EPAM’s first quarter results received a negative market reaction, as investors focused on signs of persistent client caution and delays in decision-making, particularly in North America. Management attributed revenue growth to increased demand for AI-native services, with CEO Balazs Fejes highlighting that “pure AI revenues exceeded $125 million in Q1, up nearly 20% sequentially from Q4.” However, the company also noted that macroeconomic uncertainty and underperformance in certain verticals, such as travel and consumer, contributed to lower visibility for the remainder of the year.
Is now the time to buy EPAM? Find out in our full research report (it’s free for active Edge members).
EPAM (EPAM) Q1 CY2026 Highlights:
- Revenue: $1.4 billion vs analyst estimates of $1.40 billion (7.6% year-on-year growth, in line)
- Adjusted EPS: $2.86 vs analyst estimates of $2.75 (3.8% beat)
- Adjusted EBITDA: $214.6 million vs analyst estimates of $210.5 million (15.3% margin, 1.9% beat)
- Revenue Guidance for Q2 CY2026 is $1.41 billion at the midpoint, below analyst estimates of $1.42 billion
- Management raised its full-year Adjusted EPS guidance to $13.13 at the midpoint, a 3% increase
- Operating Margin: 8.3%, in line with the same quarter last year
- Constant Currency Revenue rose 3.7% year on year (1.4% in the same quarter last year)
- Market Capitalization: $4.72 billion
While we enjoy listening to the management's commentary, our favorite part of earnings calls are the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.
Our Top 5 Analyst Questions From EPAM’s Q1 Earnings Call
- Bryan Bergin (TD Cohen) asked how much of the guidance revision was due to delays in a few large deals versus a broader slowdown; CEO Balazs Fejes clarified that delays were concentrated among a handful of customers, while CFO Jason Peterson noted guidance does not assume geopolitical improvement.
- Margaret Nolan (William Blair) questioned if guidance assumed broadening client weakness across verticals; Peterson explained the lower end of guidance reflects the possibility of wider delays, with Fejes identifying travel and consumer as areas of softness.
- Jason Kupferberg (Wells Fargo) sought details on the nature and risk adjustment of large pipeline deals; management confirmed nearly 10 outsized opportunities, emphasizing they are not fully included in guidance due to conversion uncertainty.
- Yu Lee (Guggenheim) asked about EPAM’s ability to execute on larger deals and the impact on margins; Fejes responded that the company has built differentiated AI offerings but is cautious about ramp speed, while Peterson noted AI-native projects run at higher profitability.
- Bryan Keane (Citi) explored changes in contract pricing and token economics with AI partnerships; Fejes stated pricing models are evolving but most clients currently bear token costs, while Peterson highlighted successful rate increases for a minority of clients.
Catalysts in Upcoming Quarters
Looking ahead, the StockStory team will closely watch (1) the pace and conversion of large, multi-year AI and vendor consolidation deals, (2) the impact of expanded AI partnerships and certifications on client traction, and (3) continued progress on cost optimization and margin improvement initiatives. The evolution of client spending patterns in North America and the resilience of demand in key verticals will also be key indicators for future performance.
EPAM currently trades at $91.47, down from $106.97 just before the earnings. In the wake of this quarter, is it a buy or sell? The answer lies in our full research report (it’s free).
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