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EPAM Systems, Inc. (EPAM)·Q2 2025 Earnings Summary

Executive Summary

  • Q2 2025 revenue was $1.353B, up 18.0% YoY; GAAP diluted EPS was $1.56 (down 8.2% YoY), and non-GAAP diluted EPS was $2.77 (up 13.1% YoY). EPAM raised full-year reported revenue growth to 13–15% and organic constant currency growth to 3–5% .
  • Results broadly beat Wall Street consensus: revenue $1.353B vs $1.333B estimate*, and non-GAAP EPS $2.77 vs $2.61 estimate*, driven by improved organic momentum and AI-native work; gross margin was pressured by variable compensation and lower profitability of recent acquisitions .
  • Q3 guidance: revenue $1.365–$1.380B (17.6% YoY at midpoint), GAAP EPS $1.89–$1.97, non-GAAP EPS $2.98–$3.06; full-year GAAP EPS was lowered to $6.48–$6.64 while non-GAAP EPS was raised to $10.96–$11.12 .
  • Strategic narrative: three consecutive quarters of positive organic growth, accelerating AI-native engagements (DIAL 3.0, AWS Marketplace entry), and diversified delivery hubs; CEO transition to Executive Chairman planned for September 1, 2025, with Balazs Fejes to assume CEO role .

What Went Well and What Went Wrong

What Went Well

  • Organic momentum: Third consecutive quarter of positive organic constant currency growth; Q2 organic CC growth was 5.3%, with all six industry verticals and all regions growing YoY .
  • AI-native traction: Management highlighted double-digit sequential growth in AI-related revenues and advancing enterprise-scale agentic programs; DIAL 3.0 release and DIAL availability in AWS Marketplace strengthened commercialization routes .
  • Guidance raised for top line: Reported revenue growth outlook increased to 13–15% for FY25, reflecting stronger organic CC performance and FX tailwinds; organic CC raised to 3–5% .

Management quotes:

  • “Our second quarter efforts delivered results ahead of expectations… combining best in class AI native services with our core engineering…” — Arkadiy Dobkin .
  • “Clients… are increasingly turning to us to build out their data and AI foundation.” — Balazs Fejes .
  • “We expect further improvement in our year-over-year organic constant currency growth rate in the quarter.” — Jason Peterson .

What Went Wrong

  • GAAP EPS decline YoY: GAAP diluted EPS fell to $1.56 (-8.2% YoY) due to factors including higher effective tax rate and gross margin pressure from variable compensation and acquisition mix .
  • Gross margin compression: GAAP gross margin was 28.8% (vs 29.3% prior year), with non-GAAP at 30.1%; management cited variable compensation and lower profitability of acquisitions as key headwinds .
  • Cash conversion softness intra-quarter: CFO pointed to lower Q2 operating cash flow ($53M) vs prior year ($57M) and elevated DSO given increased fixed-fee milestone billing .

Financial Results

MetricQ4 2024Q1 2025Q2 2025
Revenue ($USD Billions)$1.248 $1.302 $1.353
Revenue YoY % (reported)7.9% 11.7% 18.0%
Organic Constant Currency YoY %1.0% 1.4% 5.3%
GAAP Diluted EPS ($)$1.80 $1.28 $1.56
Non-GAAP Diluted EPS ($)$2.84 $2.41 $2.77
GAAP Operating Margin %10.9% 7.6% 9.3%
Non-GAAP Operating Margin %16.7% 13.5% 15.0%
GAAP Gross Margin %30.4% 26.9% 28.8%
Non-GAAP Gross Margin %32.2% 28.7% 30.1%

Segment Breakdown (Q2 2025)

Industry VerticalRevenue ($USD Millions)YoY %
Financial Services$32834.4%
Consumer Goods, Retail & Travel$2686.2%
Business Information & Media$1702.8%
Life Sciences & Healthcare$20511.7%
Software & Hi-Tech$22621.2%
Emerging$15628.7%

Geography Breakdown (Q2 2025)

RegionRevenue ($USD Millions)YoY %
Americas$80115.9%
EMEA$52521.7%
APAC$2713.0%

KPIs and Operating Metrics

KPIQ4 2024Q1 2025Q2 2025
Cash & Equivalents ($B)$1.290 $1.179 ~$1.041
Cash from Operations ($MM, quarter)$130 $24 $53
DSO (days)70 75 78
Utilization %76.2% 77.5% 78.1%
Share Repurchases (shares/$MM)53k / $13 796k / $160 ~1.087M / $194.9
Total Headcount~61,200 ~61,700 ~62,050
Delivery Professionals~55,100 ~55,600 ~55,800

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Revenue Growth (reported)FY 202511.5%–14.5% 13.0%–15.0% Raised
Organic CC Revenue GrowthFY 20252.0%–5.0% 3.0%–5.0% Raised (lower bound)
GAAP Op Margin % of RevenueFY 20259%–10% 9%–10% Maintained
Non-GAAP Op Margin %FY 202514.5%–15.5% 14.5%–15.5% Maintained
GAAP Effective Tax RateFY 2025~25% ~26% Raised
Non-GAAP Effective Tax RateFY 2025~24% ~24% Maintained
GAAP Diluted EPS ($)FY 2025$6.78–$7.03 $6.48–$6.64 Lowered
Non-GAAP Diluted EPS ($)FY 2025$10.70–$10.95 $10.96–$11.12 Raised
Diluted Shares (mm)FY 202556.5 56.4 Lowered
Revenue ($B)Q3 2025N/A$1.365–$1.380 (midpoint +17.6% YoY) New
GAAP Op Margin %Q3 2025N/A10%–11% New
Non-GAAP Op Margin %Q3 2025N/A15.5%–16.5% New
GAAP EPS ($)Q3 2025N/A$1.89–$1.97 New
Non-GAAP EPS ($)Q3 2025N/A$2.98–$3.06 New
GAAP/Non-GAAP Tax RateQ3 2025N/A~25% / ~24% New
Diluted Shares (mm)Q3 2025N/A55.9 New

Earnings Call Themes & Trends

TopicQ4 2024 (prior two)Q1 2025 (prior one)Q2 2025 (current)Trend
AI/Technology initiatives75% of top 100 clients engaged in GenAI; scale programs, DIAL/AI/RUN momentum Strong double-digit QoQ AI-native revenue growth; expanding agentic factories; AWS collaboration Double-digit sequential AI-native growth; AI-native revenue scaling; enterprise deployment emphasis Accelerating
Tariffs/MacroCautious spending, pricing pressure; seasonality impacts expected Tariff-related uncertainty impacting manufacturing/materials via NEORIS customer; FX tailwinds “Dynamic demand environment” but improving; Q4 likely flat-to-modest decline sequential due to seasonality Stabilizing with caution
Regional trendsAmericas +11.4% YoY; EMEA +3.1% YoY; APAC +4.3% YoY All geographies grew YoY; Americas +12.6%, EMEA +10.7%, APAC +4.3% Americas +15.9%, EMEA +21.7%, APAC +13% YoY; organic CC growth across regions Broad-based improvement
Delivery footprintIndia largest country; Ukraine profitable; diversified hubs Net additions across India, Europe, W&C Asia; GCC growth Optimization of bench; utilization gains; 4 major hubs scaling Scaling/optimization
Pricing/Gross marginWage inflation > pricing; aim to return to 16–17% adjusted IFO over time Gross margin headwinds from comp and acquisitions; limited pricing offsets GM pressured by variable comp & acquisitions; focus on utilization and account margin Gradual improvement targeted
Managed services stanceNot traditional legacy managed services; platform-based delivery emerging Fixed-fee mix rising (Middle East, consulting-led, platform models) Clarified: avoid legacy managed services; platform-managed products acceptable Evolving engagement models

Management Commentary

  • “This reaffirms our long-standing view that deep engineering and technology expertise is critical, especially in AI-led solutions… with no material exposure to traditional legacy outsourcing services.” — Arkadiy Dobkin .
  • “As our clients prioritize their AI-readiness… they are increasingly turning to us to build out their data and AI foundation.” — Balazs Fejes .
  • “Our strong results… are being driven by clients turning to EPAM for trusted quality coupled with accelerating momentum across our AI and AI native offerings.” — Jason Peterson .
  • CEO transition update: “The CEO transition plan has been going well… Balazs Fejes will become our new chief executive officer… and I transition into the role of Executive Chairman.” — Arkadiy Dobkin .

Q&A Highlights

  • Utilization and hiring balance: Active bench optimization driving utilization to 78.1%; net headcount additions expected in Q3/Q4 to support growth .
  • Discretionary demand: Clients returning to EPAM for quality execution; AI-driven modernization (data, cloud) catalyzing spend despite macro complexity .
  • Pricing and margins: Focus on account margin and appropriate pricing; 2025 profitability compressed by comp and acquisitions, with aim to exit improved and pursue 16%+ longer term .
  • Delivery strategy: Non-legacy managed services; platform-based delivery via EPAM platforms (e.g., DIAL) gaining traction; balanced pyramid and upskilling across roles .
  • DSO and cash conversion: Elevated DSO due to milestone billing in fixed-fee; still targeting 80–90% conversion over time .

Estimates Context

  • Q2 2025: Revenue $1,353.4M vs $1,333.4M estimate*; non-GAAP EPS $2.77 vs $2.61 estimate* — both beats.
  • Q1 2025: Revenue $1,301.7M vs $1,282.3M estimate*; non-GAAP EPS $2.41 vs $2.27 estimate* — beats.
  • Q4 2024: Revenue $1,248.4M vs $1,213.3M estimate*; non-GAAP EPS $2.84 vs $2.75 estimate* — beats.
MetricQ4 2024Q1 2025Q2 2025
Consensus Revenue ($MM)1,213.3*1,282.3*1,333.4*
Actual Revenue ($MM)1,248.4 1,301.7 1,353.4
Consensus EPS ($)2.7548*2.2713*2.6122*
Actual Non-GAAP EPS ($)2.84 2.41 2.77

Values retrieved from S&P Global.*

Where estimates may adjust:

  • FY25 reported revenue growth raised to 13–15% and organic CC to 3–5% (FX tailwinds and stronger organic performance), implying potential upward revisions to top-line models; FY25 non-GAAP EPS raised, GAAP EPS lowered (tax rate to ~26%, mix effects) .
  • Q3 guide implies continued YoY growth with margin improvement; seasonality likely flattens Q4 sequentially .

Key Takeaways for Investors

  • Broad-based growth and AI-native momentum underpin beats; watch for sustained organic CC growth (6.2% implied in Q3 guide) as a key driver of multiple expansion .
  • Margin trajectory is improving via utilization and account discipline, but near-term gross margin faces acquisition and comp headwinds; non-GAAP EPS outlook raised despite GAAP EPS reduction (tax rate, adjustments) .
  • Raised FY25 revenue guidance and Q3 outlook highlight stabilizing demand; seasonality and dynamic macro suggest prudent expectations for Q4 sequential trends .
  • Strategic positioning strengthened by DIAL 3.0 and AWS Marketplace presence, enabling platform-based delivery and faster AI adoption — a potential differentiator in services pricing and win rates .
  • Share repurchases lowered diluted share count, supporting EPS; liquidity remains solid (> $1.0B cash), though DSO elevated with fixed-fee milestones .
  • CEO transition appears orderly with continuity in AI-native strategy; expect further commercialization and partner-led go-to-market leverage .
  • Near-term trade: lean long on AI momentum and sequential growth into Q3; hedge for Q4 seasonality and macro variance; monitor pricing improvements, gross margin mix, and any FX shifts .

Notes on Non-GAAP Adjustments

  • Non-GAAP excludes stock-based comp, acquisition-related costs (including amortization), humanitarian support in Ukraine, cost optimization programs, FX impacts, and tax effects; reconciliations provided in exhibits .
  • Q2 guidance reconciles GAAP to non-GAAP Op margin and EPS with detailed adjustment items (e.g., SBC ~3.2% of revenue; amortization ~1.3%; tax effects) .

Additional Relevant Q2 Press Releases

  • EPAM Releases DIAL 3.0 (open-source GenAI platform); strengthens enterprise AI orchestration and agentic workflows .
  • DIAL now available in AWS Marketplace AI Agents & Tools, simplifying procurement and deployment of agentic solutions .

Disclosures

  • All figures and statements are sourced from EPAM’s Q2 2025 8-K, press release, and earnings call transcript, plus prior-quarter documents as cited. Non-GAAP and guidance reconciliations are from EPAM exhibits .
  • Estimates comparisons are based on S&P Global consensus data via GetEstimates (see asterisks above).