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EPAM Systems, Inc.

EPAM
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Business Summary

EPAM Systems, Inc. is a leading global provider of digital engineering, cloud, and AI-enabled transformation services, as well as a business and experience consulting partner for global enterprises and startups. The company addresses client transformation challenges by integrating strategy, experience, and technology consulting with over 30 years of engineering execution to accelerate time to market and enhance value from digital investments. EPAM leverages AI through platforms like EPAM AI/RUN™ and initiatives such as DIALX Lab™ to deliver transformative solutions, driving significant industry impact and fostering continuous innovation . The company's business model focuses on building long-term partnerships through innovative and scalable software solutions, integrated advisory, and a continually evolving mix of advanced capabilities.

EPAM generates revenue through a variety of service arrangements, primarily professional services, which accounted for 99.5% of total revenues in 2025 . The majority of these revenues are generated under time-and-materials contracts, where revenue is recognized based on the right to invoice for services performed . Fixed-price contracts, including maintenance and support arrangements, recognize revenue ratably over the service period, while application development arrangements measure progress using input or output methods . Licensing and other revenues constituted 0.5% of total revenues in 2025 . The company's primary customer segments span five main industry verticals: Financial Services, Consumer Goods, Retail & Travel, Software & Hi-Tech, Business Information & Media, and Life Sciences & Healthcare, along with a group of Emerging Verticals .

The company's service offerings continuously evolve, combining software engineering with customer experience design, business consulting, strategy, and technology innovation in areas such as cloud platforms, cybersecurity, and artificial intelligence . Engineering services encompass product research, customer experience design, program management, component design and integration, full lifecycle software testing, deployment, maintenance, and cross-platform migration . Cloud services involve creating roadmaps, migration and modernization strategies, and customized cloud solutions . Data, Analytics, and Artificial Intelligence services focus on modernizing data platforms, implementing data governance, and driving AI strategy and solution building . Customer Experience services integrate strategy, design, and engineering to transform organizations into adaptive, product-centric businesses . Marketing services, delivered through Empathy Lab, combine creativity, data, design, engineering, and applied AI to build customer-centered growth systems . Cybersecurity services guide clients in achieving operational resilience against threats, applying a security-by-design approach, and leveraging AI-driven tools for rapid threat responses .

For the fiscal year ended December 31, 2025, EPAM reported total revenues of $5.457 billion . Cost of revenues (exclusive of depreciation and amortization) was $3.884 billion , resulting in a gross margin of 28.8% . Operating expenses also included selling, general and administrative expenses of $928.7 million and depreciation and amortization expense of $124.8 million . Income from operations was $520.0 million , representing an operating margin of 9.5% . Net income for the period was $377.7 million , with diluted earnings per share of $6.72 . Cash and cash equivalents stood at $1.296 billion , and total debt was $25.0 million .

Comparing 2025 to 2024, total revenues increased by 15.4% from $4.728 billion to $5.457 billion . This growth was driven by acquisitions made in the fourth quarter of 2024, which contributed 9.2% to revenue growth, and a 1.3% increase due to foreign currency fluctuations . Cost of revenues (exclusive of depreciation and amortization) increased by 18.5% from $3.277 billion to $3.884 billion , leading to a decrease in gross margin from 30.7% in 2024 to 28.8% in 2025 . Selling, general and administrative expenses increased by 13.8% from $816.3 million to $928.7 million , but decreased as a percentage of revenues from 17.3% to 17.0% . Depreciation and amortization expense increased by $35.3 million from $89.6 million to $124.8 million . Income from operations decreased by 4.5% from $544.6 million to $520.0 million , and the operating margin declined from 11.5% to 9.5% . Net income decreased from $454.5 million to $377.7 million , and diluted EPS decreased from $7.84 to $6.72 .

During 2025, EPAM completed one acquisition with a total purchase price of $8.8 million , including contingent consideration with an acquisition-date fair value of $0.9 million . This acquisition expanded EPAM’s AI-enabled business operations capabilities and added $4.0 million of intangible assets, primarily customer relationships . In the fourth quarter of 2024, EPAM acquired First Derivative Ltd for $300.7 million and 99.7% of Neoris N.V. for $626.3 million . The remaining 0.3% of Neoris N.V. was acquired on January 2, 2025, for $1.4 million in cash . EPAM also initiated the 2025 Cost Optimization Program during the second quarter of 2025, which is expected to include workforce reductions and incur additional charges of approximately $25.0 million .

Business Outlook

EPAM's strategic objectives include executing its business continuity plans and maintaining a focus on clients and long-term growth, particularly in light of the ongoing conflict in Ukraine . The company's global delivery centers are stated to have sufficient resources, including infrastructure and capital, to support ongoing operations . EPAM expects some expenses related to the war in Ukraine, including humanitarian aid and geographic repositioning efforts, to continue in subsequent quarters .

The company's growth strategy involves both organic expansion and strategic acquisitions, with a focus on diversifying its client base and adding more clients to its mix . EPAM continually evaluates potential acquisition targets that can expand its vertical-specific domain expertise, geographic footprint, service portfolio, client base, and management expertise . The acquisition of First Derivative Ltd in 2024 is expected to enhance EPAM’s industry experience and jointly deliver a comprehensive set of AI-enabled capabilities in the financial services vertical . The acquisition of NEORIS in 2024 is expected to expand the company’s ability to support clients across Latin America . EPAM's strategy is increasingly focused on providing end-to-end AI-native transformations, requiring deep expertise across all service lines . The company leverages AI to deliver transformative solutions that accelerate clients' digital innovation and enhance their competitive edge, integrating advanced AI technologies into tailored business strategies through platforms like EPAM AI/RUN™ and initiatives such as DIALX Lab™ .

EPAM anticipates that its operating expenses and/or effective income tax rate could increase significantly if tax policies in Belarus, Poland, or other countries where it operates are changed, terminated, or not extended . The company is implementing the 2025 Cost Optimization Program, which is expected to incur additional charges of approximately $25.0 million and aims to improve utilization and profitability through workforce reductions . The company expects to complete all restructuring actions under this program by the end of the second quarter of 2026 .

EPAM believes that its current cash, cash equivalents, and short-term investments, combined with expected cash flow from operations, will be sufficient to meet its projected operating and capital expenditure requirements for at least the next twelve months . The company possesses the financial flexibility to execute its strategic objectives, including making acquisitions and strategic investments in the foreseeable future . Capital expenditures for 2025 were $42.2 million . EPAM's Board of Directors authorized a new share repurchase program on October 16, 2025, for up to $1.0 billion of outstanding common stock, with a term of 24 months . As of December 31, 2025, a remaining balance of $776.5 million was available under this program . The company has not declared or paid any cash dividends on its common stock and does not anticipate paying any in the foreseeable future, intending to retain all available funds for business operations, expansion, and share repurchases . EPAM has a contractual commitment to spend at least $75.0 million on cloud services over a 5-year agreement entered into on March 31, 2023 . As of December 31, 2025, $46.7 million remains to be spent under this commitment .

Risk Factors

EPAM faces significant risks from geopolitical instability, particularly due to its substantial operations and personnel in Ukraine and Belarus, with approximately 14,100 global delivery, administrative, and support personnel in these countries as of December 31, 2025 . Any escalation of the conflict, including Belarus's involvement, could jeopardize personnel, facilities, and operations, and client-imposed blocks on internet communications with these regions have already materially affected service delivery . The company is also vulnerable to increased competition from rapidly evolving digital technology innovations, such as AI, machine learning, and hyperautomation, which may reduce demand for its services if clients develop software internally or expect lower costs . There is a risk that EPAM may be unable to keep pace with AI adoption and effectively implement AI in workforce planning, potentially leading to reduced competitiveness . The company's profitability is sensitive to increases in wages, equity compensation, and other compensation expenses, which could limit its competitive advantage if not offset by increased efficiency or pricing . Operations in emerging markets expose EPAM to greater economic, financial, and banking risks, including foreign exchange volatility and instability in banking sectors, with $49.2 million of cash and cash equivalents in Ukraine and $37.8 million in Belarus as of December 31, 2025 . Legal provisions in Belarus and Ukraine could lead to involuntary liquidation of local subsidiaries if certain requirements are not met . Changes in U.S. federal policies, including those related to AI, international trade, offshore business, immigration laws, and work visas, could adversely affect EPAM's business . The company also faces risks from potential security breaches and disruptions to its network security, which could compromise information, expose it to liability, and damage its reputation .

Management Priorities

Management emphasizes EPAM's role as a leading global provider of digital engineering, cloud, and AI-enabled transformation services, leveraging its 30+ years of engineering execution to drive client value and accelerate time to market. The company is focused on building long-term partnerships through innovative and scalable software solutions, integrated strategy, experience, and technology consulting, with a continually evolving mix of advanced capabilities. Management highlights the strategic importance of AI, stating that EPAM leverages AI to deliver transformative solutions that accelerate clients' digital innovation and enhance their competitive edge, integrating advanced AI technologies into tailored business strategies through platforms like EPAM AI/RUN™ and initiatives such as DIALX Lab™ . Management also noted that the company is committed to diversifying its client base and adding more clients through organic growth and strategic acquisitions, expecting revenue concentration from its top clients to decrease over the long-term . For the upcoming period, management expects to complete all restructuring actions commenced under the 2025 Cost Optimization Program by the end of the second quarter of 2026, anticipating additional charges of approximately $25.0 million . The company believes its current cash, cash equivalents, and short-term investments, combined with expected cash flow from operations, will be sufficient to meet its projected operating and capital expenditure requirements for at least the next twelve months . The Board of Directors authorized a new share repurchase program on October 16, 2025, for up to $1.0 billion of the company's outstanding common stock .

View Source Annual Report on SEC.gov ↗

References

  1. [1] Item 1, Business — Overview
  2. [2] Item 7, MD&A — Revenues by Service Offering
  3. [3] Item 1, Business — Services
  4. [4] Item 1, Business — Services
  5. [5] Item 7, MD&A — Revenues by Service Offering
  6. [6] Item 1, Business — Industry Expertise
  7. [7] Item 1, Business — Services
  8. [8] Item 1, Business — Engineering
  9. [9] Item 1, Business — Cloud
  10. [10] Item 1, Business — Data, Analytics and Artificial Intelligence
  11. [11] Item 1, Business — Customer Experience
  12. [12] Item 1, Business — Marketing
  13. [13] Item 1, Business — Cybersecurity
  14. [14] Item 7, MD&A — Results of Operations
  15. [15] Item 7, MD&A — Results of Operations
  16. [16] Item 7, MD&A — Results of Operations
  17. [17] Item 7, MD&A — Results of Operations
  18. [18] Item 7, MD&A — Results of Operations
  19. [19] Item 7, MD&A — Results of Operations
  20. [20] Item 7, MD&A — Results of Operations
  21. [21] Item 7, MD&A — Results of Operations
  22. [22] Item 7, MD&A — Results of Operations
  23. [23] Item 7, MD&A — Capital Resources
  24. [24] Item 10, Debt — Revolving Credit Facility
  25. [25] Item 7, MD&A — Revenues
  26. [26] Item 7, MD&A — Revenues
  27. [27] Item 7, MD&A — Revenues
  28. [28] Item 7, MD&A — Cost of Revenues (Exclusive of Depreciation and Amortization)
  29. [29] Item 7, MD&A — Cost of Revenues (Exclusive of Depreciation and Amortization)
  30. [30] Item 7, MD&A — Cost of Revenues (Exclusive of Depreciation and Amortization)
  31. [31] Item 7, MD&A — Selling, General and Administrative Expenses
  32. [32] Item 7, MD&A — Selling, General and Administrative Expenses
  33. [33] Item 7, MD&A — Selling, General and Administrative Expenses
  34. [34] Item 7, MD&A — Depreciation and Amortization Expense
  35. [35] Item 7, MD&A — Depreciation and Amortization Expense
  36. [36] Item 7, MD&A — Depreciation and Amortization Expense
  37. [37] Item 7, MD&A — Results of Operations
  38. [38] Item 7, MD&A — Results of Operations
  39. [39] Item 7, MD&A — Results of Operations
  40. [40] Item 7, MD&A — Results of Operations
  41. [41] Item 7, MD&A — Results of Operations
  42. [42] Item 7, MD&A — Results of Operations
  43. [43] Item 7, MD&A — Results of Operations
  44. [44] Item 3, Acquisitions — 2025 Acquisition
  45. [45] Item 3, Acquisitions — 2025 Acquisition
  46. [46] Item 3, Acquisitions — 2025 Acquisition
  47. [47] Item 3, Acquisitions — First Derivative
  48. [48] Item 3, Acquisitions — NEORIS
  49. [49] Item 3, Acquisitions — NEORIS
  50. [50] Item 12, Cost Optimization Programs
  51. [51] Item 7, MD&A — Business Update Regarding the War in Ukraine
  52. [52] Item 7, MD&A — Business Update Regarding the War in Ukraine
  53. [53] Item 7, MD&A — Business Update Regarding the War in Ukraine
  54. [54] Item 1, Business — Clients
  55. [55] Item 1, Business — Clients
  56. [56] Item 3, Acquisitions — First Derivative
  57. [57] Item 3, Acquisitions — NEORIS
  58. [58] Item 1, Business — Services
  59. [59] Item 1, Business — Overview
  60. [60] Item 1A, Risk Factors — Risks Related to Our Operations
  61. [61] Item 12, Cost Optimization Programs
  62. [62] Item 12, Cost Optimization Programs
  63. [63] Item 12, Cost Optimization Programs
  64. [64] Item 7, MD&A — Future Capital Requirements
  65. [65] Item 7, MD&A — Future Capital Requirements
  66. [66] Item 7, MD&A — Investing Activities
  67. [67] Item 15, Stockholders' Equity — Share Repurchases
  68. [68] Item 15, Stockholders' Equity — Share Repurchases
  69. [69] Item 5, Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities — Dividend Policy
  70. [70] Item 18, Commitments and Contingencies — Contractual Commitment
  71. [71] Item 18, Commitments and Contingencies — Contractual Commitment
  72. [72] Item 1A, Risk Factors — Instability in geographies where we have significant operations and personnel or where we derive substantial amounts of revenue could have a material adverse effect on our business, clients, service delivery, and financial results.
  73. [73] Item 1A, Risk Factors — The invasion of Ukraine and the resulting war has had and could continue to have a material adverse effect on our personnel, business, and finances.
  74. [74] Item 1A, Risk Factors — Increased Adoption of AI-Based Software Tools May Reduce Demand for Our Services
  75. [75] Item 1A, Risk Factors — If we are unable to keep pace with the adoption and use of AI technology in our business and effectively implement AI in our workforce planning and deployment, we could become less competitive in our industry.
  76. [76] Item 1A, Risk Factors — Increases in wages, equity compensation, and other compensation expenses could limit our competitive advantage, increase our costs, and result in dilution to our stockholders.
  77. [77] Item 1A, Risk Factors — Our operations in emerging markets subject us to greater economic, financial, and banking risks than we would face in more developed markets.
  78. [78] Item 1A, Risk Factors — Complying with a wide variety of legal requirements in the jurisdictions where we operate can create risks to our operations and financial condition, including liquidation of the subsidiaries that operate some of our major delivery centers.
  79. [79] Item 1A, Risk Factors — Existing policy and substantial changes to fiscal, political, regulatory and other federal policies may adversely affect our business and financial results.
  80. [80] Item 1A, Risk Factors — Security breaches and other disruptions to our network security that compromise our information expose us to liability and cause our business and reputation to suffer.
  81. [81] Item 1, Business — Overview
  82. [82] Item 1, Business — Clients
  83. [83] Item 12, Cost Optimization Programs
  84. [84] Item 7, MD&A — Future Capital Requirements
  85. [85] Item 15, Stockholders' Equity — Share Repurchases

Analysis on 5/22/2026