EPAM Systems delivered better-than-expected results in the first quarter, which was met with a strong positive market reaction. Management cited robust double-digit revenue growth driven by increased demand for its digital engineering services, particularly in artificial intelligence (AI) and modernization projects. CEO Arkadiy Dobkin noted that client sentiment “remained strong across most of our verticals and geographies,” with supplier consolidation trends benefitting EPAM as clients prioritized reliability and quality. The company also highlighted the return of clients who previously left for cost reasons, underscoring EPAM’s reputation for delivery quality and expertise as a key differentiator.
Is now the time to buy EPAM? Find out in our full research report (it’s free).
EPAM (EPAM) Q1 CY2025 Highlights:
- Revenue: $1.3 billion vs analyst estimates of $1.28 billion (11.7% year-on-year growth, 1.6% beat)
- Adjusted EPS: $2.41 vs analyst estimates of $2.27 (6.1% beat)
- Adjusted EBITDA: $189.5 million vs analyst estimates of $184.1 million (14.6% margin, 3% beat)
- Revenue Guidance for Q2 CY2025 is $1.33 billion at the midpoint, above analyst estimates of $1.3 billion
- Management raised its full-year Adjusted EPS guidance to $10.83 at the midpoint, a 2.1% increase
- Operating Margin: 7.6%, down from 9.5% in the same quarter last year
- Constant Currency Revenue rose 12.6% year on year (-4.3% in the same quarter last year)
- Market Capitalization: $9.86 billion
While we enjoy listening to the management's commentary, our favorite part of earnings calls are the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.
Our Top 5 Analyst Questions EPAM’s Q1 Earnings Call
- Bryan Bergin (TD Cowen): Asked about second-half revenue visibility and confidence behind the raised guidance. CEO Arkadiy Dobkin and CFO Jason Peterson replied that visibility is strong into Q2 and Q3, but Q4 is harder to predict due to potential softness and ongoing macro uncertainty.
- Ramsey El-Assal (Barclays): Inquired about lower free cash flow and whether the drivers are temporary. Peterson explained that seasonality and milestone billings have affected cash flow and days sales outstanding, which are expected to remain slightly elevated.
- Maggie Nolan (William Blair): Asked for specifics on plans to improve gross margin. Peterson said the focus is on utilization and operational improvements, with some natural seasonal margin uplift expected in Q3, but acknowledged ongoing pressures from wage increases and acquisitions.
- David Grossman (Stifel): Questioned the acceleration in growth from clients outside the top 20. Peterson attributed some of this to recent acquisitions bringing in new, smaller customers and highlighted new business in regions like the Middle East.
- Jamie Friedman (Susquehanna): Asked about the shift to fixed-price contracts and margin impacts. Peterson responded that the increase is partly due to acquisitions and evolving pricing models, with most arrangements structured to limit delivery risk.
Catalysts in Upcoming Quarters
In future quarters, our team will focus on (1) the pace of enterprise adoption for EPAM’s AI platforms and consulting services, (2) progress on margin recovery through improved utilization and cost discipline, and (3) continued expansion in key markets like India and financial services. The execution of the CEO transition and any changes in client spending behavior amid macro uncertainty will also be critical signposts for tracking EPAM’s trajectory.
EPAM currently trades at $176, up from $159.44 just before the earnings. At this price, is it a buy or sell? Find out in our full research report (it’s free).
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