - The individual writes on Seeking Alpha to enhance their investment skills, sharpen analysis, and provide insights for better-informed decision-making [1]

Core Insights - Grid Dynamics reported a GAAP revenue increase to $101.1 million for Q2 2025, surpassing analyst expectations and its own guidance midpoint [1][2] - Non-GAAP earnings per share were $0.10, exceeding consensus estimates by $0.01, while gross margin narrowed to 34.1% from 35.6% in Q2 2024 [1][2] - The company experienced significant growth in AI and Finance services, with AI and Data practice accounting for 23% of total organic revenue [1][7] Financial Performance - Q2 2025 GAAP revenue grew by 21.7% year-over-year from $83.0 million in Q2 2024 [2][5] - The Finance segment revenue more than doubled to $25.0 million, accounting for 25.1% of total revenues [5][10] - Non-GAAP gross profit increased to $35.1 million, a 16.6% rise from $30.1 million in Q2 2024 [2][6] Business Model and Strategy - Grid Dynamics specializes in digital transformation, software engineering, and technology consulting for global enterprises [3] - The company emphasizes AI-driven projects, talent development, and expanding its international presence, particularly in India and Latin America [4] - The acquisition strategy has diversified the client base and enhanced international delivery capabilities [8] Cost and Margin Trends - Non-GAAP gross margin decreased to 34.7% from 36.2% in Q2 2024, reflecting increased R&D and administrative costs [6][9] - R&D expenses surged by 63.4% year-over-year, while general and administrative costs rose by 17.3% [6][9] Future Outlook - Management set revenue guidance for Q3 2025 at $103 million to $105 million, with full-year 2025 revenue guidance unchanged at $415 million to $435 million [12] - The company anticipates stronger seasonal performance in the second half of 2025 due to ramp-up from recently signed deals [12] - Key areas to monitor include hiring pace, integration of acquisitions, and operational developments [13]

分组1 - Grid Dynamics reported quarterly earnings of $0.1 per share, matching the Zacks Consensus Estimate, and showing an increase from $0.08 per share a year ago [1] - The company achieved revenues of $101.1 million for the quarter ended June 2025, exceeding the Zacks Consensus Estimate by 0.70% and up from $83.04 million year-over-year [2] - Over the last four quarters, Grid Dynamics has surpassed consensus EPS estimates two times and revenue estimates four times [2] 分组2 - The stock has underperformed significantly, losing about 56.4% since the beginning of the year, while the S&P 500 has gained 8.2% [3] - The current consensus EPS estimate for the upcoming quarter is $0.12 on revenues of $105.37 million, and for the current fiscal year, it is $0.46 on revenues of $416.12 million [7] - The Computers - IT Services industry, to which Grid Dynamics belongs, is currently ranked in the bottom 38% of over 250 Zacks industries, indicating potential challenges ahead [8]

Financial Data and Key Metrics Changes - The company reported a record second quarter revenue of $101 million, representing a year-over-year growth of 21.7% [4][28] - Non-GAAP EBITDA for the quarter was $12.7 million, within the guidance range [28] - GAAP net income was $5.3 million, or $0.06 per share, compared to a net income of $2.9 million in the previous quarter [35] Business Line Data and Key Metrics Changes - The retail vertical contributed 29.2% of total revenues, growing 10.4% year-over-year but declining 6.2% sequentially [30] - The finance vertical accounted for 25.1% of total revenues, doubling year-over-year and growing 1.4% sequentially [31] - Technology, Media, and Telecommunications (TMT) represented 24.9% of revenues, with a growth of 6.7% quarter-over-quarter and 8.4% year-over-year [32] Market Data and Key Metrics Changes - The company experienced a decline in the number of customers, with 194 customers in the second quarter, down from 204 in the previous quarter [33] - The top five customers contributed 37.5% of total revenues, slightly down from 38.5% year-over-year [33] Company Strategy and Development Direction - The company is focusing on an AI-first approach, integrating AI into all aspects of its business, including service offerings and talent management [5][6] - Recent acquisitions, particularly in banking and financial services, are expected to enhance industry expertise and customer engagement [7][8] - The company aims to leverage its unique market position in AI and data, with 23% of its organic revenue coming from AI and data practices [6][37] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the growth pipeline despite macroeconomic uncertainties, highlighting a strong demand for AI-native partners [6][7] - The company anticipates continued growth in AI-related business, expecting this segment to increase in the coming quarters [37] Other Important Information - The company ended the quarter with a total headcount of 5,013, up from 4,926 in the previous quarter [32] - Cash and cash equivalents totaled $336.8 million, an increase from $325.5 million in the previous quarter [35] Q&A Session Questions and Answers Question: Can you discuss the pipeline and deal conversion pace? - Management indicated a robust pipeline and expressed optimism for the second half of the year, with significant opportunities in AI and data projects [41][50] Question: How should we think about the pricing climate and hiring plans? - The company noted competitive pricing in innovative projects and emphasized the importance of maintaining a skilled workforce while optimizing costs [46][52] Question: How is AI changing the nature of work and hiring? - Management highlighted the need for training in AI context engineering and the importance of senior engineers in overseeing AI agents [57][60] Question: What is the outlook for partner growth? - The company is focusing on innovation and partnerships, particularly with hyperscalers and robotics companies, to drive growth [93][96] Question: When can we expect stabilization in client count? - The decline in client count is primarily due to rationalization efforts post-acquisitions, with a focus on enterprise customers [100][101]

[CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS](index=4&type=section&id=CAUTIONARY%20NOTE%20REGARDING%20FORWARD-LOOKING%20STATEMENTS) This section warns that the report contains forward-looking statements subject to substantial risks and uncertainties - The report contains forward-looking statements identifiable by terms such as "anticipates," "believes," "expects," and "will," which involve **substantial risks and uncertainties**[8](index=8&type=chunk) - Key factors influencing future performance include the evolution of digital engineering, ability to educate the market, **revenue growth rate**, **financial results**, GigaCube growth strategy, leadership in digital transformation, **customer acquisition and retention**, **competitive advantages**, technology scaling, new product innovation, brand protection, **AI use**, **cybersecurity**, **market capitalization**, strategic partnerships, international expansion, financing, **operating expenses**, seasonal trends, **employee retention**, acquisition benefits, regulatory changes, and geopolitical events (e.g., Ukraine conflict)[8](index=8&type=chunk) - Investors should not rely on forward-looking statements as predictions of future events, as actual results may differ materially due to various risks and uncertainties, including those detailed in "Item 1A, Risk Factors" in this and previous reports[10](index=10&type=chunk) [PART I. FINANCIAL INFORMATION](index=6&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) [Item 1. Financial Statements (Unaudited)](index=6&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) Presents unaudited condensed consolidated financial statements, including balance sheets, income, equity, and cash flows - The financial statements are unaudited, prepared in accordance with U.S. GAAP for interim information and SEC rules, and include all normal and recurring adjustments[27](index=27&type=chunk) - Operating results for the three and six months ended June 30, 2025, are not necessarily indicative of the full year's results[27](index=27&type=chunk) [Condensed Consolidated Balance Sheets](index=6&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Balance sheets show financial position, with total assets increasing to **$608.9 million** and equity growing to **$532.2 million** | Metric (in thousands) | June 30, 2025 | December 31, 2024 | | :-------------------- | :------------ | :---------------- | | Cash and cash equivalents | $336,752 | $334,655 | | Trade receivable, net | $77,727 | $69,371 | | Total current assets | $433,019 | $423,304 | | Total assets | $608,907 | $592,192 | | Total current liabilities | $58,723 | $55,544 | | Total liabilities | $76,693 | $74,363 | | Total stockholders' equity | $532,214 | $517,829 | [Condensed Consolidated Statements of Income/(Loss) and Comprehensive Income/(Loss)](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Income%2F(Loss)%20and%20Comprehensive%20Income%2F(Loss)) Revenues increased to **$101.1 million** (Q2) and **$201.5 million** (H1), achieving net income of **$5.3 million** and **$8.2 million** | 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 | | :-------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Revenues | $101,095 | $83,037 | $201,510 | $162,854 | | Cost of revenues | $66,592 | $53,474 | $130,010 | $105,626 | | Gross profit | $34,503 | $29,563 | $71,500 | $57,228 | | (Loss)/income from operations | $(123) | $40 | $(2,160) | $(5,502) | | Other income, net | $7,424 | $2,665 | $11,930 | $5,190 | | Income/(loss) before income tax | $7,301 | $2,705 | $9,770 | $(312) | | Provision for income taxes | $2,028 | $3,522 | $1,585 | $4,453 | | Net income/(loss) | $5,273 | $(817) | $8,185 | $(4,765) | | Basic EPS | $0.06 | $(0.01) | $0.10 | $(0.06) | | Diluted EPS | $0.06 | $(0.01) | $0.09 | $(0.06) | - **Net income** for Q2 2025 was **$5.3 million**, a **significant improvement** from a **net loss** of **$0.8 million** in Q2 2024[17](index=17&type=chunk) - **Diluted EPS** for Q2 2025 was **$0.06**, **up from** **$(0.01)** in Q2 2024[17](index=17&type=chunk) [UNAUDITED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY](index=8&type=section&id=UNAUDITED%20CONSOLIDATED%20STATEMENTS%20OF%20STOCKHOLDERS'%20EQUITY) Stockholders' equity increased to **$532.2 million** by June 30, 2025, driven by net income and stock-based compensation | Metric (in thousands) | Balance at Dec 31, 2024 | Balance at June 30, 2025 | | :-------------------- | :---------------------- | :----------------------- | | Additional paid-in capital | $532,578 | $533,389 | | Accumulated deficit | $(11,845) | $(3,660) | | Accumulated other comprehensive income/(loss) | $(2,912) | $2,477 | | Total stockholders' equity | $517,829 | $532,214 | - Key drivers of equity changes for the six months ended June 30, 2025, include **net income** (**$8.2 million**), **stock-based compensation** (**$17.5 million**), and foreign currency translation adjustment (**$5.4 million**), partially offset by issuance of shares and payments of tax obligations from net share settlement of vested stock awards (**$(17.1 million)**)[19](index=19&type=chunk)[22](index=22&type=chunk) [UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS](index=10&type=section&id=UNAUDITED%20CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20CASH%20FLOWS) Operating cash flow increased to **$23.7 million**, while financing activities used **$16.9 million**, primarily for tax obligations | Metric (in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------- | :----------------------------- | :----------------------------- | | Net cash provided by operating activities | $23,731 | $13,917 | | Net cash used in investing activities | $(7,313) | $(6,843) | | Net cash used in financing activities | $(16,853) | $(7,910) | | Net increase/(decrease) in cash, cash equivalents and restricted cash | $1,727 | $(1,185) | | Cash, cash equivalents and restricted cash, end of period | $336,882 | $256,042 | - **Operating cash flow improved by** **$9.8 million** year-over-year, primarily due to changes in working capital, including timing of employee compensation payments and customer collections[164](index=164&type=chunk) - **Financing activities used** **$16.9 million**, mainly due to **$17.1 million** in tax obligations from net share settlement of vested stock awards, an **increase of** **$8.5 million** compared to the prior year[166](index=166&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=12&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) Detailed notes support the financial statements, covering policies, acquisitions, fair value, assets, liabilities, revenue, leases, taxes, and equity [Note 1 — Nature of operations and summary of significant accounting policies](index=12&type=section&id=Note%201%20%E2%80%94%20Nature%20of%20operations%20and%20summary%20of%20significant%20accounting%20policies) Grid Dynamics provides technology consulting and engineering services, specializing in AI, cloud, data, and DevOps, with financial statements prepared under U.S. GAAP - **Grid Dynamics** is a leading provider of technology consulting, platform and product engineering, and advanced analytics services, with expertise in **AI**, data science, cloud computing, big data, and DevOps[25](index=25&type=chunk) - The company consolidates a variable interest entity (VIE) subcontractor because it has the power to direct the VIE's most significant activities and is its primary beneficiary[29](index=29&type=chunk) - The **allowance for credit losses** was **$3.3 million** as of June 30, 2025, **up from** **$2.7