EPAM Cuts Revenue Outlook as Earnings Growth Accelerates
Second-quarter revenue rose 4.5% to $1.415 billion as margins widened.
The digital-engineering services provider EPAM Systems (EPAM) posted a 26.3% increase in second-quarter profit to $1.97 a share, as earnings growth accelerated despite slower demand. Non-GAAP earnings rose 22.0% to $3.38 a share.
Revenue growth decelerated for a second consecutive quarter, slowing from 12.8% in the fourth quarter of 2024 and 7.6% in the first quarter. Organic constant-currency growth eased to 3.4% from 3.7% in the preceding quarter and 5.6% two quarters earlier.
Second-quarter revenue increased 4.5% from a year earlier to $1.415 billion. Sequentially, revenue rose 1.1% from $1.400 billion, reversing the first quarter's decline from $1.408 billion in the fourth quarter.
Margins provided the main lift to earnings. GAAP operating income climbed 20.4% to $152.2 million, outpacing revenue growth, while the corresponding margin expanded to 10.8% from 9.3% a year earlier and 8.3% in the first quarter. Non-GAAP operating income rose 14.7% to $232.7 million, with margin widening to 16.4%.
EPAM's delivery-professional headcount increased 0.3% from the first quarter to about 56,650, reversing a 0.2% decline in that period. Cost-optimization charges declined to $13.9 million in the quarter from $16.3 million a year earlier, though first-half charges increased to $27.3 million.
The company now expects full-year reported-revenue growth of 3.2% to 4.2%, down from its May forecast of 4.0% to 6.5%. Its organic constant-currency growth outlook was reduced to 2.0% to 3.0% from 2.5% to 5.0%. EPAM raised the lower bounds of its GAAP and non-GAAP operating-margin forecasts to 10.5% and 15.5%, respectively.
Full-year GAAP earnings are expected at $8.22 to $8.38 a share, compared with the previous range of $8.29 to $8.59. Third-quarter revenue is projected at $1.410 billion to $1.425 billion, implying 1.7% growth at the midpoint, while organic constant-currency growth is expected at 1.8%.
EPAM repurchased $85 million of shares during the quarter, bringing first-half buybacks to $409 million. Cash, cash equivalents and restricted cash fell $507.1 million from year-end to $794.3 million as first-half operating cash flow swung to a $38.8 million use of cash.