Core Viewpoint - Grid Dynamics Holdings, Inc. will host a video conference call to discuss its fourth quarter and full year 2025 financial results on March 5, 2026 [1] Company Announcement - The video conference call is scheduled for 4:30 p.m. ET [1] - A press release with the financial results will be available on the company's website prior to the call [1] - A webcast of the video conference call will be provided, along with a replay option [1]

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Core Insights - Grid Dynamics Holdings, Inc. has entered into a multi-year strategic collaboration agreement with Amazon Web Services, focusing on generative AI for enterprise companies [1] - This agreement extends a 15-year relationship between Grid Dynamics and AWS, enhancing their partnership [1] - The collaboration grants Grid Dynamics access to AWS Data Foundations, which is crucial for scaling AI initiatives [1] Company Overview - Grid Dynamics is recognized as a premier IT consulting and digital services provider [1] - The company aims to leverage the collaboration with AWS to enhance its service offerings in generative AI [1] Industry Implications - The partnership signifies a growing trend in the IT consulting industry towards integrating advanced technologies like generative AI [1] - Companies in the sector are increasingly seeking collaborations with major cloud service providers to enhance their technological capabilities [1]

Core Insights - Grid Dynamics Holdings, Inc. has entered into a multi-year strategic collaboration agreement with Amazon Web Services, focusing on generative AI for enterprise companies, extending a 15-year relationship [1] Company Summary - The collaboration allows Grid Dynamics to access AWS Data Foundations, enhancing its capabilities in IT consulting and digital services [1]

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Core Insights - Grid Dynamics (GDYN) reported quarterly earnings of $0.09 per share, matching the Zacks Consensus Estimate, and down from $0.10 per share a year ago [1] - The company achieved revenues of $104.16 million for the quarter ended September 2025, exceeding the Zacks Consensus Estimate by 0.34% and up from $87.43 million year-over-year [2] - The stock has underperformed significantly, losing approximately 63.6% since the beginning of the year compared to a 17.2% gain in the S&P 500 [3] Earnings Performance - The earnings report showed that Grid Dynamics has surpassed consensus EPS estimates two times over the last four quarters [1] - The company has topped consensus revenue estimates four times in the last four quarters [2] Future Outlook - The current consensus EPS estimate for the upcoming quarter is $0.08 on revenues of $109.3 million, and for the current fiscal year, it is $0.39 on revenues of $414.62 million [7] - The estimate revisions trend for Grid Dynamics was unfavorable prior to the earnings release, resulting in a Zacks Rank 5 (Strong Sell) for the stock, indicating expected underperformance in the near future [6] Industry Context - The Computers - IT Services industry, to which Grid Dynamics belongs, is currently ranked in the top 25% of over 250 Zacks industries, suggesting a favorable industry outlook [8]

Financial Data and Key Metrics Changes - The company reported Q3 2025 revenue of $104.2 million, marking a 19.1% year-over-year growth and slightly exceeding the guidance range of $103 million to $105 million [30] - Non-GAAP EBITDA for the quarter was $12.7 million, within the higher end of the guidance range [30] - GAAP net income was $1.2 million, or $0.01 per share, down from $5.3 million in the previous quarter [38] Business Line Data and Key Metrics Changes - The retail vertical contributed $27.8 million, experiencing a sequential decline of 2.1% and a year-over-year decrease of 2.9% [31] - The technology, media, and telecommunications (TMT) vertical accounted for 27.4% of total revenues, growing 13.5% quarter-over-quarter and 18.2% year-over-year [32] - The finance vertical represented 24.6% of total revenues, with slight sequential growth and an 81% year-over-year increase [32] Market Data and Key Metrics Changes - The company added five times more billable engineers in Q3 compared to Q2, indicating strong demand for AI-driven solutions [7] - Partnership influence revenue exceeded 18% of total revenue, reflecting the growing importance of partnerships in driving growth [26] Company Strategy and Development Direction - The company is focused on becoming an AI-first organization, with initiatives aimed at enhancing profitability and margins by at least 300 basis points over the next twelve months [9] - The strategic framework includes three horizons: Efforts Delivery, Agenda Guide at Scale, and Physical AI, aimed at embedding AI into operations and service delivery [11] - The company is committed to disciplined capital allocation, including a $50 million share repurchase program, reflecting confidence in long-term business prospects [5] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the demand recovery being structural rather than temporary, with clients shifting from risk management to growth strategies [20] - The company anticipates a materially higher billable run rate by the end of the year, positioning itself well for growth in 2026 [8] - Management noted that AI initiatives are expected to yield quicker ROI compared to traditional digital transformation programs, driving demand [22] Other Important Information - The company ended Q3 with a total headcount of 4,971, down from 5,013 in the previous quarter, while increasing billable headcount [35] - The company is rationalizing its overall headcount to align skill sets and geographies, aiming for greater efficiencies [8] Q&A Session Summary Question: Trends for 2026 growth rates - Management noted that the highest billable headcount in the company's history and longer-duration programs related to AI initiatives provide confidence for growth in 2026 [44] Question: Constraints limiting adoption of AgenTeq AI - Management highlighted that the technology continues to evolve, and they are expanding capabilities to solve a broader spectrum of business problems [48] Question: Contribution of managed services versus custom build activity - The majority of revenue is currently related to solving business cases, fueling overall growth [55] Question: Share repurchase program rationale - The program signals confidence in the company's growth trajectory and is seen as a good return on investment [74] Question: Margin expansion context - Management indicated that the 300 basis points expansion target includes both gross and EBITDA margins, driven by pricing increases and cost optimization [95][100]

Financial Performance - Revenues for the three months ended September 30, 2025, were $104.2 million, representing a year-over-year increase of 19.1%[124] - Net income for the same period was $1.2 million, a decrease from $4.3 million in the prior-year quarter, primarily due to higher cost of revenues[124] - Non-GAAP EBITDA totaled $12.7 million, or 12.2% of revenues for the quarter, compared to $14.8 million, or 16.9% of revenues in the corresponding period of 2024[124] - Total revenues for the nine months ended September 30, 2025, reached $305.7 million, reflecting a year-to-date growth of 22.1% compared to $250.3 million in 2024[137] - Gross profit for the nine months ended September 30, 2025, increased to $106.2 million, an 18.1% growth from $90.0 million in the prior year[146] - Non-GAAP EBITDA for the nine months ended September 30, 2025, was $40.050 million, an increase from $36.839 million in the same period of 2024[162] - The company generated $30.704 million in net cash from operating activities for the nine months ended September 30, 2025, up from $23.130 million in the prior year[172] - The company reported a Non-GAAP net income of $8.150 million for the three months ended September 30, 2025, compared to $10.828 million in the same period of 2024[165] - Non-GAAP diluted EPS for the nine months ended September 30, 2025, was $0.30, down from $0.34 in the same period of 2024[165] Operating Expenses - Total operating expenses for the three months ended September 30, 2025, were $34.9 million, an increase of 14.2% from $30.6 million in the prior-year quarter[135] - Engineering, research, and development expenses increased by 29.5% year-over-year, reflecting the company's commitment to innovation[135] - General and administrative expenses totaled $66.9 million for the nine months ended September 30, 2025, reflecting a 13.4% increase from $59.0 million in 2024[153] - Sales and marketing expenses increased by 6.2% year-to-date, totaling $22.7 million for the nine months ended September 30, 2025[150] Customer Metrics - The number of customers for the nine months ended September 30, 2025, was 222, a slight decrease from 229 a year ago, highlighting challenges in customer retention[129] - The top one customer accounted for 16.4% of revenues in Q3 2025, compared to 17.1% in Q3 2024, indicating a slight decrease in revenue concentration[132] - Retail vertical contributed 29.5% of total revenues for the nine months ended September 30, 2025, despite a year-over-year decline of 2.9% in the third quarter[138] - Finance vertical revenues increased to $76.0 million for the nine months ended September 30, 2025, up from $36.9 million in the prior year, representing a growth of $39.1 million[140] - Technology, Media, and Telecom vertical revenues reached $77.4 million for the nine months ended September 30, 2025, marking an 8.3% year-to-date growth[139] Employee Metrics - The total number of employees as of September 30, 2025, was 4,971, an increase from 4,298 in 2024, with significant growth in the Americas and Europe[125] Geopolitical Risks - Grid Dynamics continues to monitor geopolitical risks, particularly related to military actions in Ukraine, which could materially affect operations and business outlook[120] Currency Exposure and Hedging - Approximately 51.8% of Grid Dynamics' combined cost of revenues and total operating expenses for the three months ended September 30, 2025, were denominated in currencies other than the U.S. dollar, compared to 43.0% in the same period of 2024[180] - In the nine months ended September 30, 2025, approximately 49.4% of Grid Dynamics' $308.1 million combined cost of revenues and total operating expenses were denominated in currencies other than the U.S. dollar[182] - Grid Dynamics has implemented a hedging program to manage exposure to foreign currency fluctuations, entering into short-term foreign exchange forward contracts for Polish zloty[184] - A 10% decrease in the value of the Polish zloty against the U.S. dollar would have resulted in a $1.8 million increase in Grid Dynamics' income from operations[181] - A 10% decrease in the value of the Indian rupee against the U.S. dollar would have resulted in a $0.6 million increase in Grid Dynamics' income from operations in the three months ended September 30, 2025[181] - A 10% decrease in the value of the Mexican peso against the U.S. dollar would have resulted in a $0.3 million increase in Grid Dynamics' income from operations in the three months ended September 30, 2025[181] - A 10% increase in the value of the Polish zloty would have resulted in a $2.1 million decrease in income from operations in the three months ended September 30, 2025[181] - A 10% increase in the value of the Indian rupee would have resulted in a $0.7 million decrease in income from operations in the three months ended September 30, 2025[181] - Grid Dynamics analyzes sensitivity to the zloty and peso separately due to distinct macroeconomic and geopolitical factors affecting these currencies[183] - As of September 30, 2025, all foreign exchange forward contracts qualified for hedge accounting, with no collateral required to be posted[184] Liquidity - Grid Dynamics' liquidity is primarily supported by cash generated from operations and a recent public offering that raised $107.6 million in net proceeds[167] - The company has a revolving credit facility with $30.0 million available, with maturity extended to March 15, 2028[167] - Net cash used in investing activities decreased significantly to $11.339 million for the nine months ended September 30, 2025, compared to $41.314 million in the same period of 2024[173]