EPAM’s (NYSE:EPAM) Q2 Sales Beat Estimates, Guides for Strong Sales Next Quarter

Digital engineering services company EPAM Systems (NYSE:EPAM) reported Q2 CY2025 results exceeding the market’s revenue expectations, with sales up 18% year on year to $1.35 billion. Guidance for next quarter’s revenue was better than expected at $1.37 billion at the midpoint, 1.5% above analysts’ estimates. Its non-GAAP profit of $2.77 per share was 6% above analysts’ consensus estimates.

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"We're pleased with another strong quarter of sequential organic growth—our third in a row—marking a return to greater consistency in our performance," said Arkadiy Dobkin, CEO and President at EPAM.

Company Overview

Founded in 1993 during the early days of offshore software development, EPAM Systems (NYSE:EPAM) provides digital engineering, cloud, and AI transformation services to help global enterprises and startups modernize their technology systems and create digital products.

Revenue Growth

Examining a company’s long-term performance can provide clues about its quality. Any business can experience short-term success, but top-performing ones enjoy sustained growth for years.

With $5.07 billion in revenue over the past 12 months, EPAM is one of the larger companies in the business services industry and benefits from a well-known brand that influences purchasing decisions.

As you can see below, EPAM’s sales grew at an incredible 15.2% compounded annual growth rate over the last five years. This shows it had high demand, a useful starting point for our analysis.

We at StockStory place the most emphasis on long-term growth, but within business services, a half-decade historical view may miss recent innovations or disruptive industry trends. EPAM’s recent performance shows its demand has slowed significantly as its annualized revenue growth of 2.4% over the last two years was well below its five-year trend.

We can dig further into the company’s sales dynamics by analyzing its constant currency revenue, which excludes currency movements that are outside their control and not indicative of demand. Over the last two years, its constant currency sales were flat. Because this number is lower than its normal revenue growth, we can see that foreign exchange rates have boosted EPAM’s performance.

This quarter, EPAM reported year-on-year revenue growth of 18%, and its $1.35 billion of revenue exceeded Wall Street’s estimates by 1.5%. Company management is currently guiding for a 17.6% year-on-year increase in sales next quarter.

Looking further ahead, sell-side analysts expect revenue to grow 9.3% over the next 12 months, an improvement versus the last two years. This projection is noteworthy and suggests its newer products and services will catalyze better top-line performance.

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Operating Margin

EPAM has done a decent job managing its cost base over the last five years. The company has produced an average operating margin of 11.8%, higher than the broader business services sector.

Analyzing the trend in its profitability, EPAM’s operating margin decreased by 3.9 percentage points over the last five years. This raises questions about the company’s expense base because its revenue growth should have given it leverage on its fixed costs, resulting in better economies of scale and profitability.

In Q2, EPAM generated an operating margin profit margin of 9.3%, down 1.2 percentage points year on year. This reduction is quite minuscule and indicates the company’s overall cost structure has been relatively stable.

Earnings Per Share

We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.

EPAM’s spectacular 14% annual EPS growth over the last five years aligns with its revenue performance. This tells us it maintained its per-share profitability as it expanded.

Like with revenue, we analyze EPS over a more recent period because it can provide insight into an emerging theme or development for the business.

EPAM’s flat two-year EPS was bad and lower than its 2.4% two-year revenue growth.

Diving into the nuances of EPAM’s earnings can give us a better understanding of its performance. EPAM’s operating margin has declined by 3 percentage points over the last two years. This was the most relevant factor (aside from the revenue impact) behind its lower earnings; interest expenses and taxes can also affect EPS but don’t tell us as much about a company’s fundamentals.

In Q2, EPAM reported adjusted EPS at $2.77, up from $2.45 in the same quarter last year. This print beat analysts’ estimates by 6%. Over the next 12 months, Wall Street expects EPAM’s full-year EPS of $11.14 to grow 3.2%.

Key Takeaways from EPAM’s Q2 Results

We enjoyed seeing EPAM beat analysts’ EPS guidance for next quarter expectations this quarter. We were also glad its revenue guidance for next quarter exceeded Wall Street’s estimates. On the other hand, its constant currency revenue missed. Overall, we think this was a decent quarter with some key metrics above expectations. The stock traded up 3.5% to $156.70 immediately following the results.

EPAM put up rock-solid earnings, but one quarter doesn’t necessarily make the stock a buy. Let’s see if this is a good investment. What happened in the latest quarter matters, but not as much as longer-term business quality and valuation, when deciding whether to invest in this stock. We cover that in our actionable full research report which you can read here, it’s free.