EPAM Systems, Inc. Q3 FY2025 earnings call

Balazs Fejes noted Q3 was another quarter of double-digit revenue growth with 7.1% organic constant currency growth, marking the fourth consecutive quarter of positive organic constant currency growth. The company benefits from AI and AI-native led demand, with clients prioritizing AI build-outs. Highlights include the launch of AI/RUN Transform and Agentic QA, client collaborations (e.g., with a major telecommunications provider and Hugo Boss), and headcount details: ended Q3 with over 56,100 consultants, total growth 17.5% and organic growth 6.4% compared to Q3 2024.

In the third quarter, EPAM generated revenue of $1.394 billion, a year-over-year increase of 19.4% on a reported basis. Organic constant currency revenue growth was 7.1%. Five out of 6 verticals saw year-over-year growth. Financial Services delivered very strong growth, up 32.7% year-over-year on a reported basis with 6% organic growth in constant currency. Software and Hi-Tech grew 19.1% year-over-year. Life Sciences and Healthcare increased 11.8% year-over-year. Consumer goods, retail and travel had 9.9% year-over-year growth. Business Information & Media was flat. Emerging verticals grew 38.9% year-over-year. Geographically, Americas (representing 58% of Q3 revenues) grew 16% year-over-year; EMEA (40% of revenues) increased 24.9% year-over-year; APAC (2% of revenues) grew 17.7% year-over-year.

Based on strong Q3 and Q4 visibility, EPAM is expecting a strong Q4 exit. The company raised the bottom end of the range for 2025 full year organic constant currency revenue growth, with the midpoint now at 4.6%. There's an improved profitability outlook for Q4 and full year 2025. For Q4, revenue is expected to be in the range of $1.380 billion to $1.395 billion, with a 4.4% midpoint organic constant currency growth.

Enterprise risk increases with complexity, and the importance of advanced engineering and risk management is often overlooked. Seasonality impacts Q4 with more holidays, vacations, and potential furloughs, negatively affecting Q4 compared to Q3. Additionally, the impact of acquisitions and the release of excess client budgets can influence performance.

Q: Maggie Nolan asked about Agentic BPO and build vs buy.

A: Balazs Fejes responded that it's early days, using EPAM's build platform, and it's different from past RPA; it's early to size the impact but clients are showing build momentum.

Q: Bryan Bergin inquired about 4Q exit rate and growth potential.

A: Jason Peterson stated seasonality causes a headwind with fewer bill days, more vacations, and potential furloughs, but sequential growth has been surprisingly consistent when adjusting for factors.

Q: Jason Kupferberg asked about organic constant currency deceleration and 2026 growth.

A: Jason Peterson said clients continue investing but there's no significant release of excess budgets, and organic growth is expected to be higher in 2026 with positive signals in the pipeline.

Q: Jonathan Lee asked about winning share from peers.

A: Balazs Fejes explained it's due to deep engineering skill sets, risk management, and reliability, and the company is investing in people, tooling, and playbooks to maintain advantage.

Q: James Schneider asked about cost focus.

A: Balazs Fejes talked about rebalancing the pyramid to optimize costs, and Jason Peterson mentioned improved account margin as a result of cost focus efforts.

Q: James Friedman asked about agentic delivery.

A: Balazs Fejes said agentic delivery requires a complex agentic life cycle, more complex than SDLC, and it's a significant shift for clients.

Q: David Grossman asked about revenue per head.

A: Jason Peterson noted there's noise in the revenue per head number due to factors like utilization and foreign exchange, but there's some price uplift contributing to it.

Q: Bryan Keane asked about headcount and revenue per head.

A: Jason Peterson said headcount is expected to increase in Q4, and NEORIS and FD have an impact on organic growth, with pricing expected to be better in 2026.

Q: Sean Kennedy asked about AI projects.

A: Balazs Fejes said AI projects require senior engineering, similar profitability now, but have potential for better profitability in the future.

Q: Paul Obrecht asked about AI impact on headcount.

A: Balazs Fejes stated demand increase will outstrip efficiency gains from AI, so the company will continue to hire and grow.

Q: Antonio Jaramillo asked about GenAI revenue and Software and Hi-Tech growth.

A: Jason Peterson and Balazs Fejes discussed GenAI revenue growth and Software and Hi-Tech growth driven by strong execution and large clients