EPAM’s first quarter results were well received by the market, driven by a combination of strong double-digit revenue growth and continued expansion in advanced AI-related services. Management attributed the performance to higher client engagement across core verticals, meaningful progress in cross-selling, and increased demand for digital transformation, particularly in AI-native projects. CEO Arkadiy Dobkin noted that supplier consolidation trends have helped EPAM regain business from clients seeking quality and execution, stating, “We are encouraged to see EPAM benefit from supplier consolidation activity in our core portfolio,” and highlighted that organic growth exceeded initial expectations.
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EPAM (EPAM) Q1 CY2025 Highlights:
- Revenue: $1.30 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 $1.30 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: $10.14 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
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Bryan Bergin (TD Cowen) asked about the confidence behind raised organic growth guidance and the visibility into second-half demand. CEO Arkadiy Dobkin and CFO Jason Peterson said performance in the first half was better than expected, but visibility for the second half remains limited.
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Ramsey El-Assal (Barclays) questioned the trajectory of free cash flow and whether recent headwinds were temporary. Peterson explained that Q1 is seasonally low due to bonus payments and milestone billing, and cash flow conversion should normalize, though days sales outstanding may stay slightly elevated.
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Maggie Nolan (William Blair) inquired about plans to improve gross margin over the year. Peterson cited seasonal benefits, improved utilization, and a renewed focus on operational efficiency but acknowledged that acquisition-related headwinds and wage inflation would persist.
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David Grossman (Stifel) sought details on client cohort growth, especially outside the top 20 clients. Dobkin explained that returning clients and M&A were driving new customer growth, with improvements accumulating each quarter.
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Jamie Friedman (Susquehanna) probed into the shift toward fixed-price contracts and its impact on risk and margins. Peterson noted that the change reflects evolving pricing models and shorter-term contracts, especially from acquisitions, but risk is managed through structured arrangements and productivity gains from AI.
Catalysts in Upcoming Quarters
In the coming quarters, we will be watching (1) the pace of AI-related deal expansion and whether early-stage projects convert to larger, multi-year programs, (2) improvements in utilization and gross margin as EPAM executes on operational efficiency initiatives, and (3) the impact of leadership transition on strategic execution. Additionally, tracking the effect of macroeconomic conditions and client budget trends will be important for assessing the sustainability of growth.
EPAM currently trades at $179.03, up from $159.44 just before the earnings. Is there an opportunity in the stock?See for yourself in our full research report (it’s free).
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