Company Reports

EPAM's second-quarter revenue grew 3% year over year in constant currency. GAAP operating margin improved by 150 basis points to 10.8%. Management's revision of full-year revenue growth outlook to 3.2%-4.2% from 4.0%-6.5% sent shares down 14% in intraday trading.

EPAM's first-quarter revenue grew 8% to $1.4 billion, led by outstanding performance from the financial services and software groups. Non-GAAP operating margin improved 80 basis points year over year to 14.3%. The company also recently reached a multiyear partnership with Anthropic.

EPAM Systems is an IT services provider that focuses on workflows at the upstream of the IT services value chain—consulting, application development, and system integration. Unlike full-service IT providers such as Cognizant and Accenture, when EPAM was founded, the company did not have the resources to run lower-end services like business process outsourcing. Both of EPAM’s founders were originally from Belarus, and they had the vision to build EPAM into a software engineering hub, leveraging the large STEM talent pool across former Soviet Union countries, most notably Belarus, Russia, and Ukraine.

We've lowered our Morningstar Economic Moat Ratings for five IT services companies after reviewing artificial intelligence's potential disruption of the global technology sector.

EPAM Systems is an IT services provider that focuses on workflows at the upstream of the IT services value chain—consulting, application development, and system integration. Unlike full-service IT providers such as Cognizant and Accenture, when EPAM was founded, the company did not have the resources to run lower-end services like business process outsourcing. Both of EPAM’s founders were originally from Belarus, and they had the vision to build EPAM into a software engineering hub, leveraging the large STEM talent pool across former Soviet Union countries, most notably Belarus, Russia, and Ukraine.

EPAM finished 2025 strong, with fourth-quarter organic revenue up 6% in constant currency. GAAP and non-GAAP operating margins were stable at 11% and 8%, respectively. On the other hand, a light revenue and margin guidance for 2026 sent shares down 20% in Feb. 19 trading.

EPAM Systems is an IT services provider that focuses on workflows at the upstream of the IT services value chain—consulting, application development, and system integration. Unlike full-service IT providers such as Cognizant and Accenture, when EPAM was founded, the company did not have the resources to run lower-end services like business process outsourcing. Both of EPAM’s founders were originally from Belarus, and they had the vision to build EPAM into a software engineering hub, leveraging the large STEM talent pool across former Soviet Union countries, most notably Belarus, Russia, and Ukraine.

EPAM's third-quarter results benefited from recent growth momentum, with revenue up 19% year over year. Gross and operating margins improved respectively by 70 and 110 basis points sequentially, as the profitability impact from Neoris and First Derivative acquisitions gradually dwindles.

EPAM Systems is a boutique IT services firm that focuses on platform engineering, software development, and consulting services. These are workflows that sit upstream of the IT services value chain and usually offer more attractive margins.

EPAM Systems is an IT services provider that focuses on workflows at the upstream of the IT services value chain—consulting, application development, and system integration. Unlike full-service IT providers such as Cognizant and Accenture, when EPAM was founded, the company did not have the resources to run lower-end services like business process outsourcing. Both of EPAM’s founders were originally from Belarus, and they had the vision to build EPAM into a software engineering hub, leveraging the large STEM talent pool across former Soviet Union countries, most notably Belarus, Russia, and Ukraine.

EPAM Systems reported second-quarter revenue of $1.35 billion, up 18% year over year due to both inorganic and organic contributions to revenue. Non-GAAP operating margin was 15%, down 20 basis points year over year, as utilization tailwinds were offset by higher compensation expenses.

Narrow-moat EPAM posted strong first-quarter results and raised its full-year guidance. Despite macroeconomic turbulence, revenue growth was supported by resilient AI demand, cross-selling opportunities, and new client wins. Revenue contributions from recent acquisitions remained key topline contributors, though margins continued to stay low as a result.

EPAM Systems is a moaty IT services firm that has ample runway for solid growth and moderate margin expansion ahead. EPAM’s key offerings are engineering, operations, optimization, consulting, and design services. The firm’s deep concentration in engineering services enables it to set itself apart from companies like Accenture or Tata Consultancy Services.

Narrow-moat-rated EPAM Systems reported decent fourth-quarter results. However, the profitability outlook for 2025 was disappointing. There were several moving parts due to the company’s recent, sizable acquisition of Neoris, but even so, the margin and EPS outlooks were weaker than we or consensus expected. We already thought shares were overvalued heading into the quarter, with shares trading at an 18% premium to our pre-earnings fair value estimate of $218, and after updating our margin projections, we are decreasing our fair value estimate to $200 per share. Shares sold off roughly 18% in reaction to earnings, to roughly $219 per share, and we think there could be some incremental downside from here if organic growth and margins do not start improving materially.

EPAM Systems is a moaty IT services firm that has ample runway for solid growth and moderate margin expansion ahead. EPAM’s key offerings are engineering, operations, optimization, consulting, and design services. The firm’s deep concentration in engineering services enables it to set itself apart from companies like Accenture or Tata Consultancy Services.

EPAM Systems is a moaty IT services firm that has ample runway for solid growth and moderate margin expansion ahead. EPAM’s key offerings are engineering, operations, optimization, consulting, and design services. The firm’s deep concentration in engineering services enables it to set itself apart from companies like Accenture or Tata Consultancy Services.

We raised our fair value estimate for narrow-moat EPAM Systems to $218 per share from $209 after the firm exceeded expectations on both the top and bottom lines in the third quarter and management increased its guidance. The stock had surged 13% in intraday trading as of this writing. We are encouraged by positive catalysts including renewed client reengagement and productivity gains from geographic expansion into Latin America and India. We’ll monitor how well the company replicates its Eastern Europe success in these new regions. After previously viewing the stock as a bit undervalued, given recent strong performance we now view it as fairly valued, even after our fair value estimate increase.

EPAM Systems is a moaty IT services firm that has ample runway for solid growth and moderate margin expansion ahead. The firm sets itself apart from companies like Accenture or Tata Consultancy Services with its deep concentration in engineering services, which pertains to the creation of custom enterprise software or code. The demand for engineering services has accelerated since the covid-19 pandemic, which shed light on the need for an agile and flexible information technology landscape enabled by custom software. Yet, we think demand for such services is here to stay, as digital transformation projects require hefty software engineering to lift systems to the cloud and fine-tuning thereafter is inevitable. Altogether, EPAM’s bread and butter of engineering services is a more discretionary type of IT enterprise spending, which means its mix has proved extremely favorable in good macroeconomic times but compounded vulnerability in weaker macroeconomic times. While near-term revenue growth has been challenged, we think the long-term trajectory is solid, and we are pleased to see a focus on increasing consulting revenue that can further drive demand in EPAM’s engineering services.

We reiterate our $209 per share fair value estimate for narrow-moat EPAM after the firm reported second-quarter earnings in line with our expectations, alongside a mixed outlook. Our confidence in the firm’s ability to achieve a top-line compound annual growth rate over the next five years in the midsingle digits remains. EPAM stock declined approximately 10% upon results, now leaving the stock in undervalued territory, in our view. While we agree that the revenue outlook in the near term is bleak (though stabilized), we think that the market is overlooking EPAM’s concentration in engineering services, which is unique to its large, public IT services peers who have a more varied base of offerings. Before the current macro weakness, engineering services was one of the fastest-growing offerings in the IT services industry. We think it will return to healthy growth after the near-term slump as it appears that demand for massive tech overhauls (which depends heavily on engineering services to make enterprise tech as agile as possible) remains strong, though put on pause in the near term.

Narrow-moat-rated EPAM reported a disappointing start to 2024, as future demand gets pushed out further, revenue growth expectations for 2024 were downgraded, and the firm now expects additional restructuring charges in the second half of the year as it leans more into efficiency as growth slows. We are lowering our fair value estimate to $209 from $234. While the stock is down 25% in reaction to this quarter’s earnings, we think this is likely overdone, unless the company is stuck at a low-single-digit percentage revenue growth rate indefinitely. The expected effect on 2024 earnings is negative, but manageable, and longer term, we still expect an uptick in demand for the types of IT consulting services that EPAM provides, particularly as more AI-related capabilities and workflows are required by clients. We are still looking for a return to double-digit percentage revenue growth in 2025 and mid- to high-single-digit percentage growth thereafter.