Grid Dynamics Holdings, Inc. Q3 FY2025 earnings call

• Third quarter revenue of $104.2 million was an all-time high, fueled by AI demand which grew 10% sequentially and contributed over 25% of organic revenue. • Board authorized $50 million share repurchase program, reflecting confidence in long-term prospects. • Strong pipeline of new large enterprise logos in Q3, with new programs multi-quarter and budgets extending into 2026. • Partnership influence revenue exceeded 18% of third quarter revenue. • Midst of company-wide initiative to expand profitability and margins, aiming to improve margins by at least 300 basis points over next 12 months through efficiency improvements, enhanced pricing, portfolio rebalancing, and AI-first initiatives. • Advancing transformation into AI-first company with 3 horizons: AI-first delivery, Agentic AI at scale and physical AI. AI-first delivery centered on transforming engineering and delivery capabilities, with GAIN showing strong adoption and pilots at major clients. • Americas SVP discussed notable projects like AI-driven bug triage solution, compliance system for Digital Markets Act, AI-driven search platform modernization, and automotive parts provider's search engine replacement project. • Global Head of Partnerships and Marketing mentioned partner influence revenue over 18% of total company revenue, organizing partners into platform and ISV categories.

Third quarter revenue was $104.2 million, an all-time high. AI grew 10% sequentially and contributed to over 25% of third quarter organic revenue. Vertical performance: Retail was the largest vertical, contributing $27.8 million in Q3 2025, down 2.9% year-over-year. TMT accounted for 27.4% of total revenues, with 18.2% year-over-year growth. Finance vertical accounted for 24.6% of total revenues, up 81% year-over-year. CPG and Manufacturing represented 10.5% of quarterly revenues, with 11.3% year-over-year growth. Other vertical contributed 7.4% of total revenues, up 10.5% year-over-year. Health care and pharma made up 2.3% of revenues for the quarter.

• Fourth quarter revenue expected to be in the range of $105 million to $107 million. • Fourth quarter non-GAAP EBITDA expected to be in the range of $13 million to $14 million. • Full year revenue outlook between $410.7 million to $412.7 million, representing 17.1% to 17.7% growth year-over-year.

• Exposure to currency basket across Europe, Latin America and India, with FX fluctuations impacting EBITDA. • Market competition risks in the AI-driven industry which could affect market share.

Q: So, it was good to see increase in number of billable headcount this quarter, which you also expect to continue into 4Q. Talk to us like about the trends you are seeing for 2026? Like can growth rates next year meaningfully accelerate from like the broad set of clients compared to what you are guiding for 2025?

A: Thank you, Puneet. It's good to talk at the time when we can be comfortable to discuss the growth. First and foremost, we are the highest billable headcount in the history of the company. The rate of growth has also picked up quite a bit, and we see that going into the Q4. But why we're comfortable looking forward for the next year at this point? First and foremost, the programs we have recently renewed or we signed for are longer in nature. They're not going on a short duration. They're going on multi-quarters. The second part of that is that the programs are related to the AI initiatives, a lot of technology application, which brings the core of us bread and butter of our business. The other part, which is important is that we don't get only stuck with the traditional renewals in the beginning of the year because some of our clients now have the sliding schedule for the new fiscal year. So notable clients had their fiscal year starting in October, which means that we are very comfortable to see the growth coming through, again, longer duration. And finally, as we have told you guys before, we have a number of our top 10 clients who elect Grid Dynamics to be a preferred vendor. It wasn't as evident in the last few quarters because they were a little bit slow on expanding their technology investments. Now they're full swing, and we're taking advantage of that benefiting from being a preferred partner.

Q: I wanted to follow up actually a little bit on that last question as it relates to the Agentic work and some of the TAM expansion. So particularly this Agentic managed services activity that seems like it's brand new as far as an opportunity for you versus the custom build activity that you're known for. When you think about the work, the Agentic work that you're doing for clients, is there a way to segment how much of it is in this kind of new managed services area versus what would be kind of just SDLC-enhanced Agentic activity? Because I think, obviously, that's a huge market, the IT managed services industry that you could penetrate here in a new way.

A: Yes. So, thank you so much, Bryan, for the question. I would say, currently, majority of the revenue, which we see are actually related to solving the business cases. As SDLC, I would say, expansion of existing programs and helps to open new accounts, but this is broad in nature. So, it's actually -- it goes through majority of our engagement. So, it's very difficult to discern what exactly would be the incremental gain, I would say. It just fuels overall growth, which we saw in Q3 and was significant.