EPAM Systems Experiences Stock Decline Despite Strong Earnings
IT consulting firm EPAM Systems saw its stock drop by 18.4% by 10 a.m. ET on Thursday, even after reporting better-than-expected sales and earnings.
Prior to the release of the fourth-quarter earnings, analysts projected EPAM to earn $3.16 per share on revenues close to $1.4 billion. Surprisingly, EPAM reported earnings of $3.26 per share, albeit on modest revenue of exactly $1.4 billion.
However, the seeming positive results may not tell the full story. While EPAM’s sales climbed 13% in the fourth quarter, the company trumpeted its pro forma profit numbers (with a 15% rise in non-GAAP profit), but its actual profit—calculated under generally accepted accounting principles (GAAP)—was far lower, at just $1.98 per share. That’s a 39% disparity compared to non-GAAP figures, and only a 10% year-over-year increase.
For the entire year, EPAM reported $5.5 billion in revenue, marking a 15% increase, but with a modest 6% rise in non-GAAP profit. The GAAP profit was reported at $1.5 billion, translating to approximately $6.72 per share.
CEO Balazs Fejes mentioned that the company is “scaling and accelerating AI-native revenue,” claiming EPAM is an AI stock, and the revenue trends support that. However, the weak GAAP earnings in the fourth quarter and the overall year-over-year earnings drop are concerning.
On a brighter note, EPAM’s guidance suggests potential earnings improvement ahead. The company anticipates a slower sales growth rate of about 6% into 2026 but forecasts an earnings rise to about $8.10 per share—20% above last year’s figures, which would significantly outpace sales growth.
Currently, EPAM’s stock trades at slightly over $136, and with a projected 20% earnings growth, the stock is positioned at just 16.8 times earnings. This decline could potentially offer a solid buying opportunity for investors interested in EPAM.
Before considering an investment in EPAM Systems, it’s wise to take note of additional insights available on other stock recommendations.
