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GRID DYNAMICS HOLDINGS, INC. (GDYN)·Q3 2025 Earnings Summary

Executive Summary

  • Record revenue of $104.2M, a modest beat vs S&P Global consensus ($103.7M*); non-GAAP diluted EPS $0.09 was slightly below consensus ($0.093*). AI contributed >25% of organic revenue and grew 10% QoQ .
  • FY 2025 revenue outlook lowered to $410.7–$412.7M (from $415–$435M), primarily due to timing and client-specific items; Q4 revenue guided to $105–$107M and non-GAAP EBITDA to $13–$14M .
  • Board authorized a $50.0M share repurchase (~15% of cash), signaling confidence in long-term prospects and capital discipline .
  • Management targets at least 300 bps margin expansion over the next 12 months via pricing, mix, geographic optimization, and AI-first delivery (GAIN); stronger billable run-rate exiting 2025 sets up 2026 growth .

What Went Well and What Went Wrong

What Went Well

  • AI momentum: “AI revenue grew 10% sequentially and contributed to over 25% of our third quarter organic revenue” .
  • Capacity and productivity: “We added five times more billable engineers than we added in the second quarter… and grew average revenue per person by 4% sequentially” .
  • Partner ecosystem: Partner-influenced revenue exceeded 18%; expanding work with hyperscalers, Snowflake, Databricks, and NVIDIA (Omniverse) to drive pipeline and industrial digital twins .
  • Commercial wins with tangible ROI: A Vertex AI search deployment delivered a 3.33% uplift in revenue per search, generating >$600K in two weeks (50% traffic), with plans to expand across channels .

What Went Wrong

  • Margin compression YoY: GAAP gross margin fell to 33.3% (vs 37.4% in Q3’24) and non-GAAP EBITDA declined YoY to $12.7M (vs $14.8M), driven by FX headwinds, higher OpEx, and mix .
  • Retail softness: Retail, the largest vertical, declined sequentially due to a handful of large customers, while TMT and Finance offset with growth .
  • Slight EPS miss vs consensus: Non-GAAP EPS of $0.09 vs ~$0.093*; FX and cost timing were noted by CFO as headwinds .

Financial Results

Core P&L vs prior periods

MetricQ1 2025Q2 2025Q3 2025
Revenue ($USD Millions)$100.415 $101.095 $104.163
GAAP diluted EPS ($)$0.03 $0.06 $0.01
Non-GAAP diluted EPS ($)$0.11 $0.10 $0.09
GAAP Gross Margin (%)36.8% 34.1% 33.3%
Non-GAAP Gross Margin (%)37.4% 34.7% 33.8%
Non-GAAP EBITDA ($USD Millions)$14.6 $12.7 $12.7
Non-GAAP EBITDA Margin (%)14.5% 12.6% 12.2%

Actuals vs S&P Global consensus

MetricQ1 2025 EstimateQ1 2025 ActualQ2 2025 EstimateQ2 2025 ActualQ3 2025 EstimateQ3 2025 Actual
Revenue ($USD Millions)$98.355*$100.415 $101.323*$101.095 $103.703*$104.163
Primary EPS ($)$0.088*$0.11 $0.098*$0.10 $0.093*$0.09

Values retrieved from S&P Global.*

Vertical/Segment mix (sequential compare)

Vertical ($USD Thousands, % of Revenue)Q2 2025Q3 2025
Retail$29,557; 29.2% $28,951; 27.8%
Technology, Media & Telecom (TMT)$25,188; 24.9% $28,579; 27.4%
Finance$25,386; 25.1% $25,623; 24.6%
CPG/Manufacturing$10,604; 10.5% $10,912; 10.5%
Healthcare & Pharma$2,556; 2.5% $2,422; 2.3%
Other$7,804; 7.8% $7,676; 7.4%

KPIs

KPIQ2 2025Q3 2025
Total headcount5,013 4,971
Customer count194 186
Top-5 customer concentration37.5% 40.1%
Top-10 customer concentration57.3% 58.3%
Cash & equivalents ($USD Millions)$336.8 $338.6
Partner-influenced revenue17.9% >18%
AI as % of organic revenue23% (1H25) >25%

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Revenue ($USD Millions)Q4 2025N/A$105.0–$107.0 New
Non-GAAP EBITDA ($USD Millions)Q4 2025N/A$13.0–$14.0 New
Basic shares (Millions)Q4 2025N/A85–86 New
Diluted shares (Millions)Q4 2025N/A86–87 New
Revenue ($USD Millions)FY 2025$415–$435 $410.7–$412.7 Lowered
Share repurchase authorizationN/ANone$50.0M (no termination date) New

CFO characterized the FY outlook change as timing-related and client-specific (including two clients ~$25–$26M impact) rather than structural; some delayed ramps now improving into 2026 .

Earnings Call Themes & Trends

TopicQ1 2025 (Prior-2)Q2 2025 (Prior-1)Q3 2025 (Current)Trend
AI/technology initiatives (GAIN, agentic platforms)Scaling AI engagements; GridU training; agentic platforms in CPG/fintech Introduced GAIN; AI-first SDLC opening legacy modernization economics; faster POC cycles AI revenue +10% QoQ; >25% organic; pilots across major clients; three-horizon strategy including Physical AI Accelerating
Partnerships (hyperscalers, ISVs, NVIDIA)Robust hyperscaler traction; Google Next sponsorship Partner-influenced revenue 17.9%; deepening EU traction with Google Partner influence >18%; expanding badges/certs; ISV middleware; NVIDIA Omniverse digital twins Strengthening
Vertical trendsFinance strong; retail mixed; TMT flat YoY Finance doubled YoY; retail mixed; TMT up TMT up 13.5% QoQ/18.2% YoY; Retail down sequentially; Finance strong Mixed; diversification
Headcount/utilizationRecord billable headcount; internship pipeline Headcount up; investing ahead of demand; FX and cost timing affected margins Net billable adds at Q3 levels expected in Q4; overall headcount rationalized; ARPP up 4% QoQ Improving billable mix
Margin focusNon-GAAP EBITDA 14.5% in Q1 12.6% in Q2; FX headwinds Plan to expand margins ≥300 bps over 12 months via pricing/mix/geos/AI tools Pivot to expansion
Capital allocationN/AN/A$50M buyback; M&A remains priority New catalyst
Regulatory/LegalN/AN/ADMA compliance project (on-device processing) for tech client Emerging theme
Physical AI/RoboticsEarly mentionsPartnerships with robotics providers SmartRay weld inspection; expanding physical AI capabilities Building

Management Commentary

  • “Our third quarter revenue of $104.2 million was another all time high, fueled by AI demand. AI grew 10% on a sequential basis and contributed to over 25% of our third quarter organic revenue.” — CEO .
  • “We expect to improve our margins by at least 300 basis points… efficiency improvements with focus on higher margin geographies, enhanced pricing with AI, portfolio rebalancing, and embracing technologies with our AI-first initiatives.” — CEO .
  • “Partner influence revenue has grown to over 18% of total company revenue… expanding certifications and joint solutions with hyperscalers and ISVs; building NVIDIA-based industrial digital twins.” — SVP Partnerships .
  • “Non-GAAP EBITDA was $12.7M… FX fluctuations had a net impact of ~$0.6M QoQ and ~$1.3M YoY.” — CFO .
  • “We expect to end the year with a materially higher billable run rate, positioning us well for growth in 2026.” — CEO .

Q&A Highlights

  • 2026 growth setup: Management highlighted record billable headcount and multi-quarter AI programs with renewals starting in October, positioning for growth acceleration in 2026 .
  • Reconciling outlook changes: CFO cited timing of ramps, two client-specific impacts (~$25–$26M), and M&A assumptions at the high end of prior guide; one top-10 client is coming back strong .
  • Partner revenue trajectory: Long-term target cited at 25–30% of revenue; acquisitions initially dilute percentage but dollar growth is strong .
  • Buyback rationale: Signal of undervaluation and confidence; M&A remains a core capital priority; expect cash generation to replenish .
  • Margin expansion mechanics: Pricing improvements via ROI-led AI solutions (GAIN), geographic mix optimization (FX-sensitive EU), and internal AI tools driving Opex efficiency; goal is ≥300 bps by Q4’26 even in a flat macro .

Estimates Context

  • Q3 beat/miss: Revenue modestly beat ($104.163M vs $103.703M*), EPS slightly below ($0.09 vs $0.093*). Non-GAAP EBITDA $12.7M in line with company guidance .
  • Forward: Q4 revenue guide $105–$107M broadly in line with consensus ($106.43M*); FY revenue guide $410.7–$412.7M vs consensus ($411.62M*). The company does not guide EPS but consensus implies Q4 EPS ~$0.091* and FY EPS ~$0.395*; management aims for EBITDA margin improvement over the next 12 months .

Values retrieved from S&P Global.*

Where estimates may adjust:

  • Slight EPS miss with stronger revenue may prompt small downward tweaks to Q4/FY EPS, offset by expected margin expansion and buyback support .

Key Takeaways for Investors

  • Revenue momentum with AI-led demand and rising billable run-rate supports a constructive setup into 2026; pipeline quality and duration improved materially .
  • Guidance reset is timing/portfolio-driven rather than structural; Q4 guide is healthy and management flagged a returning top-10 client .
  • Margin expansion plan (≥300 bps over 12 months) is credible given pricing leverage from GAIN, mix/geography optimization, and internal AI tooling; monitor gross margin cadence and EBITDA conversion .
  • $50M buyback adds a tangible capital return catalyst while preserving M&A flexibility; signals confidence and potential EPS accretion .
  • Partner ecosystem deepening (hyperscalers/ISVs/NVIDIA) enhances go-to-market and accelerates industrial AI opportunities; watch partner-influenced revenue trajectory toward 25–30% over time .
  • Vertical mix is diversifying (TMT and Finance strength vs Retail softness), reducing historical cyclicality; track sequential trends in TMT/Finance through Q4 .
  • Near-term trading: modest revenue beat plus buyback may support shares; slight EPS miss and lowered FY revenue guide could temper reaction. Medium-term thesis rests on AI-first execution, margin lift, and 2026 growth inflection .

Additional Relevant Press Releases (Q3)

  • Launch of Temporal Agentic AI Platform to scale reliable agent orchestration and durable workflows for enterprise AI; strengthens platform capabilities and observability for production agentic systems .