EPAM's Revenue Soars, But Net Income Dips Amid Rising Costs

TL;DR

**EPAM's top-line growth is impressive, but the significant drop in net income and cash burn on buybacks makes it a 'show-me' story for profitability.**

AI Summary

EPAM Systems, Inc. reported a significant increase in revenues for both the three and nine months ended September 30, 2025, reaching $1,394,373 thousand and $4,049,508 thousand, respectively, compared to $1,167,527 thousand and $3,479,589 thousand in the prior year. Despite this revenue growth, net income decreased to $106,816 thousand for the three months ended September 30, 2025, from $136,346 thousand in the same period of 2024, representing a 21.66% decline. For the nine-month period, net income fell to $268,324 thousand from $351,234 thousand, a 23.61% decrease. This decline was primarily driven by a substantial increase in cost of revenues, which rose to $983,169 thousand for the quarter and $2,899,189 thousand for the nine months, and a significant foreign exchange loss of $20,581 thousand for the nine months ended September 30, 2025. The company also saw a decrease in cash and cash equivalents from $1,286,267 thousand at December 31, 2024, to $1,239,136 thousand at September 30, 2025, partly due to $438,633 thousand in common stock repurchases. Strategic outlook includes leveraging AI and GenAI to deliver transformative solutions and building long-term partnerships with clients.

Why It Matters

EPAM's strong revenue growth signals robust demand for its digital engineering and AI-enabled transformation services, which is positive for investors and employees in the tech sector. However, the notable decline in net income, despite increased revenue, raises concerns about profitability and operational efficiency, potentially impacting investor confidence and future stock performance. The substantial foreign exchange losses and increased cost of revenues highlight challenges in managing global operations and inflationary pressures. Competitively, EPAM's focus on AI and GenAI positions it well against rivals in the rapidly evolving tech consulting landscape, but its ability to translate revenue into profit will be key to maintaining its market position and attracting top talent.

Risk Assessment

Risk Level: medium — The company faces a medium risk level due to declining net income despite revenue growth, with net income falling 21.66% for the quarter and 23.61% for the nine months ended September 30, 2025. This is exacerbated by a significant foreign exchange loss of $20,581 thousand for the nine-month period and a decrease in cash and cash equivalents from $1,286,267 thousand to $1,239,136 thousand, partly due to $438,633 thousand in common stock repurchases.

Analyst Insight

Investors should closely monitor EPAM's upcoming earnings calls for management's strategy to improve net income and mitigate foreign exchange risks. Consider holding existing positions but deferring new investments until there's clear evidence of improved profitability and more efficient capital allocation, especially regarding share repurchases versus reinvestment.

Financial Highlights

debt To Equity

0.03

revenue

$4,049,508

operating Margin

9.2%

total Assets

$4,843,300

total Debt

$25,036

net Income

$268,324

cash Position

$1,239,136

revenue Growth

+16.4%

Revenue Breakdown

Key Numbers

• $1,394,373 — Revenues (Three Months) (Increased from $1,167,527 thousand in Q3 2024)
• $4,049,508 — Revenues (Nine Months) (Increased from $3,479,589 thousand in the first nine months of 2024)
• $106,816 — Net Income (Three Months) (Decreased from $136,346 thousand in Q3 2024)
• $268,324 — Net Income (Nine Months) (Decreased from $351,234 thousand in the first nine months of 2024)
• $20,581 — Foreign Exchange Loss (Nine Months) (Significant increase from $1,416 thousand in the prior year)
• $438,633 — Repurchase of Common Stock (Nine Months) (Increased from $385,025 thousand in the prior year)
• $1,239,136 — Cash and Cash Equivalents (September 30, 2025) (Decreased from $1,286,267 thousand at December 31, 2024)
• 55,242,618 — Common Stock Shares Outstanding (As of October 31, 2025)
• $44.7 — Cash in Ukraine (As of September 30, 2025, subject to banking instability)
• $24.6 — Cash in Belarus (As of September 30, 2025, subject to dividend distribution restrictions)

Key Players & Entities

• EPAM Systems, Inc. (company) — global provider of digital engineering, cloud and AI-enabled transformation services
• Newtown, Pennsylvania (location) — headquarters of EPAM Systems, Inc.
• FASB (regulator) — standards-setting body for accounting pronouncements
• Ukraine (location) — country where EPAM holds cash and cash equivalents
• Belarus (location) — country where EPAM holds cash and cash equivalents, with dividend distribution restrictions
• U.S. dollars (dollar_amount) — predominant currency for EPAM's global operations
• September 30, 2025 (date) — end of the reported quarterly period
• December 31, 2024 (date) — end of the prior fiscal year
• ASU No. 2025-06 (document) — new accounting standard on internal-use software

FAQ

Risk Factors

• Geopolitical Instability and Operational Disruption [high — operational]: The company has significant operations and cash holdings in Eastern Europe, specifically $44.7 million in Ukraine and $24.6 million in Belarus as of September 30, 2025. Banking instability in Ukraine and dividend distribution restrictions in Belarus pose operational and financial risks, potentially impacting the company's ability to access or utilize these funds.
• Foreign Exchange Fluctuations [medium — financial]: EPAM experienced a substantial foreign exchange loss of $20,581 thousand for the nine months ended September 30, 2025, a significant increase from $1,416 thousand in the prior year. This highlights the company's vulnerability to currency volatility, which can negatively impact profitability.
• Increased Cost of Revenues [high — financial]: The cost of revenues increased significantly to $983,169 thousand for the three months and $2,899,189 thousand for the nine months ended September 30, 2025. This rise, outpacing revenue growth, directly impacted gross margins and contributed to the decline in net income.
• Share Repurchases Impacting Cash [medium — financial]: The company utilized $438,633 thousand for common stock repurchases during the nine months ended September 30, 2025. While intended to return value to shareholders, this activity contributed to the decrease in cash and cash equivalents from $1,286,267 thousand at December 31, 2024, to $1,239,136 thousand at September 30, 2025.
• Intensifying Competition [medium — market]: The IT services market is highly competitive, with numerous global and regional players. While EPAM is leveraging AI and GenAI, continued innovation and differentiation are crucial to maintain market share and pricing power against competitors.
• Data Privacy and Cybersecurity Regulations [medium — regulatory]: As a global provider of digital transformation services, EPAM is subject to evolving data privacy laws (e.g., GDPR, CCPA) and increasing cybersecurity threats. Non-compliance or breaches can lead to significant fines, reputational damage, and loss of client trust.

Industry Context

The IT services industry is characterized by rapid technological advancements, particularly in areas like AI and GenAI, which EPAM is actively pursuing. The competitive landscape remains intense, with clients demanding innovative and cost-effective digital transformation solutions. Geopolitical factors and global economic conditions also play a significant role in client spending and project pipelines.

Regulatory Implications

EPAM operates globally and must comply with diverse regulatory environments, including data privacy laws (e.g., GDPR) and cybersecurity standards. Changes in international trade policies or sanctions could also impact operations in specific regions. Ensuring compliance is critical to avoid penalties and maintain client trust.

What Investors Should Do

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Key Dates

• 2025-09-30: End of Third Quarter and Nine Months — Reporting period for the financial results discussed in the 10-Q, showing revenue growth but declining net income.
• 2025-10-31: Common Stock Shares Outstanding — As of this date, 55,242,618 shares were outstanding, reflecting the impact of share repurchases.
• 2024-12-31: End of Fiscal Year — Reference point for cash and cash equivalents ($1,286,267 thousand) at the beginning of the reporting period.

Glossary

Cost of revenues

Direct costs associated with providing services, including salaries, benefits, and contractor costs for delivery personnel. (A significant driver of the decrease in net income, as it increased substantially relative to revenue.)

Foreign exchange loss

Losses incurred due to unfavorable movements in currency exchange rates when converting foreign currency transactions or balances into the reporting currency. (A notable contributor to the decline in net income for the nine-month period.)

Common stock repurchases

The company buying back its own shares from the open market, reducing the number of shares outstanding. (Contributed to the decrease in cash and cash equivalents during the period.)

Operating lease right-of-use assets

Assets recognized on the balance sheet representing the right to use an asset for the lease term, arising from operating leases. (Part of the company's long-term assets and liabilities, reflecting its office space and equipment leases.)

Goodwill

An intangible asset that arises when a company acquires another company for a price greater than the fair value of its net identifiable assets. (Represents a significant portion of the company's intangible assets, reflecting past acquisitions.)

Year-Over-Year Comparison

EPAM Systems reported strong revenue growth, with a 19.4% increase for the quarter and 16.4% for the nine months compared to the prior year. However, net income declined significantly by 21.7% for the quarter and 23.6% for the nine months. This divergence was primarily driven by a substantial increase in the cost of revenues and a notable foreign exchange loss, which eroded profitability despite top-line expansion. Cash and cash equivalents also saw a slight decrease, partly due to increased share repurchases.

Key Financial Figures

• $0.001 — ich Registered Common Stock, par value $0.001 per share EPAM New York Stock Exchange

Filing Documents

• epam-20250930.htm (10-Q) — 2007KB
• exhibit311q32025.htm (EX-31.1) — 10KB
• exhibit312q32025.htm (EX-31.2) — 10KB
• exhibit321q32025.htm (EX-32.1) — 5KB
• exhibit322q32025.htm (EX-32.2) — 5KB
• epam-20250930_g1.gif (GRAPHIC) — 3KB
• 0001352010-25-000056.txt ( ) — 11039KB
• epam-20250930.xsd (EX-101.SCH) — 55KB
• epam-20250930_cal.xml (EX-101.CAL) — 81KB
• epam-20250930_def.xml (EX-101.DEF) — 343KB
• epam-20250930_lab.xml (EX-101.LAB) — 810KB
• epam-20250930_pre.xml (EX-101.PRE) — 585KB
• epam-20250930_htm.xml (XML) — 2154KB

FINANCIAL INFORMATION

PART I. FINANCIAL INFORMATION 3

Financial Statements (Unaudited)

Item 1. Financial Statements (Unaudited) 3 Condensed Consolidated Balance Sheets as of September 30, 2025 and December 31, 2024 3 Condensed Consolidated Statements of Income for the Three and Nine Months Ended September 30, 2025 and 2024 4 Condensed Consolidated Statements of Comprehensive Income for the Three and Nine Months Ended September 30, 2025 and 2024 5 Condensed Consolidated Statements of Changes in Equity for the Three and Nine Months Ended September 30, 2025 and 2024 6 Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2025 and 2024 8 Notes to Condensed Consolidated Financial Statements 10

Management's Discussion and Analysis of Financial Condition and Results of Operations

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 34

Quantitative and Qualitative Disclosures About Market Risk

Item 3. Quantitative and Qualitative Disclosures About Market Risk 45

Controls and Procedures

Item 4. Controls and Procedures 47

OTHER INFORMATION

PART II. OTHER INFORMATION 47

Legal Proceedings

Item 1. Legal Proceedings 47

Risk Factors

Item 1A. Risk Factors 47

Unregistered Sales of Equity Securities and Use of Proceeds

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 47

Defaults Upon Senior Securities

Item 3. Defaults Upon Senior Securities 48

Mine Safety Disclosures

Item 4. Mine Safety Disclosures 48

Other Information

Item 5. Other Information 48

Exhibits

Item 6. Exhibits 49

SIGNATURES

SIGNATURES 50 Table of contents

FINANCIAL INFORMATION

PART I. FINANCIAL INFORMATION

Financial Statements (Unaudited)

Item 1. Financial Statements (Unaudited) EPAM SYSTEMS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (In thousands, except par value) As of September 30, 2025 As of December 31, 2024 Assets Current assets Cash and cash equivalents $ 1,239,136 $ 1,286,267 Trade receivables and contract assets, net of allowance of $ 4,481 and $ 5,612 , respectively 1,130,496 1,002,175 Prepaid and other current assets 154,408 137,806 Total current assets 2,524,040 2,426,248 Property and equipment, net 198,821 207,667 Operating lease right-of-use assets, net 123,439 128,244 Intangible assets, net 419,806 436,418 Goodwill 1,208,912 1,181,575 Deferred tax assets 235,318 269,799 Other noncurrent assets 132,964 100,522 Total assets $ 4,843,300 $ 4,750,473 Liabilities Current liabilities Accounts payable $ 42,981 $ 44,702 Accrued compensation and benefits expenses 543,738 484,952 Accrued expenses and other current liabilities 188,591 201,356 Income taxes payable, current 19,492 50,395 Operating lease liabilities, current 40,460 39,634 Total current liabilities 835,262 821,039 Long-term debt 25,036 25,194 Operating lease liabilities, noncurrent 89,721 98,426 Deferred tax liabilities, noncurrent 96,956 92,362 Other noncurrent liabilities 69,482 82,301 Total liabilities 1,116,457 1,119,322 Commitments and contingencies (Note 15) Equity Stockholders' equity Common stock, $ 0.001 par value; 160,000 shares authorized; 55,214 shares issued and outstanding at September 30, 2025, and 56,869 shares issued and outstanding at December 31, 2024 55 57 Additional paid-in capital 1,329,512 1,190,222 Retained earnings 2,384,297 2,555,796 Accumulated other comprehensive income/(loss) 12,397 ( 116,864 ) Total EPAM Systems, Inc. stockholders' equity 3,726,261 3,629,211 Noncontrolling interest in consolidated subsidiaries 582 1,940 Total equity 3,726,843 3,631,151 Total liabilities and equity $ 4,843,300 $ 4,750,473 The accompanying n