10-K: EPAM Reports Revenue Growth Amid Profit Decline in 2025

Sentiment:

Annual Report 26 February 2026 4:08 PM

EPAM Systems, Inc. announced a 15.4% revenue increase to $5.46 billion in 2025, while net income and diluted EPS decreased by 16.9% and 14.3% respectively, alongside a new $1 billion share repurchase program.

Worse than expectedNet income decreased by 16.9% to $377.68 million in 2025, despite a 15.4% increase in revenues.Diluted earnings per share decreased by 14.3% to $6.72 in 2025.Operating income decreased by 4.5% in 2025, indicating a decline in operational efficiency or increased costs relative to revenue growth.The effective tax rate increased to 25.3% in 2025, partly due to a tax shortfall from stock awards, negatively impacting net earnings.

Summary

Revenues increased by 15.4% to $5.457 billion for the year ended December 31, 2025, compared to $4.728 billion in 2024.
Net income decreased by 16.9% to $377.68 million in 2025 from $454.53 million in 2024.
Diluted earnings per share fell by 14.3% to $6.72 in 2025 from $7.84 in 2024.
Operating income decreased by 4.5% to $520.00 million in 2025 from $544.58 million in 2024.
A new share repurchase program of up to $1.0 billion was authorized on October 16, 2025, with $776.5 million remaining as of December 31, 2025.
The company completed one acquisition in 2025 for $8.8 million, expanding AI-enabled business operations.
Acquisitions of NEORIS and First Derivative in Q4 2024 contributed 9.2% to revenue growth in 2025.
Total employees reached approximately 62,850 as of December 31, 2025, with 56,600 delivery professionals.
The company initiated a 2025 Cost Optimization Program in Q2 2025, including workforce reductions, with an expected additional charge of approximately $25.0 million.

Sentiment

Score: 6

Explanation: StockSavvy.ai views this filing as moderately positive. While revenue growth is robust and strategic AI investments are promising, the decline in net income and EPS, coupled with ongoing geopolitical risks and increased costs, presents a mixed financial picture that warrants careful monitoring.

Positives

Total revenues grew by 15.4% to $5.457 billion in 2025, demonstrating continued business expansion.
Revenue growth was observed across all industry verticals, with Financial Services growing 16.1% and Life Sciences & Healthcare growing 49.5%.
Emerging Verticals experienced significant growth of 29.3% in 2025, indicating successful diversification.
The company authorized a new $1.0 billion share repurchase program, signaling confidence in its valuation and commitment to shareholder returns.
Voluntary attrition rate decreased to 8.5% in 2025 from 8.9% in 2024, suggesting improved employee retention.
Utilization rates of delivery professionals slightly increased to 76.8% in 2025 from 76.7% in 2024.
Cash provided by operating activities increased to $654.93 million in 2025 from $559.17 million in 2024.
The company expects a $24.5 million reduction in cash tax payments for the 2025 tax year due to the U.S. federal 'One Big Beautiful Bill Act'.

Negatives

Net income decreased by 16.9% to $377.68 million in 2025, compared to $454.53 million in 2024.
Diluted earnings per share decreased by 14.3% to $6.72 in 2025 from $7.84 in 2024.
Income from operations decreased by 4.5% in 2025, indicating pressure on profitability.
Cost of revenues (exclusive of depreciation and amortization) increased to 71.2% of revenues in 2025 from 69.3% in 2024, primarily due to compensation increases not fully offset by pricing, acquisitions, higher variable compensation, and lower government incentives.
Interest and other income, net, significantly decreased to $11.55 million in 2025 from $46.88 million in 2024, largely due to a $37.0 million decrease in interest income.
Foreign exchange loss increased to $25.93 million in 2025 from $7.05 million in 2024.
Business Information & Media vertical revenues decreased by 6.5% in 2025, primarily due to decreased demand from two historically top 10 clients.
The effective tax rate increased to 25.3% in 2025 from 22.2% in 2024, partly due to a tax shortfall upon vesting/exercise of stock awards of $1.9 million in 2025 compared to an excess tax benefit of $22.4 million in 2024.

Risks

Geopolitical instability in regions with significant operations (e.g., Ukraine, Belarus) could materially adversely affect personnel, operations, service delivery, and financial results, and increase expenses.
Inability to keep pace with the rapid adoption and use of AI technology in business and effectively implement AI in workforce planning and deployment could reduce competitiveness.
Increased adoption of AI-based software tools by clients may reduce demand for services and lead to pricing pressures, potentially impacting revenues and profitability.
Challenges in effectively managing growth, including recruiting, training, and retaining qualified personnel, and productively utilizing them, could impact profitability.
Intense competition for highly skilled professionals and wage inflation in operating markets could increase costs and limit competitive advantage.
Operations in emerging markets expose the company to greater economic, financial, and banking risks, including instability, sanctions, and restrictions on cash movement (e.g., $49.2 million cash in Ukraine, $37.8 million in Belarus as of December 31, 2025).
Lack of long-term client commitments means clients may terminate contracts before completion or choose not to renew, and payment for services is not guaranteed, potentially affecting revenues.
High dependence on a limited number of industries (Financial Services, Software & Hi-Tech, Business Information & Media, Consumer Goods, Retail & Travel, Life Sciences & Healthcare) makes the company vulnerable to downturns in these sectors.
Inaccurate pricing structures or inability to maintain favorable pricing for services could lead to unprofitable contracts or failure to meet profitability projections.
Security breaches and other disruptions to network security, including those enhanced by AI, could compromise information, expose the company to liability, and damage its business and reputation.
Changes in privacy and data protection regulations (e.g., GDPR, U.K. GDPR, India's Digital Personal Data Protection Act) could lead to non-compliance risks, significant financial penalties, and increased compliance costs.
Undetected software design defects, errors, or failures may result in loss of business, client data, and liabilities, potentially damaging reputation and financial results.
The company's stock price is volatile and can be affected by variations in financial results, competitor announcements, geopolitical events, and economic conditions.
The hedging program is subject to counterparty default risk, which could result in significant losses during economic downturns.
War, terrorism, other acts of violence, or natural/man-made disasters may affect markets, clients, and service delivery, disrupting operations and increasing costs.

Future Outlook

The company expects to continue leveraging AI to deliver transformative solutions and accelerate clients' digital innovation. It anticipates continued growth in client portfolios organically and through strategic acquisitions, with a long-term expectation for decreased revenue concentration from top clients. The company believes its current liquidity is sufficient for the next twelve months and possesses financial flexibility for future acquisitions and strategic investments, despite ongoing geopolitical and macroeconomic uncertainties.

Management Comments

"We address our clients transformation challenges by fusing EPAM Continuums integrated strategy, experience and technology consulting with our 30+ years of engineering execution to speed our clients time to market and drive greater value from their innovations and digital investments."
"We leverage AI to deliver transformative solutions that accelerate our clients' digital innovation and enhance their competitive edge."
"Our highest priority remains the safety and security of our employees and their families in Ukraine as well as in the broader region, and we have continued to support relocating our employees to lower risk locations, both inside Ukraine and to other countries where we operate."
"We believe that our existing cash, cash equivalents and short-term investments, combined with our expected cash flow from operations will be sufficient to meet our projected operating and capital expenditure requirements for at least the next twelve months and that we possess the financial flexibility to execute our strategic objectives, including the ability to make acquisitions and strategic investments in the foreseeable future."

Industry Context

StockSavvy.ai notes that EPAM's strategic focus on AI-native transformations aligns with broader industry trends of digital acceleration and the increasing integration of AI into enterprise solutions. The company's continued diversification across verticals and geographies, coupled with strategic acquisitions like NEORIS and First Derivative, positions it to compete with global technology solutions providers such as Accenture and Capgemini, who are also heavily investing in AI and digital transformation capabilities. The reported decrease in client concentration suggests a healthy move towards a more diversified revenue base, a common goal among leading IT service providers to mitigate risk.

Comparison to Industry Standards

EPAM's 15.4% revenue growth in 2025 is strong, especially considering the challenging macroeconomic environment, and compares favorably to some peers who may be experiencing slower growth in a maturing digital transformation market.
The decline in net income and diluted EPS, despite revenue growth, indicates potential margin pressures, which could be a broader industry trend due to increased competition, wage inflation, and significant investments in new technologies like AI.
The voluntary attrition rate of 8.5% is competitive within the IT services industry, where talent retention is a key challenge, and is generally lower than some competitors operating in high-demand tech hubs.
The utilization rate of 76.8% for delivery professionals is a solid operational metric, indicating efficient deployment of talent, comparable to industry leaders in offshore and nearshore delivery models.
The company's significant investment in AI capabilities, including platforms like EPAM AI/RUN and DIALX Lab, positions it to compete with firms like Globant and Thoughtworks, which are known for their innovation and agile delivery in emerging tech areas.

Corporate Governance

Change Type	Description	Effective Date	Impact Assessment
Board Oversight Delegation	The Board of Directors delegated cybersecurity and information technology systems oversight to the Audit Committee in 2024, and created a subcommittee of the Audit Committee solely focused on cybersecurity and information security.	2024	Enhances specialized oversight of critical cybersecurity risks and improves communication between cybersecurity management and the Board.
Director Diversity	Women represent approximately 44% of the independent directors on the Board, reflecting an organizational priority to increase breadth of viewpoints and experiences in leadership roles.	Ongoing	Strengthens governance through diverse perspectives and aligns with evolving ESG expectations for board composition.
Director/Officer Liability & Indemnification	Certificate of Incorporation provides no personal monetary liability for directors or officers for breach of fiduciary duty, except as required by Delaware law, and indemnifies them to the fullest extent permitted by Delaware law.	As per Certificate of Incorporation	Protects directors and officers, potentially encouraging qualified individuals to serve, but may limit recourse for shareholders in certain circumstances.
Anti-Takeover Provisions	Provisions in the Certificate and Bylaws, such as a classified board, limits on written consents, special meetings callable only by the board, and advance notice requirements for stockholder nominations/proposals, are designed to discourage coercive takeover practices.	As per Certificate and Bylaws	Aims to encourage negotiations with the Board for acquisition proposals, potentially benefiting long-term shareholder value, but could also deter unsolicited bids that might be in shareholders' best interest.
Delaware Business Combination Statute Opt-Out	The company is not subject to Section 203 of the Delaware General Corporation Law, but its Certificate largely prevents interested stockholders (owning 15% or more of voting stock) from engaging in business combinations for three years unless specific conditions are met.	As per Certificate of Incorporation	Provides similar anti-takeover protections to Section 203, making it more difficult for an interested stockholder to effect certain business combinations and potentially preventing changes in management.
Forum Selection Clause	The Court of Chancery of the State of Delaware is the exclusive forum for certain internal corporate actions, including derivative actions and fiduciary duty claims.	As per Certificate of Incorporation	Centralizes litigation in a jurisdiction known for its corporate law expertise, potentially leading to more consistent legal outcomes and reducing litigation costs, but may limit forum options for plaintiffs.

Legal Proceedings

Not currently a party to any material legal proceeding, nor aware of any material legal or governmental proceedings pending or contemplated.

Stakeholder Impact

Shareholders: Experience a decrease in diluted EPS, but benefit from a new $1.0 billion share repurchase program. Potential for dilution if future equity capital raises occur. Stock price volatility remains a risk.
Employees: Benefit from ongoing humanitarian aid in Ukraine ($10.1 million remaining commitment), competitive compensation, and extensive learning and development programs (2.6 million learning hours in 2025). However, workforce reductions are part of the 2025 Cost Optimization Program.
Customers: Benefit from the company's focus on AI-native transformations, expanded service capabilities through acquisitions, and a diversified global delivery model. May face pricing adjustments due to increased costs or new AI-driven pricing models.
Creditors: The company maintains a $700.0 million revolving credit facility and is in compliance with all covenants, indicating sound financial management of debt obligations.
Communities: Benefit from the EPAM E-Kids program, which teaches STEM concepts and coding skills in 17 countries, and broader corporate social responsibility efforts.

Next Steps

Complete all restructuring actions under the 2025 Cost Optimization Program by the end of the second quarter of 2026.
Continue to monitor and respond to the difficult conditions in Ukraine and the broader region.
Continue to track the impact of inflation, particularly on wages, and implement pricing and cost management strategies to minimize its effects.
Assess the timing and impact of adopting new accounting standards related to Government Grants (ASU 2025-10) and Internal-Use Software (ASU 2025-06).
Plan to adopt ASU 2024-03 (Disaggregation of Income Statement Expenses) in 2027.

Key Dates

Date	Description
1993	Predecessor entity founded.
December 18, 2002	EPAM Systems, Inc. incorporated in Delaware.
February 24, 2022	Russian forces attacked Ukraine, initiating ongoing conflict.
March 4, 2022	Company announced discontinuation of services to clients located in Russia and a $100 million humanitarian commitment to support employees in Ukraine.
July 26, 2023	Completed the sale of remaining holdings in Russia to a third-party.
September 30, 2023	Initiated the 2023 Cost Optimization Program.
June 30, 2024	Completed all restructuring actions under the 2023 Cost Optimization Program.
April 2024	Belarus instituted restrictions on distributing dividends from Belarus to shareholders in certain countries, including the U.S., scheduled until the end of 2026.
June 30, 2024	Initiated the 2024 Cost Optimization Program.
September 30, 2025	Exhausted the $500 million authorized under the 2024 Repurchase Program.
October 3, 2025	Replaced the 2021 Credit Agreement with the 2025 Credit Agreement, establishing a new revolving credit facility.
October 16, 2025	Board of Directors authorized a new share repurchase program for up to $1.0 billion.
July 4, 2025	U.S. federal government enacted the 'One Big Beautiful Bill Act' tax reform legislation.
December 31, 2025	End of the fiscal year covered by this Annual Report on Form 10-K.
February 10, 2026	Number of common stock shares outstanding was 54,139,969.
February 26, 2026	Date of signing for the Annual Report on Form 10-K.

Recommendation

hold

EPAM demonstrates strong revenue growth and strategic investments in AI, which are positive long-term indicators. However, the notable decline in net income and diluted EPS, coupled with ongoing geopolitical risks and increased operating costs, presents a mixed financial performance. The new share repurchase program offers some support, but a seasoned investor would likely 'hold' to observe the effectiveness of cost optimization programs and the realization of profitability from AI investments before making a more aggressive move.

Keywords

Digital Engineering, Cloud Transformation, Artificial Intelligence, IT Services, Software Development, Financial Services, Life Sciences, Cybersecurity, Global Delivery Model, SEC Filing, 10-K, EPAM

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