EPAM Reports Results for Second Quarter 2026

EPAM SYSTEMS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

(In thousands, except per share data)

Three Months Ended

June 30,

Six Months Ended

June 30,

2026

2025

2026

2025

Revenues

$  1,414,767

$  1,353,443

$ 2,814,828

$ 2,655,135

Operating expenses:

Cost of revenues (exclusive of depreciation and amortization)

985,199

964,012

1,997,251

1,916,020

Selling, general and administrative expenses

245,245

231,681

484,947

450,598

Depreciation and amortization expense

32,101

31,274

63,640

62,711

Income from operations

152,222

126,476

268,990

225,806

Interest and other income (loss), net

(1,821)

3,519

(239)

9,333

Foreign exchange loss

(9,850)

(6,227)

(7,552)

(16,954)

Income before provision for income taxes

140,551

123,768

261,199

218,185

Provision for income taxes

37,572

35,742

75,699

56,677

Net income

$    102,979

$      88,026

$   185,500

$   161,508

Net income per share:

Basic

$         1.97

$         1.56

$       3.50

$       2.86

Diluted

$         1.97

$         1.56

$       3.49

$       2.84

Shares used in calculation of net income per share:

Basic

52,197

56,319

52,991

56,548

Diluted

52,267

56,536

53,220

56,898

EPAM SYSTEMS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(In thousands, except par value)

As of

June 30,

2026

As of

December 31,

2025

Assets

Current assets

Cash and cash equivalents

$     789,397

$  1,296,077

Trade receivables and contract assets, net of allowance of $3,939 and $6,350, respectively

1,268,036

1,108,201

Prepaid and other current assets

158,556

129,610

Total current assets

2,215,989

2,533,888

Property and equipment, net

204,967

202,387

Operating lease right-of-use assets, net

124,999

114,875

Intangible assets, net

372,969

406,586

Goodwill

1,203,048

1,210,564

Deferred tax assets

295,947

295,115

Other noncurrent assets

156,167

138,721

Total assets

$  4,574,086

$  4,902,136

Liabilities

Current liabilities

Accounts payable

$       41,551

$      55,329

Accrued compensation and benefits expenses

495,961

608,232

Accrued expenses and other current liabilities

208,531

250,688

Income taxes payable, current

19,093

25,520

Operating lease liabilities, current

39,301

37,173

Total current liabilities

804,437

976,942

Long-term debt

25,000

25,034

Operating lease liabilities, noncurrent

87,942

81,497

Deferred tax liabilities, noncurrent

74,505

76,969

Other noncurrent liabilities

62,901

63,886

Total liabilities

1,054,785

1,224,328

Commitments and contingencies

Equity

Stockholders' equity

Common stock, $0.001 par value; 160,000 shares authorized; 51,585 shares issued

and outstanding at June 30, 2026, and 54,274 shares issued and outstanding at

December 31, 2025

52

54

Additional paid-in capital

1,487,973

1,390,423

Retained earnings

2,035,664

2,268,204

Accumulated other comprehensive income (loss)

(4,970)

18,545

Total EPAM Systems, Inc. stockholders' equity

3,518,719

3,677,226

Noncontrolling interest in consolidated subsidiaries

582

582

Total equity

3,519,301

3,677,808

Total liabilities and equity

$  4,574,086

$  4,902,136

EPAM SYSTEMS, INC. AND SUBSIDIARIES

Reconciliations of Non-GAAP Financial Measures to Comparable GAAP Financial Measures

(Unaudited)

(In thousands, except percentages and per share amounts)

Reconciliation of year-over-year revenue growth as reported on a GAAP basis to revenue growth on an organic constant currency

basis is presented in the table below:

Three Months Ended

June 30, 2026

Six Months Ended

June 30, 2026

Revenue growth as reported

4.5 %

6.0 %

Inorganic revenue

— %

— %

Foreign exchange rates

(1.1) %

(2.5) %

Revenue growth on an organic constant currency basis

3.4 %

3.5 %

Reconciliation of various income statement amounts from GAAP to non-GAAP for the three and six months ended June 30, 2026 and 2025:

Three Months Ended

June 30, 2026

Six Months Ended

June 30, 2026

GAAP

Adjustments

Non-GAAP

GAAP

Adjustments

Non-GAAP

Cost of revenues (exclusive of depreciation and amortization)⁽¹⁾

$  985,199

$   (23,361)

$  961,838

$   1,997,251

$  (46,771)

$   1,950,480

Selling, general and administrative expenses⁽²⁾

$  245,245

$   (39,474)

$  205,771

$      484,947

$  (82,314)

$      402,633

Income from operations⁽³⁾

$  152,222

$    80,444

$  232,666

$      268,990

$ 164,412

$      433,402

Operating margin

10.8 %

5.6 %

16.4 %

9.6 %

5.8 %

15.4 %

Net income⁽⁴⁾

$  102,979

$    73,831

$ 176,810

$     185,500

$ 146,535

$      332,035

Diluted earnings per share

$        1.97

$       3.38

$           3.49

$            6.24

Three Months Ended

June 30, 2025

Six Months Ended

June 30, 2025

GAAP

Adjustments

Non-GAAP

GAAP

Adjustments

Non-GAAP

Cost of revenues (exclusive of depreciation and amortization)⁽¹⁾

$  964,012

$   (18,232)

$  945,780

$  1,916,020

$  (42,773)

$   1,873,247

Selling, general and administrative expenses⁽²⁾

$  231,681

$   (40,349)

$  191,332

$     450,598

$  (74,572)

$      376,026

Income from operations⁽³⁾

$  126,476

$    76,417

$  202,893

$     225,806

$ 152,837

$      378,643

Operating margin

9.3 %

5.7 %

15.0 %

8.5 %

5.8 %

14.3 %

Net income⁽⁴⁾

$    88,026

$    68,765

$  156,791

$    161,508

$ 133,298

$      294,806

Diluted earnings per share

$        1.56

$        2.77

$          2.84

$            5.18

Items (1) through (4) above are detailed in the table below with the specific cross-reference noted in the appropriate item.

Three Months Ended

June 30,

Six Months Ended

June 30,

2026

2025

2026

2025

Stock-based compensation expenses

$      22,833

$      18,161

$   45,686

$   42,084

Humanitarian support in Ukraine^(a)

528

576

1,085

1,194

Poland R&D incentives ^(b)

—

(505)

—

(505)

Total adjustments to GAAP cost of revenues⁽¹⁾

23,361

18,232

46,771

42,773

Stock-based compensation expenses

23,568

20,397

50,634

44,930

Cost Optimization charges^(c)

13,940

16,275

27,336

21,586

Humanitarian support in Ukraine^(a)

1,961

3,282

4,370

7,014

Other acquisition-related expenses

1

292

7

862

One-time charges (benefits)

4

103

(33)

180

Total adjustments to GAAP selling, general and administrative expenses⁽²⁾

39,474

40,349

82,314

74,572

Amortization of acquired intangible assets

17,609

17,836

35,327

35,492

Total adjustments to GAAP income from operations⁽³⁾

80,444

76,417

164,412

152,837

Foreign exchange loss

9,850

6,227

7,552

16,954

Change in fair value of contingent consideration included in Interest and other income, net

1,435

(232)

2,420

(1,969)

Impairment of financial assets

356

—

356

—

Gain on financial instrument

—

—

—

(350)

Provision for income taxes:

Tax effect on non-GAAP adjustments

(19,997)

(18,291)

(39,128)

(38,201)

Tax shortfall related to stock-based compensation

1,743

1,106

11,592

563

Net discrete charge (benefit) from tax planning^(d)

—

3,538

(669)

3,464

Total adjustments to GAAP net income⁽⁴⁾

$      73,831

$      68,765

$  146,535

$  133,298

(a)

Humanitarian support in Ukraine includes expenses related to EPAM's $100 million humanitarian commitment in response to Russia's invasion of Ukraine to support EPAM professionals and their families in and displaced from Ukraine. These expenses are incremental to those expenses incurred prior to the crisis, clearly separable from normal operations, and not expected to recur once the crisis has subsided and operations return to normal.

(b)

We have excluded from non-GAAP results the portion of the benefit from Poland R&D incentives related to qualifying activities performed in 2023 as it represents a nonrecurring one-time benefit.

(c)

Cost Optimization charges include employee separation costs incurred in connection with the programs initiated in the second quarter of 2024 and second quarter of 2025. Consistent with the Company's historical non-GAAP policy, costs incurred in connection with formal restructuring initiatives have been excluded from non-GAAP results as these are attributable to targeted restructuring efforts and not expected to recur once the respective Cost Optimization program is completed.

(d)

Net discrete charge (benefit) related to the implementation of tax planning to disregard certain foreign subsidiaries as separate entities for U.S. income tax purposes. Consistent with the Company's historical non-GAAP policy, the charge (benefit) related to the implementation of tax planning has been excluded from non-GAAP results as it is one-time and unusual in nature.

EPAM SYSTEMS, INC. AND SUBSIDIARIES

Reconciliations of Guidance Non-GAAP Financial Measures to Comparable GAAP Financial Measures

(Unaudited)

The below guidance constitutes forward-looking statements within the meaning of the federal securities laws and is

based on a number of assumptions that are subject to change and many of which are outside the control of the

Company. Actual results may differ materially from the Company's expectations depending on factors discussed in

the Company's filings with the Securities and Exchange Commission.

Reconciliation of expected year-over-year revenue growth on a GAAP basis to expected revenue growth on an organic

constant currency basis is presented in the table below:

Third Quarter 2026

Full Year 2026

(at midpoint of range)

Revenue growth

1.7 %

3.2% to 4.2%

Foreign exchange rates impact

0.1 %

(1.2) %

Inorganic revenue growth

— %

— %

Revenue growth on an organic constant currency basis

1.8 %

2.0% to 3.0%

Reconciliation of expected GAAP to non-GAAP income from operations as a percentage of revenues is presented in the table below:

Third Quarter 2026

Full Year 2026

GAAP income from operations as a percentage of revenues

11.0% to 12.0%

10.5% to 11.0%

Stock-based compensation expenses

3.1 %

3.2 %

Included in cost of revenues (exclusive of depreciation and amortization)

1.5 %

1.5 %

Included in selling, general and administrative expenses

1.6 %

1.7 %

Humanitarian support in Ukraine^(a)

0.2 %

0.2 %

Cost Optimization charges^(c)

— %

0.4 %

Amortization of acquired intangible assets

1.2 %

1.2 %

Non-GAAP income from operations as a percentage of revenues^(e)

15.5% to 16.5%

15.5% to 16.0%

(e)

EPAM has not included the impact of potential future one-time charges including asset impairments, unusual gains and losses, expenses incurred in connection with future cost optimization actions, and other acquisition-related expenses because the Company is unable to predict these amounts with reasonable certainty.

Reconciliation of expected GAAP to non-GAAP effective tax rate is presented in the table below:

Third Quarter 2026

Full Year 2026

GAAP effective tax rate (approximately)

25.0 %

27.0 %

Tax effect on non-GAAP adjustments

(0.8) %

(0.8) %

Tax shortfall related to stock-based compensation

(0.2) %

(2.3) %

Net discrete benefit from tax planning^(d)

— %

0.1 %

Non-GAAP effective tax rate (approximately)

24.0 %

24.0 %

Reconciliation of expected GAAP to non-GAAP diluted earnings per share is presented in the table below:

Third Quarter 2026

Full Year 2026

GAAP diluted earnings per share

$2.33 to $2.41

$8.22 to $8.38

Stock-based compensation expenses

0.85

3.55

Included in cost of revenues (exclusive of depreciation and amortization)

0.39

1.66

Included in selling, general and administrative expenses

0.46

1.89

Humanitarian support in Ukraine^(a)

0.05

0.20

Cost Optimization charges^(c)

—

0.52

One-time charges^(e)

0.02

0.03

Amortization of acquired intangible assets

0.34

1.34

Change in fair value of contingent consideration

—

0.05

Foreign exchange loss

0.06

0.22

Provision for income taxes:

     Tax effect on non-GAAP adjustments

(0.28)

(1.30)

     Tax shortfall related to stock-based compensation

0.01

0.26

     Net discrete benefit from tax planning^(d)

—

(0.01)

Non-GAAP diluted earnings per share^(e)

$3.38 to $3.46

$13.08 to $13.24