Epam Systems ((EPAM)) has held its Q2 earnings call. Read on for the main highlights of the call.
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EPAM Systems’ latest earnings call showcased a largely positive sentiment, driven by the company’s strong financial performance and strategic positioning. Despite some challenges in gross margin and cash flow, EPAM’s significant revenue growth and robust performance across all verticals and geographic regions highlight its well-positioned stance for future growth, particularly in AI-driven transformation.
Double-Digit Revenue Growth
EPAM Systems reported impressive double-digit year-over-year revenue growth, with Q2 revenue reaching $1.353 billion, marking an 18% increase. The company saw organic growth accelerate from low single digits to mid-single digits, underscoring its strong market presence and effective growth strategies.
Strong Performance Across Verticals
All six of EPAM’s verticals demonstrated year-over-year and sequential growth. Notably, financial services, software and hi-tech, and emerging verticals stood out as significant contributors to this success, reflecting the company’s diverse and resilient business model.
Geographic Growth
EPAM achieved strong year-over-year growth across all three regions: the Americas, EMEA, and APAC. The EMEA region led with the highest organic growth at 7.6% in constant currency, highlighting the company’s effective global expansion strategies.
AI-Driven Transformation
EPAM’s focus on AI-driven transformation is yielding positive results, with AI native revenue growing at double digits sequentially. This growth is fueled by high AI adoption and the company’s advanced AI capabilities, platforms, tools, and accelerators.
Client Engagement and New Wins
The company’s new client success program, targeting the top 100 clients, has led to significant wins in digital product and platform transformation, cloud, and AI native services. This initiative underscores EPAM’s commitment to strengthening client relationships and expanding its service offerings.
Gross Margin Decline
Despite the positive revenue growth, EPAM experienced a decline in its gross margin. The GAAP gross margin decreased to 28.8% from 29.3% year-over-year, with non-GAAP gross margin also impacted by higher variable compensation and recent acquisitions.
Cash Flow Reduction
EPAM reported a reduction in cash flow from operations, which decreased to $53 million from $57 million in the same quarter last year. Free cash flow also saw a decline, indicating challenges in cash management amidst growth.
Seasonality Impact on Future Guidance
EPAM anticipates a flat to modest sequential revenue decline in Q4 due to seasonal impacts such as holidays and vacations. This expectation highlights the company’s awareness of external factors affecting its financial outlook.
Forward-Looking Guidance
EPAM’s forward-looking guidance remains optimistic, with expectations of revenue growth between 13% and 15% for the full year, supported by inorganic contributions from recent acquisitions. The company projects Q3 2025 revenue between $1.365 billion and $1.380 billion, with a year-over-year growth of 17.6% at the midpoint. EPAM is committed to improving profitability through better utilization rates and high-quality engagements, while acknowledging the seasonal impacts on its Q4 outlook.
In summary, EPAM Systems’ earnings call reflected a positive sentiment, driven by strong financial performance and strategic growth initiatives. Despite challenges in gross margin and cash flow, the company’s robust revenue growth, effective client engagement, and focus on AI-driven transformation position it well for future success.