EPAM(US:EPAM)2025-08-07 13:00Financial Data and Key Metrics Changes - In Q2 2025, EPAM generated revenue of $1.353 billion, an 18% year-over-year increase, surpassing the upper end of the revenue outlook [31] - Organic constant currency revenue grew 5.3% compared to Q2 2024, marking the third consecutive quarter of positive organic growth [31][32] - 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 last 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 grew 34.4% year-over-year, with 6.5% organic growth in constant currency, driven by strength in banking and insurance [33] - Software and high-tech increased by 21.2% year-over-year, while Life Sciences and Healthcare grew 11.7% [33] - Emerging verticals delivered strong growth of 28.7% year-over-year, positively impacted by recent acquisitions [35] - Consumer Goods, Retail, and Travel showed 6.2% year-over-year growth, indicating improvement [34] Market Data and Key Metrics Changes - The Americas, representing 59% of Q2 revenues, grew 15.9% year-over-year, while EMEA increased by 21.7% [36] - APAC, making up 2% of revenues, saw a 13% year-over-year increase [36] - Revenues from the top 20 clients grew 8.8% year-over-year, while revenues from clients outside the top 20 increased by 23% [36] Company Strategy and Development Direction - The company is focused on AI-native services and core engineering strengths, positioning itself for sustainable growth [6][10] - EPAM is expanding its market-leading position as an AI-native transformation company, with significant investments in AI capabilities [12][13] - The company is optimizing its global delivery hubs to provide scalable options and enhance talent capabilities [15][16] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the stabilization and potential improvement in demand conditions, despite a complex macroeconomic backdrop [7][9] - The company anticipates further improvement in organic constant currency growth rates in Q3 and is raising the bottom end of the revenue growth range for 2025 [42][44] - Management highlighted the importance of quality execution and strategic efficiency for clients, which aligns with EPAM's strengths [10][21] Other Important Information - The CEO transition plan is on track, with the current CEO transitioning to the role of executive chairman [19] - The company has made strategic acquisitions to enhance capabilities in regulated industries and cloud-native engineering [26] Q&A Session Summary Question: Workforce and Talent Addition - Management acknowledged the balance between hiring new talent and optimizing existing resources, indicating a thoughtful approach to bench management [55][57] Question: Client Discretionary Spending - Management noted that clients are returning to discretionary spending due to regulatory requirements and the need for AI adoption, which aligns with EPAM's strengths [59][61] Question: Q4 Activity and Outlook - Management provided insights on the range of Q4 activity, indicating that achieving the midpoint of the guidance requires stable demand and seasonal adjustments [66][68] Question: New Discretionary Transformation Programs - Management highlighted that EPAM is seeing incremental increases in discretionary transformation programs, particularly in AI-driven initiatives [69] Question: Employee Upskilling Progress - Management reported that over 80% of employees have undergone AI upskilling, with ongoing efforts to enhance capabilities across the organization [75][76] Question: Margin and Profitability Outlook - Management indicated a focus on improving utilization and profitability, with expectations to exit the year with better margins compared to previous periods [78][84]