EPAM (EPAM) Q1 FY26 earnings call: guidance and Q&A

Can you elaborate on the reasons for the 2026 organic growth guide revision? Is it a few large engagements slowing or a broader dynamic? What gives confidence in H2 sequential growth, and does it assume geopolitical volatility moderates?

The Q2 impact is from a handful of customers delaying decisions, primarily in April/May. The H2 confidence is not based on geopolitical moderation, but on a pipeline of unusually large AI-native vendor consolidation and transformation deals that were previously inaccessible to EPAM, which are expected to close and ramp in Q3/Q4.

“Number one, in our estimate, we are not kind of considering that the geopolitical environment changes significantly. So we are guiding as we see it right now. So we're not assuming anything significantly changing in the current geopolitical setup. At the same time, we have quite a bit of -- as I in the prepared remarks, I highlighted large, unusually large opportunities, which we are targeting.”

asked by Bryan Bergin · answered by Balazs Fejes

How different is the Anthropic partnership model from your traditional delivery, and could it drive an inflection in AI native revenue growth?

The Anthropic partnership is an expansion, not a pivot, leveraging EPAM's established playbook of preparing engineers and achieving certifications. Over 1,400 Claude architects are already certified. EPAM will go to market with Anthropic to bring applied AI solutions, focusing on AI native transformation, and expects acceleration from this partnership.

“I think Anthropic is going to be a very important relationship for -- we are -- I think we are following a playbook, which we've done before. We are -- we prepared preprepared engineers with our internal development. Once commercial products became available and certification quickly. We pivoted towards uncertified or engineering team. I just checked this morning, we are over 1,400 certified cloud architects as of this moment.”

asked by Bryan Bergin · answered by Balazs Fejes

Does the full-year guidance range consider any broadening of weakness beyond the currently affected subset of clients? Are specific verticals more impacted?

The lower end of the guidance range reflects potential broadening of delayed decision-making. While Financial Services and Hi-Tech show strong demand, impacts are already seen in the travel and consumer sectors. The company is confident about larger opportunities in H2, but the bottom end accounts for potential wider weakness.

“So again, we took the top down because we are sort of have a less rapid entry into the second half. We still feel good, as FB said, about some of the larger opportunities that we're looking to close here in the second half, but the bottom end of the range clearly reflect that there's some broadening of the delayed decision-making.”

asked by Margaret Nolan · answered by Jason Peterson

Can you provide more detail on quarter-over-quarter revenue growth expectations for Q3 and Q4, and clarify the nature and risk-adjusted inclusion of the large vendor consolidation opportunities in the H2 guide?

H2 expects stronger sequential growth driven by seasonal factors and a subset of large deals. There are close to 10 such opportunities, which are outsized, non-T&M, combine AI, and involve business transformation/vendor consolidation. These are outside EPAM's typical norm. The guide includes a risk-adjusted subset, not all of them, due to uncertainty in closing and ramping speed.

“So it's no longer just 3 or 4. We're actually talking about close to 10 opportunities at this point of time. These opportunities are outsized in terms of range, all of them are non-T&M, so different commercial models, combining AI, token in the picture themselves. They are -- it's a variation of business transformation, vendor consolidation and the size is really outside of EPAM's norm, what we typically do.”

asked by Jason Kupferberg · answered by Balazs Fejes

How do you manage margins with tokenization costs in longer-duration projects? Also, what types of M&A are you considering for H2, and what are current valuation dynamics?

Managing token costs involves controlling model usage (task, model, frequency), selecting the right blend of models for ROI, and multi-sourcing tokens from various providers to optimize price, availability, and cash hit limits. This capability is crucial for pricing and profit levels. For M&A, EPAM focuses on domain capabilities, data assets, and geographic expansion (e.g., Asia Pac). While there's a disconnect between private market expectations and public valuations, M&A may be prioritized later in the year, alongside ongoing share repurchases.

“What you need to do is you need to control multiple aspects. You need to, first of all, control the model usage, what task, which model you are using what is the frequency of that model. You need to have the right blend of model. So what we are building out is this blending capability, which is which where for each particle task, you need to select the right model, which is able to execute, but cheap enough to deliver the ROI.”

asked by James Faucette · answered by Balazs Fejes