EPAM Systems is a global technology services firm that designs, builds, and modernizes software for clients in banking, retail, travel, software, media, and healthcare. It was founded in 1993 by Belarusian immigrant Arkadiy Dobkin in Princeton, New Jersey, who built it on Eastern European engineering talent serving Western clients. Though fans joke the name stands for "Effective Programming for America," it actually comes from the initials of its founders.
Operating margin rebounded to 10.8% as cost optimization and lower compensation costs took hold, even as revenue growth slowed to 4.5%.
Profitability turned a corner this quarter. rose 4.5% to $1.41 billion, but expanded to 10.8% from 9.3% a year ago as cost of revenues fell relative to sales, driving a 26.3% increase in to $1.97. The margin recovery is underway, though revenue growth is now slowing as acquisition contributions annualize.
Key takeaways
expanded to 10.8% from 9.3% a year ago, the highest level in six quarters, driven by cost of revenues declining as a percentage of sales due to cost optimization and lower compensation costs.
rose 4.5% to $1.41 billion, with foreign exchange contributing 1.1 percentage points; on a constant-currency basis, growth was 3.4%, indicating organic demand improvement as the boost from 2024 acquisitions annualizes.
improved to 30.4% from 28.8% a year ago, crossing back above 30% for the first time in four quarters as compensation expense eased relative to .
Section summaries
Management's Discussion and Analysis
EPAM Q2 2026 revenue rose 4.5% to $1.415B, with operating margin expanding to 10.8% driven by cost optimization and lower compensation costs.
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Total revenues grew 4.5% to $1.415B in Q2 2026, with a 1.1% from foreign exchange; six-month revenues rose 6.0% to $2.815B.
margin improved to 10.8% in Q2 2026 from 9.3% a year ago, primarily due to cost of revenues declining as a percentage of sales.
The Americas grew only 0.6% , but surged 15.1% due to cost optimization initiatives; Financial Services was the top vertical, up 15.3%.
rose 26.3% to $1.97, aided by higher and a reduced share count from accelerated share repurchases.
Europe rose 10.0% with up 24.4%, led by Life Sciences & Healthcare and Software & Hi-Tech, while Americas revenue grew only 0.6% but operating profit rose 15.1% on cost optimization.
for the first half of 2026 was negative $38.8 million, pressured by higher variable compensation payouts tied to 2025 performance and an increase in .
What changed
Q2 2026 at 30.4% answered the question flagged last quarter: the 27.7% Q1 print was not a new floor, and margins have now recovered above 30% as compensation costs eased and acquisition integration costs annualized.
growth slowed to 4.5% from 18.0% a year ago, confirming the watch item that double-digit growth would fade as the 2024 acquisition contribution annualized; constant-currency growth of 3.4% suggests underlying organic demand is still expanding.
remained negative at -$38.8 million for the half, extending the Q1 seasonal outflow flagged last quarter, as variable compensation payments and higher continued to weigh on cash generation.
Cash held in Ukraine and Belarus totaled $71.6 million at quarter-end, down from the $113.5 million flagged in Q1, though it remains uninsured and exposed to banking instability with Belarus restrictions extended through 2026.
What to watch
Q3 2026 against the $1,394.4 million Q3 2025 base to see if sustains as the acquisition contribution fully annualizes and constant-currency growth holds near 3.4%.
Q3 2026 to see if the 10.8% level continues expanding toward the mid-teens as cost optimization and lower compensation costs flow through, now that the Poland R&D incentive comparison has neutralized.
Q3 2026 to see if the negative $38.8 million first-half print reverses as variable compensation payments normalize and improve.
Next quarter cash in Ukraine and Belarus given $71.6 million uninsured and Belarus restrictions through end-2026 limiting repatriation.
The Europe jumped 10.0% (8.5% in ), with up 24.4%, led by strong growth in Life Sciences & Healthcare and Software & Hi-Tech.
rose to $1.97 from $1.56, aided by higher and a lower share count from accelerated share repurchases.
turned negative at -$38.8M for the first half of 2026, impacted by higher variable compensation payouts and an increase in .
Quantitative and Qualitative Disclosures About Market Risk
Market risks stem from credit concentration in unstable banking regions, foreign exchange exposure, and interest rates, managed via hedging and cash monitoring.
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As of June 30, 2026, the company held $37.5M in cash in Belarus and $34.1M in Ukraine, where banking sectors face periodic instability and deposits are uninsured.
Belarusian restrictions through end of 2026 may prevent repatriation of excess funds, though the company does not expect a material impact on meeting global cash obligations.
Trade are dispersed across many clients and industries, limiting credit risk concentration, and historical credit losses have not been material.
Approximately 40.1% of Q2 2026 consolidated revenues were denominated in non-U.S. dollar currencies, primarily euros, British pounds, and Swiss francs.
The company hedges a portion of forecasted non-U.S. dollar operating expenses using foreign exchange forward contracts of twelve months or less, designated as .
analysis shows Q2 2026 growth would have been 3.4% instead of the reported 4.5%, while growth would have been 28.1% instead of 20.4%.
From time to time, we are involved in litigation and claims arising out of our business and operations in the normal course of business. We are not currently a party to any material legal proceeding, nor are we aware of any material legal or governmental proceedings pending or c…
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From time to time, we are involved in litigation and claims arising out of our business and operations in the normal course of business. We are not currently a party to any material legal proceeding, nor are we aware of any material legal or governmental proceedings pending or contemplated to be brought against us.
For a discussion of our potential risks and uncertainties, including the role of AI technologies in our business and workforce and as competition to the services that we sell, and our significant operations in Belarus and Ukraine and the material adverse effect the invasion of U…
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For a discussion of our potential risks and uncertainties, including the role of AI technologies in our business and workforce and as competition to the services that we sell, and our significant operations in Belarus and Ukraine and the material adverse effect the invasion of Ukraine by Russia has had and may have on our operations, business, and financial results, see the risk factors disclosed under the heading “Part I. Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2025.
The risks and uncertainties that we face are not limited to those set forth in our Annual Report on Form 10-K. Additional risks and uncertainties not presently known to us or that we currently believe to be immaterial may also adversely affect our business and the trading price of our common stock.