EPAM Systems, Inc. Q2 2026 Earnings Call Summary

Moby Intelligence

Fri, August 7, 2026 at 1:11 AM GMT+3 3 min read

EPAM +4.68%

EPAM Systems, Inc. Q2 2026 Earnings Call Summary - Moby

Strategic Performance and Operational Context

Our analysts just identified a stock with the potential to be the next Nvidia. Tell us how you invest and we'll show you why it's our #1 pick. Tap here.

Revenue growth reached the high end of the outlook range, driven by strong double-digit performance in EMEA and the Financial Services vertical.
Management identified a 'growth gap' in North America where clients are reprioritizing budgets away from task-based services like manual testing and front-end engineering toward AI-led modernization.
The Software & Hi-Tech vertical experienced project ramp downs in non-AI services that outweighed growth in AI, cloud, and cybersecurity work.
EPAM is executing a multi-quarter commercial transformation in North America to shift from an engineering-fulfillment focus to a domain-led, business-case-driven sales motion.
AI-native revenues reached $160 million, representing 11% of total business and marking the sixth consecutive quarter of sequential double-digit growth.
The company is aggressively building a multimodal bench through elite partnerships with OpenAI, Google, and Anthropic to address the increasing complexity AI adds to enterprise architecture.
Management attributes the North American underperformance to idiosyncratic go-to-market execution issues rather than broad macro deterioration.

Outlook and Strategic Assumptions

Full-year revenue guidance was lowered to 3.2% to 4.2% growth, assuming flattish sequential revenue from Q3 to Q4 due to slow recovery in North America.
Meaningful revenue contribution from a growing pipeline of large, multiyear AI-led deals is now expected in the first half of 2027 rather than late 2026.
Management maintains a target of $600 million in pure AI-native revenues for the full year 2026.
Profitability expectations were raised to the high end of the 15% to 16% adjusted income from operations range due to first-half performance and cost discipline.
Free cash flow conversion for 2026 is projected at approximately 70%, below the typical 80% to 90% range, due to timing of client payments and higher variable compensation.

Operational Risks and Structural Adjustments

The 2025 cost optimization program was completed in Q2; subsequent severance-related expenses will no longer be adjusted out of non-GAAP results.
DSO increased to 82 days in Q2, partly due to specific client payment delays occurring in the final days of the quarter.
Geopolitical volatility, specifically the persistent war in the Middle East, continues to contribute to prolonged client decision-making cycles.
The transition to AI-native services is noted as non-linear, with some legacy programs stopping faster than new AI-led work can ramp.

Q&A Session Highlights

One stock. Nvidia-level potential. 30M+ investors trust Moby to find it first. Get the pick. Tap here.

Specific drivers of North American idiosyncratic weakness and recovery timeline

The weakness is concentrated in the SaaS client base within the Software & Hi-Tech sector, where spend is shifting toward GPUs and tokens.
Recovery depends on a 'capability gap' fix in business development, moving beyond pure engineering excellence to selling business outcomes.
Management noted that the EMEA region's double-digit growth serves as a proven model for this domain-led sales approach.

Sustainability of gross margins and impact of foreign exchange

Gross margins improved despite negative FX headwinds from appreciating currencies in Poland, Hungary, and Mexico.
Profitability was supported by price increases achieved earlier in the year and improved efficiency in fixed-fee projects.
Management expects to maintain gross margins in excess of 32% for the remainder of the year.

Composition and timing of the 'big deals' pipeline

The pipeline includes significant opportunities in regulated industries like banking and insurance, focusing on agentic managed services and mainframe transformation.
While these deals are progressing and the pipeline is growing, management is excluding them from current guidance until closing and ramp timing are certain.
These deals represent 'complementary growth' in areas where EPAM has not historically competed, such as BPO-style managed services.