EPAM Systems Stock Up as Q2 Earnings & Revenues Surpass Estimates

The company’s second-quarter revenues of $1.415 billion surpassed the Zacks Consensus Estimate by 0.52% and increased 4.5% year over year. On an organic constant-currency basis, revenues grew 3.4% year over year.

Traction in Financial Services Drives EPAM’s Q2 Growth

EPAM Systems’ year-over-year revenue growth was driven by strong performance in Financial Services and Life Sciences & Healthcare, while Software & Hi-Tech and Business Information & Media remained weak. Financial Services revenues were $366.2 million, accounting for 25.9% of total revenues and increasing 11.5% year over year. Life Sciences & Healthcare revenues were $169.1 million, or 12% of total revenues, up 8% year over year.

Revenues from Consumer Goods, Retail & Travel were $274.3 million, representing 19.4% of total revenues and increasing 2.3% year over year. Emerging Verticals revenues were $236.5 million, or 16.6% of total revenues, up 4.9% year over year. Meanwhile, Software & Hi-Tech revenues declined 1.3% year over year to $202 million, while Business Information & Media revenues fell 2.1% to $166.7 million.

EMEA Drives EPAM Systems’ Geographic Revenue Growth

Geographically, Americas revenues were $805.4 million, up 0.5% year over year, while EMEA revenues increased 10.9% to $582.3 million. APAC revenues declined 0.3% year over year to $27.1 million.

Management attributed the lower revenue outlook primarily to slower growth in North America and project ramp-downs in Software & Hi-Tech. The company said North American clients are shifting spending away from more traditional services toward AI-led modernization, creating a gap as replacement work ramps up. EPAM expects several large AI-related opportunities to contribute more meaningfully beginning in the first half of 2027, rather than in the second half of 2026.

EPAM Expands Margins as AI-Native Revenues Accelerate

EPAM’s non-GAAP gross profit increased to $452.9 million from $407.7 million in the year-ago quarter, while the non-GAAP gross margin expanded 190 basis points to 32%. Non-GAAP operating income increased 14.7% year over year to $232.7 million, with the operating margin expanding to 16.4% from 15%. Non-GAAP net income rose to $176.8 million from $156.8 million.

The company said its AI-native revenues continued to accelerate, extending a run of double-digit sequential growth and accounting for more than 11% of total business. EPAM also expanded its strategic AI partnerships, including joining the OpenAI Partner Network as an Advanced Partner, certifying more than 2,000 professionals through Google’s Gemini program and becoming one of Anthropic’s top five globally certified partners with more than 5,700 certified engineers.

EPAM’s Balance Sheet & Cash Flow

As of June 30, 2026, EPAM had $789.4 million in cash and cash equivalents, down from $1.04 billion as of March 31, 2026, while long-term debt stood at $25 million.

During the first six months of 2026, cash used in operating activities was $38.8 million, compared with cash generated of $77.4 million in the year-ago period. Free cash flow was negative $71.8 million during the first half, with second-quarter free cash flow of negative $17.6 million. EPAM spent $409 million on share repurchases during the first six months, including $85 million in the second quarter.

EPAM Lowers 2026 Revenue Guidance, Raises Profitability Outlook

For the third quarter of 2026, EPAM expects revenues to be in the range of $1.410 billion to $1.425 billion, implying year-over-year growth of 1.7% at the midpoint. Organic constant-currency revenue growth is expected to be 1.8% at the midpoint.

The company expects third-quarter non-GAAP operating margin to be between 15.5% and 16.5% and non-GAAP EPS to be in the range of $3.38-$3.46.

For full-year 2026, EPAM now expects revenues to grow 3.2% to 4.2% year over year, with organic constant-currency growth of 2% to 3%.

The company expects a non-GAAP operating margin of 15.5-16%. EPAM now expects non-GAAP diluted EPS of $13.08-$13.24.

Zacks Rank and Stocks to Consider

At present, EPAM carries Zacks Rank #3 (Hold).

Some better-ranked stocks in the broader Zacks Computer and Technology sector are Lumentum LITE, Applied Materials AMAT and Analog Devices ADI, each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Shares of Lumentum have surged 141.5% year to date. The Zacks Consensus Estimate for LITE’s fiscal 2026 earnings is pegged at $8.19 per share, up by 5 cents over the past 30 days, indicating an increase of 297.6% year over year.

Shares of Applied Materials have jumped 109.8% year to date. The Zacks Consensus Estimate for AMAT’s fiscal 2026 earnings is pegged at $12.14 per share, up by 3 cents over the past seven days, indicating a rise of 29.2% year over year.

Analog Devices shares have surged 43.8% year to date. The Zacks Consensus Estimate for ADI’s fiscal 2026 earnings is pegged at $12.42 per share, up by 10 cents over the past 30 days, indicating an increase of 33.9% year over year.

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