EPAM Systems, Inc.

EPAM Systems develops software and provides engineering and consulting services to businesses. It reports operations through Americas and Europe customer segments and delivers work through teams across multiple countries. Its shares trade as EPAM on the New York Stock Exchange.

Comparable quarterly earnings

Adjusted earnings exclude stock compensation, acquired-intangible amortization, restructuring and specified other costs, gains and tax effects. Poland R&D incentives reduced cost of revenue by $12.0 million in Q3, versus $13.2 million a year earlier; the current recurring benefit remains in adjusted results.

Management attributes margin improvement to lower variable-compensation expense and higher profitability on client accounts. The smaller share count also increased earnings per share.

Earlier forecasts and updated expectations

In August, EPAM forecast Q3 revenue of $1.410 billion to $1.425 billion and adjusted EPS of $3.38 to $3.46. Actual revenue of $1.426 billion and adjusted EPS of $3.51 exceeded both ranges.

The annual adjusted-EPS forecast is now $13.23 to $13.31, compared with $13.08 to $13.24 in August. Annual organic constant-currency revenue growth is now expected at 2.5% to 2.7%, within the previous 2% to 3% range. This measure excludes currency movements and acquired revenue for the first year after purchase.

Organic constant-currency growth slowed from 3.7% in Q1 to 3.4% in Q2 and 2.5% in Q3. Q4 guidance calls for 0.5% to 1.6% growth on that basis and adjusted EPS of $3.50 to $3.58.

Cash generation and repurchases

The company links weaker nine-month operating cash to higher bonus payments based on 2025 results and a larger increase in collection times. Q3 itself generated $288.8 million of operating cash and $274.2 million of free cash flow, compared with $294.7 million and $286.4 million a year earlier.

Nine-month repurchase payments were approximately 2.4 times free cash flow. They include a $300 million accelerated buyback paid in March and finally settled in shares on April 17.

The new capital-return framework

The board authorized a replacement $1.8 billion repurchase program on September 30, running through December 31, 2029. That total includes the previous program's remaining $293 million.

EPAM expects to enter a separate $500 million accelerated buyback during the week of November 9, funded with cash and borrowing under its existing facility. It also commits to returning at least 50% of free cash flow to shareholders in each year from 2027 through 2029.

The November investor presentation includes a target of at least $1.8 billion of cumulative free cash flow over 2026 through 2028. This covers a different period from the annual shareholder-return commitment.

Liquidity and other commitments

At September 30, EPAM held $965.2 million of cash and cash equivalents, with a further $4.8 million of restricted cash. It had $25 million drawn on a $700 million revolving facility and $675 million of borrowing capacity available. The facility matures October 3, 2030, and the company was in compliance with its covenants.

Remaining software-license payments were approximately $18.5 million, expected in 2026. A five-year cloud-services agreement signed in March 2023 had $30.3 million of spending commitments remaining; cancellation would cost 20% of the unused commitment.