Loading...
01/11 13:53
Loading...
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The earnings call presented mixed signals. While there is strong growth in AI-related revenues and positive client engagement, financial metrics like gross margin, income from operations, and cash flow have declined year-over-year. The Q&A section reveals uncertainties about pricing, cash flow normalization, and management's reluctance to provide specific numbers, which may concern investors. Despite positive AI initiatives, the weak financial performance and vague guidance lead to a neutral sentiment, suggesting limited stock price movement in the near term.
Revenue $1.3 billion, a year-over-year increase of 11.7%. Organic constant currency revenue grew 1.4% compared to Q1 2024, exceeding expectations of flat organic growth.
Gross Margin (GAAP) 26.9%, compared to 28.4% in Q1 of last year. The decrease was impacted by 2024 compensation increases and lower profitability from recent acquisitions.
Gross Margin (Non-GAAP) 28.7%, compared to 30.4% for the same quarter last year. The decline was due to compensation increases and lower profitability from acquisitions.
Income from Operations (GAAP) $99 million or 7.6% of revenue, compared to $111 million or 9.5% of revenues in Q1 of last year.
Income from Operations (Non-GAAP) $176 million or 13.5% of revenue, compared to $174 million or 14.9% of revenue in Q1 of last year.
Diluted EPS (GAAP) $1.28, compared to $2.46 in Q1 of last year.
Diluted EPS (Non-GAAP) $2.41, a decrease of $0.05 year-over-year from $2.46.
Cash Flow from Operations $24 million, compared to $130 million in the same quarter last year, due to higher bonus payments and increased DSO.
Free Cash Flow $15 million, compared to $123 million in the same quarter last year.
Cash and Cash Equivalents $1.2 billion at the end of the quarter.
Days Sales Outstanding (DSO) 75 days, compared to 70 days for Q4 2024 and 73 days for the same quarter last year.
Share Repurchases Approximately 796,000 shares for $160 million at an average price of $201.07 per share.
Headcount Growth Total growth of 18.2% and organic growth of 6.4% compared to Q1 2024.
Utilization Rate 77.5%, compared to 76.8% in Q1 of last year.
AI Native Revenues Growth: In Q1, our AI native revenues grew strong double-digit quarter-over-quarter, continuing the strong momentum from the previous quarter.
EPAM AI/Run: Introduced EPAM AI/Run, our AI native SDLC framework and toolkit, positioned to build on this foundation through a strategic collaboration agreement with AWS.
DIAL Platform Evolution: DIAL has evolved into a complete GenAI platform with orchestration including Agentic marketplace, Mind Maps and DIAL Expressive Logic.
Market Positioning in AI: EPAM's credibility and growing reputation as a leading partner in AI and AI native transformation is driving greater market awareness and demand.
Client Demand for AI Capabilities: Incremental demand for AI capabilities is being observed as clients focus on productivity and efficiency gains.
Headcount Growth: In Q1, we added over 500 professionals, reflecting total growth of 18.2% and organic growth of 6.4% compared to Q1 2024.
Utilization Rate: Utilization was 77.5% compared to 76.8% in Q1 of last year.
Leadership Transition: Arkadiy Dobkin will transition to Executive Chairman, with Balazs Fejes becoming CEO on September 1, 2025.
Focus on AI Transformation: EPAM aims to evolve into a world-leading AI native transformation company, emphasizing quality, execution, and excellence.
Macroeconomic Environment: The company acknowledges a tough macroeconomic environment, which poses risks to business performance and client spending.
Client Demand Uncertainty: There are external pressures and increased caution in decision-making due to microeconomic uncertainty, which could impact client demand.
Regulatory and Tariff Issues: Elevated uncertainties from tariffs and impacts on manufacturing and materials industries are leading to reduced demand from a top customer.
Leadership Transition Risks: The planned transition of leadership may introduce uncertainties regarding strategic direction and operational execution during the change.
Supply Chain Challenges: The company is facing challenges related to supply chain dynamics, which could affect service delivery and operational efficiency.
AI Adoption Challenges: Scaling AI adoption across enterprises remains a challenge, with only 30% of advanced companies reporting success, which could impact EPAM's growth in AI services.
Gross Margin Pressure: Gross margin has been negatively impacted by compensation increases and lower profitability from recent acquisitions, which could affect overall financial performance.
Cash Flow Decline: A significant decline in cash flow from operations and free cash flow compared to the previous year raises concerns about liquidity and operational efficiency.
Leadership Transition: Arkadiy Dobkin will transition to Executive Chairman, with Balazs Fejes becoming CEO on September 1, 2025.
AI Native Transformation: EPAM aims to evolve into a leading AI native transformation company, focusing on quality and execution.
Client Engagement: Strengthening client engagement and enhancing cross-selling efforts are key strategic initiatives.
Global Delivery Hubs: EPAM is expanding its global delivery hubs to better serve clients and balance cost, quality, and execution.
AI Initiatives: EPAM is engaged in various AI initiatives with top clients, focusing on productivity and efficiency gains.
2025 Revenue Growth: Revenue growth is expected to be in the range of 11.5% to 14.5%, with an inorganic contribution of approximately 9%.
Q2 2025 Revenue Outlook: Revenue is expected to be in the range of $1.325 to $1.340 billion, reflecting year-over-year growth of 16.2%.
GAAP EPS Guidance: GAAP diluted EPS is expected to be in the range of $6.78 to $7.03 for the full year.
Non-GAAP EPS Guidance: Non-GAAP diluted EPS is expected to be in the range of $10.70 to $10.95 for the full year.
Q2 2025 EPS Guidance: GAAP diluted EPS is expected to be in the range of $1.67 to $1.75 for Q2.
Share Repurchases: In Q1, EPAM repurchased approximately 796,000 shares for $160 million at an average price of $201.07 per share.
The earnings call highlights strong AI-driven growth, strategic investments, and improved margins. Despite some negative seasonality impacts and uncertainties in the Agentic BPO space, the company shows a positive outlook with robust revenue growth projections and strategic share repurchases. The Q&A section reveals confidence in AI initiatives and competitive advantages, although some responses were vague. Overall, the strategic focus on AI and client engagement, along with expected profitability improvements, suggests a positive sentiment. However, the lack of market cap data limits the precision of the prediction.
The earnings call indicates solid growth and strategic initiatives, particularly in AI transformation and client engagement. Despite some cautious guidance on Q4, there is optimism in discretionary spending and AI-driven programs. The Q&A section reveals management's focus on improving utilization and margins, with positive client demand trends. The ongoing AI upskilling and balanced workforce composition are strengths. While some risks are not fully detailed, the overall sentiment is positive, with strong financial metrics and strategic direction likely to support a 2% to 8% stock price increase.
The earnings call presented mixed signals. While there is strong growth in AI-related revenues and positive client engagement, financial metrics like gross margin, income from operations, and cash flow have declined year-over-year. The Q&A section reveals uncertainties about pricing, cash flow normalization, and management's reluctance to provide specific numbers, which may concern investors. Despite positive AI initiatives, the weak financial performance and vague guidance lead to a neutral sentiment, suggesting limited stock price movement in the near term.
The earnings call presents a mixed picture. While Q4 revenue and EPS saw growth, margins declined due to compensation increases and recent acquisitions, posing profitability concerns. The cautious revenue guidance and macroeconomic risks further temper expectations. However, the company's focus on AI and strategic acquisitions could provide long-term benefits. The Q&A highlighted cautious optimism, but management's lack of specificity on certain issues adds uncertainty. Overall, the stock is likely to remain relatively stable in the short term, leading to a neutral sentiment.
All transcripts are sourced directly from the official live webcast or the company’s official investor relations website. We use the exact words spoken during the call with no paraphrasing of the core discussion.
Full verbatim transcripts are typically published within 4–12 hours after the call ends. Same-day availability is guaranteed for all S&P 500 and most mid-cap companies.
No material content is ever changed or summarized in the “Full Transcript” section. We only correct obvious spoken typos (e.g., “um”, “ah”, repeated 10 times”, or clear misspoken ticker symbols) and add speaker names/titles for readability. Every substantive sentence remains 100% as spoken.
When audio quality is poor or multiple speakers talk over each other, we mark the section instead of guessing. This ensures complete accuracy rather than introducing potential errors.
They are generated by a specialized financial-language model trained exclusively on 15+ years of earnings transcripts. The model extracts financial figures, guidance, and tone with 97%+ accuracy and is regularly validated against human analysts. The full raw transcript always remains available for verification.
