EPAM Systems (EPAM) Q2 2026 earnings summary

Executive summary

• Q2 2026 revenue reached $1.415 billion, up 4.5% year-over-year, with organic constant currency growth of 3.4%.

• AI-native revenues accelerated for the sixth consecutive quarter, now over $160 million and 11% of total revenue, with double-digit sequential growth.

• Profitability improved: GAAP income from operations up 20.4% and non-GAAP up 14.7% year-over-year; GAAP diluted EPS was $1.97 (up 26.3%), non-GAAP $3.38 (up 22%).

• Strategic partnerships expanded, joining the OpenAI Partner Network and deepening collaborations with Google, Anthropic, and others; recognized with multiple industry awards for AI and consulting leadership.

• Four of six verticals grew year-over-year, led by financial services (up 11.5%) and life sciences/healthcare (up 8%); EMEA delivered strong double-digit growth, while Americas growth was modest and APAC declined slightly.

Financial highlights

• GAAP gross margin improved to 30.4% (from 28.8%); non-GAAP gross margin rose to 32% (from 30.1%).

• Cash and equivalents stood at $800 million at quarter end; DSO increased to 82 days.

• Cash flow from operations was negative $2 million in Q2, impacted by timing of client payments and higher variable compensation; free cash flow was negative $18 million.

• Repurchased 1.3 million shares in Q2, returning $1.6 billion to shareholders since program inception; $85 million spent on share repurchases in Q2, $409 million year-to-date.

• Net income for Q2 was $103.0 million (7.3% margin), up from $88.0 million (6.5%) in Q2 2025.

Outlook and guidance

• Full-year 2026 revenue growth expected at 3.2%-4.2%, with organic constant currency growth of 2%-3%; guidance range $5.632B–$5.686B.

• GAAP income from operations forecasted at 10.5%-11%; non-GAAP at 15.5%-16%.

• GAAP diluted EPS guidance: $8.22-$8.38; non-GAAP diluted EPS: $13.08-$13.24, over 14% growth at midpoint.

• Q3 2026 revenue expected at $1.410-$1.425 billion, up 1.7% year-over-year at midpoint.

• Free cash flow conversion for 2026 expected at 70%, below typical 80%-90%, but anticipated to normalize in 2027; long-term target of $1.8B+ cumulative free cash flow from 2026–2028.