EPAM

EPAM Systems, Inc.

Next est. report 2026-11-05 · BMO

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Overview

EPAM Systems, Inc. is a global provider of digital platform engineering and software development solutions. The company offers extensive services, including eng

EPAM Systems, Inc. is a global provider of digital platform engineering and software development solutions. The company offers extensive services, including engineering, infrastructure management, and consulting, with a significant and growing focus on AI-native solutions. EPAM serves a diverse global clientele across financial services, life sciences, and high-tech industries. AI-native revenues currently represent over 11% of its business, driving strategic transformation.

Search Keywords Brand Product

AI/Run platform
DIAL platform
MF Lens
Agentic managed services
AI native software engineering
AI transformation services
digital engineering solutions
software development
AI-led modernization
cloud migration
cybersecurity services
data engineering
customer experience solutions
financial services technology
life sciences technology
energy sector IT
retail technology
business information media solutions
IT consulting

Search Keywords Event Phrases

EPAM Q2 2026 earnings
EPAM Investor Day

Search Keywords Policy Regulatory

FINMA compliance
AI regulation impact

What They Do (Plain English & Analogies): EPAM Systems is like a highly skilled digital construction company. Instead of building physical structures, they build and improve the software and digital systems that businesses rely on. They help companies design, build, test, and maintain everything from complex online platforms and mobile apps to the underlying technology infrastructure. They also act as expert consultants, guiding businesses on how to use technology, especially advanced tools like Artificial Intelligence (AI), to become more efficient, solve problems, and create new digital experiences for their customers. For example, they can help a bank modernize its old computer systems using AI, or assist a beverage company in organizing all its data to make smarter business decisions.
Very Brief History: EPAM Systems, Inc. was established in 1993 and has its headquarters in Newtown, Pennsylvania. Over the years, it has grown to become a leading global provider of digital platform engineering and software development solutions, continuously expanding its service portfolio to include cutting-edge technologies like AI and specialized consulting.
"Street Stereotype": EPAM is generally perceived as a strong, engineering-focused IT services company known for its technical excellence and delivery capabilities. However, the 'street' is currently focused on its ability to adapt its go-to-market strategy in North America, where a shift in client spending from traditional task-based services to AI-led modernization has created a 'growth gap.' There's also a perception that, like other 'people factories' in the IT services sector, EPAM needs to effectively leverage AI to drive internal efficiencies and help clients do the same, moving beyond just fulfilling engineering demand to providing business-outcome-driven solutions.
Subsidiaries On Linked In*: {"subsidiaries":[]}
Customer Sectors & Example Clients: EPAM serves a diverse global clientele across various sectors, including Financial Services, Life Sciences & Healthcare, Consumer Goods, Retail & Travel, Software & Hi-Tech, Business Information & Media, and Emerging Verticals like Energy and Manufacturing. While specific client names are not provided in the transcript, examples of their work include modernizing mainframe systems for a leading financial services wealth management firm, building a unified data platform for a multinational beverage manufacturing company, migrating over 1,000 workloads to AWS for a global energy commodity company, and migrating a Swiss private bank's entire IT landscape to Microsoft Azure.
New Customers / Segments They'Re Targeting: EPAM is actively targeting new areas within its existing client base, specifically focusing on AI-led modernization, agentic managed services, and application maintenance. These are areas where EPAM hasn't historically been a primary provider, allowing them to expand their footprint and impact. They are also expanding their offerings within the Energy vertical to include midstream, downstream, and data center work, moving beyond their historical focus on upstream operations.
Supply Chain And Sourcing Geographies: EPAM's supply chain primarily involves sourcing talent for its global delivery centers. The company has a significant workforce in India, and also maintains substantial operations in countries like Poland, Hungary, Mexico, and Colombia. These locations serve as key delivery hubs for their software engineering and digital transformation services.
Sales Geographies And Expansion Plans: EPAM currently sells its services across three main geographic regions: the Americas, which accounted for 57% of its Q2 revenues; EMEA (Europe, Middle East, and Africa), representing 41% of Q2 revenues and demonstrating strong double-digit growth; and APAC (Asia-Pacific), making up 2% of Q2 revenues. The company is actively focusing on a 'multi-quarter commercial transformation' to improve its go-to-market motions and sales capabilities, particularly in North America, where it aims to restart growth.
How Key Themes May Help/Hurt: EPAM is directly impacted by the 'BS Jobs '26: Billable Hours Pyramid' theme. The company is actively positioning itself as an 'AI accelerator' and a partner for 'AI transformation services,' which aligns with the theme's bull case of AI driving productivity gains and efficiency. Their focus on 'AI native software engineering' and 'AI-led modernization' helps clients achieve savings through AI, which can then be reinvested into new AI-driven services. The expansion into 'agentic managed services' is a direct play on automating tasks that might be considered 'BS jobs' within client organizations. However, the theme also presents challenges. EPAM is experiencing a 'growth gap' in North America as clients shift spending away from traditional task-based services (like manual testing and front-end engineering) towards AI-led modernization, a direct manifestation of AI replacing certain low-value, task-based roles. The 'slow pace of technology adoption' and potential 'reluctance of management to cut jobs' or reallocate budgets could also hurt if clients delay AI-driven transformations, impacting EPAM's revenue ramp-up from new AI-native services.

3 Main Long-Term Bull Details

EPAM's strong leadership in AI transformation services and 'AI native software engineering,' backed by significant investment in training and strategic partnerships with leading AI providers like OpenAI, Google, and Anthropic, positions it as a key enabler for enterprises navigating the AI era.
The company's ability to expand its footprint and impact by competing for portions of existing clients' business where it hasn't been historically positioned, particularly in AI-led managed services and modernization, offers a substantial avenue for complementary growth beyond its core business.
Proven success in driving double-digit growth in specific verticals like Financial Services and Life Sciences & Healthcare through AI-led deployments, mainframe modernization, and data platform initiatives demonstrates a scalable model for applying its AI capabilities across other sectors.

3 Main Long-Term Bear Details

A significant 'growth gap' in North America, EPAM's largest region, is driven by a faster-than-expected shift in client buying priorities away from traditional task-based services towards AI-led modernization, coupled with a lagging go-to-market strategy in the region.
The 'noisy and volatile' nature of the AI adoption cycle, characterized by programs starting, stopping, and converting, leads to uneven revenue contribution and longer procurement cycles for large AI-led deals, pushing meaningful revenue contribution from these opportunities into 2027.
Reliance on clients realizing savings from AI to fund new AI-native services, which may appear slower than expected, creates a timing mismatch and impacts the immediate ramp-up of EPAM's AI-driven revenue, despite strong AI native revenue growth.

Competitors And Differentiation: While specific competitors are not named in the transcript, EPAM operates in the highly competitive IT services and digital transformation market. Its differentiation strategy centers on its 'AI native software engineering' approach, which involves rebuilding how software is engineered from the inside out, moving beyond traditional software development lifecycles. EPAM leverages advanced proprietary tools like AI/Run, DIAL, and MF Lens, and has established strategic partnerships with leading AI providers such including OpenAI (as an advanced partner with Path to Elite status), Google (Gemini Certified Partner Specialist program and GCP relationship), and Anthropic (among the top 5 globally certified partners). This focus on specialized AI talent and capabilities, combined with deep domain knowledge, allows them to address complex client challenges and expand into new service areas like agentic managed services.
Recent Performance & What The Market'S Focused On: EPAM delivered strong Q2 2026 results, outperforming the high end of its guidance for organic constant currency revenue growth, profitability, and EPS. Revenue reached $1.415 billion, growing 4.5% year-over-year (3.4% organic constant currency). AI native revenues accelerated to over $160 million in the quarter, now representing over 11% of the business and marking the sixth consecutive quarter of double-digit sequential growth. Gross margins and non-GAAP income from operations both improved year-over-year. Financial Services and Life Sciences & Healthcare were the fastest-growing verticals, and EMEA continued to lead growth with strong double-digit performance. However, North America delivered significantly lower growth, and Software & Hi-Tech and Business Information & Media declined. The company lowered its full-year 2026 revenue guidance to a range of 3.2% to 4.2% but raised its non-GAAP income from operations guidance to 15.5% to 16%. Cash flow from operations was negative in Q2 due to higher variable compensation payments and an increase in DSO. The market is primarily focused on the slowdown in North America and the Software & Hi-Tech vertical, and the company's efforts to address its go-to-market strategy in the region. Investors are also tracking the timing and conversion of large AI-led deals, which are now expected to contribute meaningfully in early 2027 rather than late 2026. The durability of margins despite slower revenue growth and the company's ability to achieve its $600 million AI native revenue target for 2026 are also key areas of market attention.

Revenue Segments And Estimated Mix: Americas — Mix: 57%; Source: Q2 2026 earnings transcript; Trend: Grew 0.5% year-over-year
EMEA — Mix: 41%; Source: Q2 2026 earnings transcript; Trend: Increased 10.9% year-over-year (9.4% in constant currency)
APAC — Mix: 2%; Source: Q2 2026 earnings transcript; Trend: Decreased 0.3% year-over-year
Financial Services — Mix: n/m; Source: Q2 2026 earnings transcript; Trend: Grew 11.5% year-over-year, fastest-growing vertical
Life Sciences & Healthcare — Mix: n/m; Source: Q2 2026 earnings transcript; Trend: Grew 8% year-over-year, second fastest-growing vertical
Consumer Goods, Retail & Travel — Mix: n/m; Source: Q2 2026 earnings transcript; Trend: Grew 2.3% year-over-year
Emerging Verticals (Energy, Manufacturing) — Mix: n/m; Source: Q2 2026 earnings transcript; Trend: Grew 4.9% year-over-year
Software & Hi-Tech — Mix: n/m; Source: Q2 2026 earnings transcript; Trend: Declined 1.3% year-over-year
Business Information & Media — Mix: n/m; Source: Q2 2026 earnings transcript; Trend: Decreased 2.1% year-over-year
AI Native Revenues — Mix: Over 11%; Source: Q2 2026 earnings transcript; Trend: Reached over $160 million in Q2, sixth consecutive quarter of sequential double-digit growth
Product Brands: AI/Run
DIAL
MF Lens

Bull / Bear Details

EPAM is transforming into a global leader in AI transformation services, leveraging its deep engineering expertise and strategic partnerships to capitalize on t

Thesis

EPAM is transforming into a global leader in AI transformation services, leveraging its deep engineering expertise and strategic partnerships to capitalize on the enterprise shift towards AI-led modernization. While facing near-term growth challenges in North America due to rapid demand shifts, its accelerating AI-native revenues and strong profitability demonstrate a compelling long-term opportunity as clients seek AI-driven efficiencies. Updated: 2026-08-21.

Bull case

EPAM's pure AI native revenues are accelerating, reaching over $160 million in Q2 2026 and representing over 11% of the business, with a clear path to $600 million for the full year. The company is building a "full stack AI native organization" through extensive partnerships and certifications (e.g., OpenAI, Google, Anthropic), positioning it as a key enabler for clients seeking AI-driven efficiencies.
EPAM is executing a multi-year strategy to lead in AI native software engineering, moving clients beyond traditional SDLC into integrated agentic enterprise harnesses and data modernization. This strategic pivot addresses the market's evolving demand for AI-driven solutions, allowing EPAM to expand its footprint into new areas like agentic managed services and compete for larger, multi-year deals.
Despite revenue growth challenges, EPAM demonstrated improved profitability in Q2 2026, with non-GAAP gross margins exceeding expectations and non-GAAP income from operations growing 14.7% year-over-year. Strong double-digit growth in EMEA and key verticals like Financial Services and Life Sciences & Healthcare validate the company's ability to drive growth and profitability in regions where its go-to-market strategy is effective.

Bear case

EPAM faces significant near-term headwinds in North America, where growth is "not fast enough" and expected to remain slow. This is driven by a rapid client shift from task-based services to AI-led modernization, creating a growth gap, and acknowledged deficiencies in EPAM's regional go-to-market strategy, which requires a multi-quarter transformation.
While EPAM is developing a promising pipeline of large AI-led deals, meaningful revenue contribution has been pushed out to H1 2027 from H2 2026, indicating longer sales cycles and potential execution risks. Additionally, Q2 2026 saw negative free cash flow and increased Days Sales Outstanding (DSO), leading to a lowered full-year FCF conversion rate, raising concerns about working capital management.
Clients are reprioritizing budgets towards AI, often funding new initiatives from savings, which are realizing slower than expected, impacting EPAM's traditional service lines. The macro environment remains volatile with prolonged decision-making, and non-AI discretionary spending is muted, creating an uneven demand landscape and potential for further project ramp-downs in non-AI areas.

Bull / Bear Case

Bear Case: EPAM faces significant near-term headwinds in North America, its largest region (57% of Q2 revenues), where growth is "not fast enough" and expected to remain very slow for the remainder of the year. This is primarily driven by a rapid client shift from traditional task-based services to AI-led modernization, creating a growth gap, coupled with acknowledged deficiencies in EPAM's regional go-to-market strategy that requires a multi-quarter transformation. While a promising pipeline of large AI-led deals is developing, meaningful revenue contribution has been pushed out to H1 2027 from H2 2026, indicating longer sales cycles and potential execution risks. Additionally, Q2 2026 saw negative free cash flow and increased Days Sales Outstanding (DSO) to 82 days, leading to a lowered full-year FCF conversion rate of around 70%, raising concerns about working capital management. The macro environment remains volatile with prolonged decision-making, and non-AI discretionary spending is muted, creating an uneven demand landscape and potential for further project ramp-downs in non-AI areas.
Bull Case: EPAM's pure AI native revenues are accelerating, reaching over $160 million in Q2 2026 and representing over 11% of the business, with a clear path to $600 million for the full year. The company is strategically building a "full stack AI native organization" through extensive partnerships and certifications with key players like OpenAI, Google, and Anthropic, positioning it as a crucial enabler for clients seeking AI-driven efficiencies. This strategic pivot allows EPAM to expand its footprint into new, high-growth areas like agentic managed services and compete for larger, multi-year deals. Despite some revenue growth challenges, EPAM demonstrated improved profitability in Q2 2026, with non-GAAP gross margins exceeding expectations and non-GAAP income from operations growing 14.7% year-over-year. Strong double-digit growth in EMEA and key verticals like Financial Services and Life Sciences & Healthcare further validate the company's ability to drive growth and profitability where its go-to-market strategy is effective.
More Compelling & Why: Given the current valuation, the Bull Case is more compelling. EPAM's TTM P/E ratio of approximately 13.19 to 14.66 is significantly below its 10-year median of 41.30, indicating the market has likely overcorrected for the near-term headwinds. The strongest argument for the bull case is EPAM's accelerating AI-native revenue growth and extensive strategic partnerships, positioning it for long-term leadership in the expanding AI transformation market. My view would flip if AI-native revenue growth significantly decelerates or if the North American go-to-market transformation fails to show tangible sequential improvement in revenue growth over the next two quarters.

Key Factors5 rows

Key Factor	Why It Matters	What To Watch	What It Signals	Where/How To Track	Free Alt Data	Paid Alt Data
North America Revenue Growth and Go-to-Market Transformation Progress	North America is EPAM's largest revenue contributor. Improvement in its growth rate, driven by the ongoing commercial transformation, is crucial for overall company performance and signals successful adaptation to evolving client demand for AI-led services.	Q3 2026 North America revenue growth rate. Management commentary on the effectiveness of the multi-quarter commercial transformation, new sales force build-out, and pipeline conversion in the region.	Sequential improvement in North America revenue growth (e.g., exceeding 1-2% year-over-year) or strong positive commentary on sales transformation progress is a bullish signal. Continued slow growth or further declines indicates a bearish trend.	EPAM's Q3 2026 earnings release and conference call (late October/early November 2026). Company investor presentations and SEC filings (10-Q).	LinkedIn: Monitor EPAM's job postings in North America for sales, business development, and consulting roles. Industry news and reports on IT services demand and spending trends in North America.	Revelio Labs: EPAM headcount changes in North America, specifically focusing on sales and business development roles. Thinknum: EPAM job postings for 'Sales Director North America' or 'Business Development Manager EPAM' to track hiring trends.
Progress on AI Certifications and Strategic Partnerships	Aggressive pursuit of AI certifications with key partners (OpenAI, Google, Anthropic) demonstrates EPAM's commitment to building a highly skilled AI-native workforce, crucial for delivering complex AI solutions and capturing market share.	Q3 2026 updates on the number of certified professionals for OpenAI, Google Gemini, and Anthropic, specifically against stated targets (e.g., 5,000 Google Gemini by Q3).	Meeting or exceeding the Q3 certification targets (e.g., 5,000 Google Gemini certified specialists) and continued strong progress towards year-end goals (e.g., 10,000 Claude-certified architects) is a bullish signal. Delays or failure to meet these targets would be a bearish signal.	EPAM's Q3 2026 earnings release and conference call (late October/early November 2026). Company press releases, investor presentations, and official blog posts regarding talent development.	LinkedIn: Search for 'EPAM OpenAI certified,' 'EPAM Google Gemini certified,' or 'EPAM Anthropic certified' profiles to gauge internal talent development. Company blog posts or press releases on training programs and academies.	Revelio Labs: Employee skill data for EPAM, tracking the growth in specific AI certifications over time. Lightcast/Burning Glass: Demand for specific AI skills in the broader IT services market to contextualize EPAM's efforts.
AI Native Revenue Growth and 2026 Target Achievement	This metric directly reflects EPAM's success in pivoting to higher-value AI services, validating its strategic transformation and ability to capitalize on the AI market. Sustained growth indicates strong demand and execution, potentially leading to a positive re-rating.	Q3 2026 AI native revenue figures. Progress towards the stated goal of $600 million in AI native revenues for the full year 2026. Look for continued double-digit sequential growth.	Continued double-digit sequential growth in AI native revenue and being on track to meet or exceed the $600 million 2026 target is a bullish signal. Deceleration in growth or risk to the annual target is a bearish signal.	EPAM's Q3 2026 earnings release and conference call, typically in late October or early November 2026. Company investor presentations and SEC filings (10-Q).	Google Trends: Search volume for 'EPAM AI services,' 'EPAM generative AI,' or specific EPAM AI product names like 'AI/Run' or 'MF Lens.' Monitor industry news for EPAM's AI project announcements.	Thinknum: Job postings for 'AI Engineer EPAM' or 'Generative AI Consultant EPAM' to track growth in AI-related roles. Similarweb: Web traffic to epam.com/ai-solutions for engagement trends.
Conversion of Large AI-led Deals from Pipeline	The successful conversion of these multi-year, AI-led opportunities (Agentic managed services, application maintenance) with existing clients signifies EPAM's ability to expand its market footprint into new, higher-value segments and secure future revenue streams.	Announcements of specific large AI-led contract signings in Q3 2026. Details on Total Contract Value (TCV) and any updated timelines for meaningful revenue contribution (currently expected H1 2027).	Announcement of one or more large AI-led deals signed in Q3 2026, especially if TCV is substantial (e.g., >$50 million each) or if revenue contribution is pulled forward from H1 2027, is a bullish signal. Lack of updates or further delays in closing these deals is a bearish signal.	EPAM's press releases, SEC filings (8-K for material contracts), and Q3 2026 earnings call (late October/early November 2026).	Industry news wires (e.g., Reuters, Bloomberg) for large contract announcements involving EPAM. EPAM's official company blog or LinkedIn page for client success stories or partnership updates.	Bloomberg Terminal/Refinitiv Eikon: Track news sentiment for EPAM and search for contract award databases. FactSet/S&P Capital IQ: Analyst reports for updates on pipeline conversion and deal flow.
Days Sales Outstanding (DSO) and Free Cash Flow Conversion Rate	DSO and free cash flow conversion are key indicators of operational efficiency and cash management. Improvement in these metrics signals better working capital management and stronger financial health, supporting investments in AI capabilities.	Q3 2026 DSO figures (compared to 82 days in Q2 2026) and the free cash flow conversion rate. Management commentary on client payment behavior and efforts to improve working capital.	DSO decreasing from 82 days (e.g., below 80 days) and free cash flow conversion rate improving significantly towards the 70% full-year target (or exceeding it) in Q3 is a bullish signal. A further increase in DSO or continued weak cash flow generation is a bearish signal.	EPAM's Q3 2026 earnings release and conference call (late October/early November 2026). Company's 10-Q filing for detailed financial statements.	Not many direct free alternative data sources for intra-quarter DSO or FCF. Monitor macroeconomic indicators for client liquidity and payment cycles, such as corporate bond spreads.	Credit agencies (e.g., S&P, Moody's): EPAM's credit ratings and outlook for insights into financial stability. FactSet/S&P Capital IQ: Consensus estimates for cash flow and any revisions based on company updates.

Key Reported Metrics, Reratings Triggers & Results3 rows

This vertical was EPAM's fastest-growing segment in the last quarter, driven by AI-led deployments. Its continued strong performance is vital for offsetting wea

Upcoming print · 2026-11-05

Key reported metrics
Metric	Last period	Why it matters
Financial Services Revenue Growth	11.5%	This vertical was EPAM's fastest-growing segment in the last quarter, driven by AI-led deployments. Its continued strong performance is vital for offsetting weaknesses in other segments and validating EPAM's AI-driven strategy.
North America Revenue Growth	0.5%	North America is EPAM's largest geographic segment, and its underperformance is a key concern. The growth rate here will indicate the success of the ongoing commercial transformation and the company's ability to adapt to shifting client demands in this critical market.
Organic Constant Currency Revenue Growth	3.4%	This metric reflects EPAM's core business performance, excluding currency fluctuations and acquisitions. It is crucial for assessing underlying demand and the effectiveness of strategic initiatives, especially given the recently lowered full-year guidance.

Key Questions

Will EPAM's multi-quarter commercial transformation in North America effectively address the identified go-to-market capability gap and lead to an acceleration

Will EPAM's multi-quarter commercial transformation in North America effectively address the identified go-to-market capability gap and lead to an acceleration of revenue growth in the region in the next quarter, or will the growth gap persist?

Question 2: Can EPAM's AI native revenues continue their double-digit sequential growth and increase their share of the overall business rapidly enough to materially offset declines in traditional task-based services and lift the company's total revenue growth rate in the upcoming quarter?
Question 3: Will EPAM demonstrate a significant improvement in free cash flow generation and a reduction in Days Sales Outstanding (DSO) in the third quarter of 2026, indicating a recovery towards its typical conversion rates and mitigating concerns about working capital management?

Earnings Transcript SummaryTable

2026-08-06 · 2026Q2 Earnings Call

3 Things Management Is Most Focused On	Call Takeaway & Tone	Prior Quarter'S Y/Y Growth By Segment	3 Things Analysts Most Pressed On (And Mgmt Responses)	Revenue Segments
3 Things Management Is Most Focused On1. Leading in AI native software engineering: Management is focused on rebuilding software engineering from the inside out, taking clients beyond traditional SDLC into integrated agentic enterprise harnesses, real-time data modernization, cyber resilience, and token cost engineering, leveraging advanced tools like AI/Run, DIAL, and MF Lens. 2. Turning EPAM into a full stack AI native organization: This involves accelerating and expanding strategic partnerships with companies like OpenAI, Google, and Anthropic, with significant commitments to certify thousands of specialists and extend capabilities into security, managed services, and industry-specific solutions. 3. Go-to-market transformation, especially in North America: Management is implementing a multi-quarter commercial transformation to standardize client prioritization, improve new logo pipeline management, and invest in sales capabilities and training to address growth gaps in the region.	Call Takeaway & ToneThe overall takeaway of the call is that EPAM delivered strong second-quarter results, exceeding its guidance for revenue, profitability, and EPS, driven by continued momentum in AI-native revenues. However, the company lowered its full-year revenue guidance due to a faster-than-anticipated shift in client spending away from traditional services towards AI-led modernization, particularly impacting North America and the Software & Hi-Tech vertical. Management is actively addressing these challenges through a significant commercial transformation and strategic AI partnerships. The tone was mixed to cautious, with management expressing confidence in their long-term strategy and AI momentum but being very 'direct' and 'clear-eyed' about the current growth gaps and the expectation of an 'uneven' second half of the year, especially in North America.	Prior Quarter'S Y/Y Growth By SegmentFinancial Services: 11.5% year-over-year growth; Software and Hi-Tech: 10.9% year-over-year growth; Consumer goods, retail and travel: 7.2% year-over-year growth; Life Sciences & Healthcare: 5.9% year-over-year growth; Business Information & Media: declined 0.7% year-over-year; Emerging verticals: 6.8% year-over-year growth.	3 Things Analysts Most Pressed On (And Mgmt Responses)1. Fiscal '26 guide, headwinds, and North American weakness: Analysts questioned the primary headwinds in the reduced outlook, particularly the slowdown in Business Information & Media and Software & Hi-Tech, and the idiosyncratic pressures in North America, asking what specific changes are being made to restart growth. Management responded that clients are reprioritizing AI budgets away from task-based services (like manual testing, UX, JavaScript front-end engineering) towards AI-led modernization, creating a growth gap as this shift is happening faster than replacement work ramps up. They acknowledged that their North American go-to-market has not been operating at the necessary level and are implementing a multi-quarter commercial transformation, building domain and consulting capabilities, and expanding the sales force in the region. 2. Free cash flow and working capital headwind: Analysts asked about the moving pieces behind the free cash flow, particularly the working capital headwind, and management's confidence in H2 free cash flow improvement. Management explained that Q2 cash flow was negatively impacted by clients making expected payments in early Q3 instead of late Q2 due to additional review. They noted an expected higher DSO throughout the year but expressed high confidence in returning to an 80%-90% free cash flow conversion rate beyond 2026. 3. Margin durability: Analysts inquired about margin durability, the impact of foreign currency and cost optimization, and the ability to maintain margin levels into 2027 with low single-digit organic growth. Management stated that foreign exchange has not been a significant benefit and has been somewhat negative due to currency appreciation in certain delivery centers. They attributed improved gross margins to price increases, better fixed-fee profitability, and ongoing cost efficiency efforts, expecting gross margins to remain above 32% for Q3 and Q4 2026.	Revenue SegmentsFinancial Services: 11.5% year-over-year growth; Consumer goods, retail and travel: 2.3% year-over-year growth; Life Sciences & Healthcare: 8% year-over-year growth; Software and Hi-Tech: declined 1.3% year-over-year; Business Information & Media: decreased 2.1% year-over-year; Emerging verticals: 4.9% year-over-year growth.

Transcript TidbitsTable

2026-08-06

About Expanding Eligible Market	About Competition	About The Broader Industry	Where Things Are Headed	Updates On Theme	Bullish-Leaning Quotes (Short)	Bearish-Leaning Quotes (Short)	Hiring
About Expanding Eligible MarketEPAM is expanding its book of business in Energy into midstream, downstream, and data center work, moving beyond its historical focus on upstream. The company is also using its AI native capabilities to compete for portions of existing clients' business for which EPAM hasn't been historically positioned, thereby expanding its footprint and impact. These AI-led opportunities are exclusively with existing clients and are for Agentic managed services and application maintenance.	About CompetitionEPAM has not seen demand migrate to its peers, with some spend shifting to tokens, infrastructure, or GPUs, which clients are often buying directly. The company believes it is not losing to competitors. While agentic solutions can produce a more cost-effective offering, which might appear as a price haircut to competitors already delivering managed services, for EPAM, it represents an incremental opportunity.	About The Broader IndustryAI is transforming everything and adding more complexity across the enterprise. The gap between AI experimentation, adoption, and optimization presents an opportunity for EPAM. The industry has been noisy and volatile, reflecting the disruptive nature of AI and technology. Client sentiment and budget behavior have not materially improved or worsened, with prolonged decision-making persisting due to the war in the Middle East. There is a genuine shift in what North American clients are buying, moving away from task-based services towards AI-led modernization. The industry overall is still relatively early in the process of AI adoption within complex enterprises.	Where Things Are HeadedEPAM is executing a multi-quarter commercial transformation, standardizing how it prioritizes and pursues largest accounts, building more disciplined new logo pipeline management, and investing in sales capabilities and training across the organization, particularly in North America. The company expects more meaningful revenue contribution from new big deals starting in the first half of 2027, rather than the second half of 2026. EPAM remains confident in its long-term strategy to become a global leader in AI transformation services. The second half of the year is expected to be uneven, especially in North America. The company aims to be the source and solution for partners to solve their needs around Forward Deployed Engineers (FDEs).	Updates On ThemeThe	Bullish-Leaning Quotes (Short)“Revenue growth in the second quarter came in the high end of our outlook range with continued improvement in profitability and strong adjusted earnings per share.” “Our pure AI native revenues accelerated, reaching more than $160 million in the quarter.” “We remain confident in our long-term strategy to become a global leader in AI transformation services, serving as a trusted AI accelerator and a partner for our clients.”	Bearish-Leaning Quotes (Short)“North America is not growing fast enough. We now expect it to operate below our expectations in the second half.” “This transition is happening faster than the replacement work is ramping, creating a growth gap that needs to be filled even faster.” “The environment hasn't materially improved nor worsened, and we continue to see prolonged decision making as the war in the Middle East persists.”	HiringEPAM is investing in sales capabilities and training across the organization, specifically building out and hiring a bigger sales force in North America. The company ended Q2 with over 56,650 delivery professionals, a 1.5% increase year-over-year, and a total headcount of over 62,850 employees. EPAM has a first-year commitment to certify more than 5,000 OpenAI consultants and train over 10,000 EPAM specialists. They have certified over 2,000 under the Google Gemini Certified Partner Specialist program (towards a Q3 target of 5,000) and over 5,700 Claude-certified engineers with Anthropic (ahead of a Q3 milestone of 5,000), aiming for more than 10,000 Claude-certified architects by year-end. Over half of their delivery organization has completed Anthropic Academic coursework. AI accelerates demand for specialized talent and new ranges of capability.

Upcoming Events2 rows

Catalyst ID	Estimated Timing	Estimated Date Start	Estimated Date End	Catalyst	Why It Matters	Ticker Or Theme Specific	Transcript Date	Source Type
EPAM_112cd649	by the year-end	2026-10-01	2026-12-31	Achieving the target of certifying more than 10,000 Anthropic Claude-certified architects.	This demonstrates EPAM's commitment to scaling its AI expertise and partnerships, enhancing its ability to deliver AI-driven solutions and capture market share in the rapidly evolving AI services landscape.	Ticker	2026-08-06	earnings_transcript
EPAM_58bd6f5e	by Q3 target	2026-07-01	2026-09-30	Achieving the target of certifying 5,000 Google Gemini Certified Partner Specialists.	This indicates EPAM's progress in building AI capabilities and strengthening its partnership with Google, which is crucial for its AI-native strategy and competitive positioning.	Ticker	2026-08-06	earnings_transcript