UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
| ☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | ||||
For the quarterly period ended March 31, 2026
OR
| ☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | ||||
For the transition period from ________to________
Commission file number: 001-35418
EPAM SYSTEMS, INC.
(Exact name of registrant as specified in its charter)
| Delaware | 22-3536104 | ||||||||||
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | ||||||||||
| 41 University Drive | Suite 202 | 18940 | |||||||||
| Newtown | Pennsylvania | ||||||||||
| (Address of principal executive offices) | (Zip code) | ||||||||||
267-759-9000
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
| Title of Each Class | Trading Symbol | Name of Each Exchange on which Registered | ||||||
| Common Stock, par value $0.001 per share | EPAM | New York Stock Exchange | ||||||
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☒ | Accelerated filer | ☐ | ||||||||
| Non-accelerated filer | ☐ | Smaller reporting company | ☐ | ||||||||
| Emerging growth company | ☐ | ||||||||||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
| Title of Each Class | Outstanding as of April 30, 2026 | |||||||
| Common Stock, par value $0.001 per share | 52,244,451 shares | |||||||
EPAM SYSTEMS, INC.
TABLE OF CONTENTS
| Page | |||||
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
EPAM SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands, except par value)
| As of March 31, 2026 | As of December 31, 2025 | ||||||||||
| Assets | |||||||||||
| Current assets | |||||||||||
| Cash and cash equivalents | $ | 1,036,959 | $ | 1,296,077 | |||||||
Trade receivables and contract assets, net of allowance of $5,060 and $6,350, respectively | 1,174,660 | 1,108,201 | |||||||||
| Prepaid and other current assets | 145,806 | 129,610 | |||||||||
| Total current assets | 2,357,425 | 2,533,888 | |||||||||
| Property and equipment, net | 202,826 | 202,387 | |||||||||
| Operating lease right-of-use assets, net | 118,431 | 114,875 | |||||||||
| Intangible assets, net | 385,728 | 406,586 | |||||||||
| Goodwill | 1,204,577 | 1,210,564 | |||||||||
| Deferred tax assets | 283,027 | 295,115 | |||||||||
| Other noncurrent assets | 151,437 | 138,721 | |||||||||
| Total assets | $ | 4,703,451 | $ | 4,902,136 | |||||||
| Liabilities | |||||||||||
| Current liabilities | |||||||||||
| Accounts payable | $ | 40,113 | $ | 55,329 | |||||||
| Accrued compensation and benefits expenses | 567,656 | 608,232 | |||||||||
| Accrued expenses and other current liabilities | 224,171 | 250,688 | |||||||||
| Income taxes payable, current | 15,639 | 25,520 | |||||||||
| Operating lease liabilities, current | 36,750 | 37,173 | |||||||||
| Total current liabilities | 884,329 | 976,942 | |||||||||
| Long-term debt | 165,000 | 25,034 | |||||||||
| Operating lease liabilities, noncurrent | 86,193 | 81,497 | |||||||||
| Deferred tax liabilities, noncurrent | 73,795 | 76,969 | |||||||||
| Other noncurrent liabilities | 62,422 | 63,886 | |||||||||
| Total liabilities | 1,271,739 | 1,224,328 | |||||||||
Commitments and contingencies (Note 13) | |||||||||||
| Equity | |||||||||||
| Stockholders’ equity | |||||||||||
Common stock, $0.001 par value; 160,000 shares authorized; 52,757 shares issued and outstanding at March 31, 2026, and 54,274 shares issued and outstanding at December 31, 2025 | 53 | 54 | |||||||||
| Additional paid-in capital | 1,360,302 | 1,390,423 | |||||||||
| Retained earnings | 2,084,540 | 2,268,204 | |||||||||
| Accumulated other comprehensive income (loss) | (13,765) | 18,545 | |||||||||
| Total EPAM Systems, Inc. stockholders’ equity | 3,431,130 | 3,677,226 | |||||||||
| Noncontrolling interest in consolidated subsidiaries | 582 | 582 | |||||||||
| Total equity | 3,431,712 | 3,677,808 | |||||||||
| Total liabilities and equity | $ | 4,703,451 | $ | 4,902,136 | |||||||
The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.
3
EPAM SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(In thousands, except per share data)
| Three Months Ended March 31, | |||||||||||
| 2026 | 2025 | ||||||||||
| Revenues | $ | 1,400,061 | $ | 1,301,692 | |||||||
| Operating expenses: | |||||||||||
| Cost of revenues (exclusive of depreciation and amortization) | 1,012,052 | 952,008 | |||||||||
| Selling, general and administrative expenses | 239,702 | 218,917 | |||||||||
| Depreciation and amortization expense | 31,539 | 31,437 | |||||||||
| Income from operations | 116,768 | 99,330 | |||||||||
| Interest and other income, net | 1,582 | 5,814 | |||||||||
| Foreign exchange gain (loss) | 2,298 | (10,727) | |||||||||
| Income before provision for income taxes | 120,648 | 94,417 | |||||||||
| Provision for income taxes | 38,127 | 20,935 | |||||||||
| Net income | $ | 82,521 | $ | 73,482 | |||||||
| Net income per share: | |||||||||||
| Basic | $ | 1.53 | $ | 1.29 | |||||||
| Diluted | $ | 1.52 | $ | 1.28 | |||||||
| Shares used in calculation of net income per share: | |||||||||||
| Basic | 53,793 | 56,780 | |||||||||
| Diluted | 54,183 | 57,262 | |||||||||
The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.
4
EPAM SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
(In thousands)
| Three Months Ended March 31, | |||||||||||
| 2026 | 2025 | ||||||||||
| Net income | $ | 82,521 | $ | 73,482 | |||||||
| Other comprehensive income (loss), net of tax: | |||||||||||
| Foreign currency translation adjustments | (25,542) | 40,870 | |||||||||
| Unrealized gain (loss) on hedging instruments | (7,170) | 13,956 | |||||||||
| Defined benefit plans | 402 | 185 | |||||||||
| Other comprehensive income (loss) | (32,310) | 55,011 | |||||||||
| Comprehensive income | $ | 50,211 | $ | 128,493 | |||||||
The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.
5
EPAM SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(Unaudited)
(In thousands)
| Common Stock | Additional Paid-in Capital | Retained Earnings | Accumulated Other Comprehensive Income (Loss) | Non-Controlling Interest in Consolidated Subsidiaries | Total Equity | ||||||||||||||||||||||||||||||||||||
| Shares | Amount | ||||||||||||||||||||||||||||||||||||||||
Balance, January 1, 2026 | 54,274 | $ | 54 | $ | 1,390,423 | $ | 2,268,204 | $ | 18,545 | $ | 582 | $ | 3,677,808 | ||||||||||||||||||||||||||||
| Restricted stock units vested | 436 | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||
| Equity withheld for employee taxes | (149) | — | (20,438) | — | — | — | (20,438) | ||||||||||||||||||||||||||||||||||
| Stock-based compensation expense | — | — | 49,613 | — | — | — | 49,613 | ||||||||||||||||||||||||||||||||||
| Exercise of stock options | 31 | — | 704 | — | — | — | 704 | ||||||||||||||||||||||||||||||||||
| Repurchase of common stock, including excise tax | (1,835) | (1) | (60,000) | (266,185) | — | — | (326,186) | ||||||||||||||||||||||||||||||||||
| Other comprehensive loss | — | — | — | — | (32,310) | — | (32,310) | ||||||||||||||||||||||||||||||||||
| Net income | — | — | — | 82,521 | — | — | 82,521 | ||||||||||||||||||||||||||||||||||
Balance, March 31, 2026 | 52,757 | $ | 53 | $ | 1,360,302 | $ | 2,084,540 | $ | (13,765) | $ | 582 | $ | 3,431,712 | ||||||||||||||||||||||||||||
| Common Stock | Additional Paid-in Capital | Retained Earnings | Accumulated Other Comprehensive Income (Loss) | Non-Controlling Interest in Consolidated Subsidiaries | Total Equity | ||||||||||||||||||||||||||||||||||||
| Shares | Amount | ||||||||||||||||||||||||||||||||||||||||
Balance, January 1, 2025 | 56,869 | $ | 57 | $ | 1,190,222 | $ | 2,555,796 | $ | (116,864) | $ | 1,940 | $ | 3,631,151 | ||||||||||||||||||||||||||||
Restricted stock units vested | 315 | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||
| Equity withheld for employee taxes | (117) | — | (21,455) | — | — | — | (21,455) | ||||||||||||||||||||||||||||||||||
Stock issued in connection with 2021 acquisition | 2 | — | 375 | — | — | — | 375 | ||||||||||||||||||||||||||||||||||
Stock-based compensation expense | — | — | 46,885 | — | — | — | 46,885 | ||||||||||||||||||||||||||||||||||
| Exercise of stock options | 353 | — | 19,448 | — | — | — | 19,448 | ||||||||||||||||||||||||||||||||||
Repurchase of common stock, including excise tax | (796) | — | — | (160,323) | — | — | (160,323) | ||||||||||||||||||||||||||||||||||
| Purchase of subsidiary shares from noncontrolling interest | — | — | — | — | — | (1,358) | (1,358) | ||||||||||||||||||||||||||||||||||
| Other comprehensive income | — | — | — | — | 55,011 | — | 55,011 | ||||||||||||||||||||||||||||||||||
Net income | — | — | — | 73,482 | — | — | 73,482 | ||||||||||||||||||||||||||||||||||
Balance, March 31, 2025 | 56,626 | $ | 57 | $ | 1,235,475 | $ | 2,468,955 | $ | (61,853) | $ | 582 | $ | 3,643,216 | ||||||||||||||||||||||||||||
The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.
6
EPAM SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
| Three Months Ended March 31, | |||||||||||
| 2026 | 2025 | ||||||||||
| Cash flows from operating activities: | |||||||||||
| Net income | $ | 82,521 | $ | 73,482 | |||||||
| Adjustments to reconcile net income to net cash provided by operating activities: | |||||||||||
| Depreciation and amortization expense | 31,539 | 31,437 | |||||||||
| Operating lease right-of-use assets amortization expense | 10,435 | 9,929 | |||||||||
| Bad debt recovery | (593) | (218) | |||||||||
| Deferred taxes | 19,070 | 2,386 | |||||||||
| Stock-based compensation expense | 49,919 | 48,456 | |||||||||
| Other | 394 | 3,729 | |||||||||
| Changes in assets and liabilities: | |||||||||||
| Trade receivables and contract assets | (78,801) | (76,680) | |||||||||
| Prepaid and other assets | (16,057) | (9,163) | |||||||||
| Accounts payable | (12,806) | 502 | |||||||||
| Accrued expenses and other liabilities | (85,881) | (27,248) | |||||||||
| Operating lease liabilities | (9,642) | (10,975) | |||||||||
| Income taxes payable | (26,458) | (21,475) | |||||||||
| Net cash provided by (used in) operating activities | (36,360) | 24,162 | |||||||||
| Cash flows from investing activities: | |||||||||||
| Purchases of property and equipment | (17,857) | (9,329) | |||||||||
| Purchases of short-term investments | (835) | (1,991) | |||||||||
| Proceeds from short-term investments | 2,213 | — | |||||||||
| Acquisition of business, net of cash acquired | (307) | 3,325 | |||||||||
| Purchases of non-marketable securities | — | (360) | |||||||||
| Proceeds from non-marketable securities | — | 2,913 | |||||||||
| Other investing activities, net | 1,140 | 134 | |||||||||
| Net cash used in investing activities | (15,646) | (5,308) | |||||||||
| Cash flows from financing activities: | |||||||||||
| Proceeds from issuance of stock under the employee incentive programs | 704 | 19,480 | |||||||||
| Payments of withholding taxes related to net share settlements of restricted stock units | (3,152) | (1,293) | |||||||||
| Proceeds from debt | 140,000 | — | |||||||||
| Repayment of debt | (155) | (684) | |||||||||
| Repurchase of common stock | (323,980) | (159,998) | |||||||||
| Payment of contingent consideration for previously acquired businesses | (5,708) | (4,746) | |||||||||
| Purchase of subsidiary shares from noncontrolling interest | — | (1,358) | |||||||||
| Other financing activities, net | 92 | (915) | |||||||||
| Net cash used in financing activities | (192,199) | (149,514) | |||||||||
| Effect of exchange rate changes on cash, cash equivalents and restricted cash | (14,555) | 18,770 | |||||||||
| Net decrease in cash, cash equivalents and restricted cash | (258,760) | (111,890) | |||||||||
| Cash, cash equivalents and restricted cash, beginning of period | 1,301,377 | 1,290,392 | |||||||||
| Cash, cash equivalents and restricted cash, end of period | $ | 1,042,617 | $ | 1,178,502 | |||||||
7
EPAM SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
(Continued)
The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the condensed consolidated balance sheets:
| As of March 31, 2026 | As of December 31, 2025 | ||||||||||
| Balance sheet classification | |||||||||||
| Cash and cash equivalents | $ | 1,036,959 | $ | 1,296,077 | |||||||
| Restricted cash in Prepaid and other current assets | 1,542 | 1,337 | |||||||||
| Restricted cash in Other noncurrent assets | 4,116 | 3,963 | |||||||||
| Total restricted cash | 5,658 | 5,300 | |||||||||
| Total cash, cash equivalents and restricted cash | $ | 1,042,617 | $ | 1,301,377 | |||||||
The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.
8
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(In thousands, except per share data and as otherwise disclosed)
1.ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
EPAM Systems, Inc. (the “Company” or “EPAM”) is a global provider of digital engineering, cloud and AI-enabled transformation services, as well as a leading business and experience consulting partner for global enterprises and ambitious startups. EPAM leverages AI to deliver transformative solutions that accelerate its clients' digital innovation and enhance their competitive edge. In a business landscape that is constantly challenged by the pressures of digitization, EPAM focuses on building long-term partnerships with clients in various industries through innovative and scalable software solutions, integrated strategy, experience and technology consulting, and a continually evolving mix of advanced capabilities. The Company is incorporated in Delaware with headquarters in Newtown, Pennsylvania.
Basis of Presentation — The accompanying unaudited condensed consolidated financial statements of EPAM have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP” or “U.S. GAAP”) and Article 10 of Regulation S-X under the Securities Exchange Act of 1934, as amended. The unaudited condensed consolidated financial statements include the financial statements of EPAM Systems, Inc. and its subsidiaries with all intercompany balances and transactions eliminated.
These unaudited condensed consolidated financial statements and accompanying notes should be read in conjunction with the Company’s audited consolidated financial statements and the notes thereto for the year ended December 31, 2025 included in its Annual Report on Form 10-K. The preparation of these condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in these condensed consolidated financial statements and accompanying notes. Actual results could differ from those estimates, and such differences may be material to the unaudited condensed consolidated financial statements. Operating results for the interim periods are not necessarily indicative of results that may be expected to occur for the entire year. In management’s opinion, the accompanying unaudited condensed consolidated financial statements include all normal and recurring adjustments necessary for a fair presentation of the Company’s financial position as of March 31, 2026 and the results of its operations and its cash flows for the periods presented.
Risks and Uncertainties — As a result of its global operations, the Company may be subject to certain inherent risks.
Concentration of Credit — Financial instruments that potentially subject the Company to concentration of credit risk consist primarily of cash, cash equivalents, short-term investments and trade receivables. The Company maintains cash, cash equivalents and short-term investments with financial institutions. The Company believes its credit policies reflect normal industry terms and business risk and there is no expectation of non-performance by the counterparties.
The Company has cash in several countries, including Ukraine and Belarus, where the banking sector remains subject to periodic instability; banking and other financial systems generally do not meet the banking standards of more developed markets; and bank deposits made by corporate entities are not insured. The Company regularly monitors cash held in these countries and, to the extent the cash held exceeds the amounts required to support its operations in these countries, the Company distributes the excess funds into markets with more developed banking sectors to the extent it is possible to do so. As of March 31, 2026, the Company had $63.5 million of cash and cash equivalents in banks in Ukraine and $50.0 million of cash and cash equivalents in banks in Belarus. In April 2024, Belarus instituted restrictions on distributing dividends from Belarus to shareholders in certain countries, including the U.S. The restrictions are scheduled to remain in place until the end of 2026 and may prevent EPAM from distributing excess funds, if any, out of Belarus. The Company does not expect these restrictions to have a material impact on its ability to meet its worldwide cash obligations during this period. The Company places its cash and cash equivalents with financial institutions considered stable in the region, limits the amount of credit exposure with any one financial institution and conducts ongoing evaluations of the credit worthiness of the financial institutions with which it does business. However, a banking crisis, bankruptcy or insolvency of banks that process or hold the Company’s funds, or sanctions may result in the loss of deposits or adversely affect the Company’s ability to complete banking transactions, which could adversely affect the Company’s business and financial condition.
Trade receivables are generally dispersed across many clients operating in different industries and geographies; therefore, concentration of credit risk is limited. Historically, credit losses and write-offs of trade receivables have not been material to the consolidated financial statements. If the Company’s clients enter bankruptcy protection or otherwise take steps to alleviate their financial distress, the Company’s credit losses and write-offs of trade receivables could increase, which would negatively impact its results of operations.
9
Foreign currency risk — The Company’s global operations are conducted predominantly in U.S. dollars. Other than U.S. dollars, the Company generates revenues in various currencies, principally in euros, British pounds, and Swiss francs and incurs expenditures principally in euros, Polish zlotys, Indian rupees, British pounds, and Mexican pesos. The Company’s international operations expose it to risk of adverse fluctuations in foreign currency exchange rates through the remeasurement of foreign currency denominated assets and liabilities (both third-party and intercompany) and translation of earnings and cash flows into U.S. dollars. The Company has a hedging program whereby it enters into a series of foreign exchange forward contracts with durations of twelve months or less that are designated as cash flow hedges of forecasted Polish zloty, Indian rupee, Hungarian forint, Colombian peso, and Mexican peso transactions. See Note 5 “Derivative Financial Instruments” for further information on the Company’s hedging program.
Interest rate risk — The Company is exposed to market risk from changes in interest rates. Exposure to interest rate risk results primarily from variable rates related to cash and cash equivalent deposits, short-term investments and the Company’s borrowings, mainly under the 2025 Credit Agreement, which is subject to a variety of rates depending on the type and timing of funds borrowed (See Note 6 “Debt”). The Company does not believe it is exposed to material direct risks associated with changes in interest rates related to these deposits, investments and borrowings.
Adoption of New Accounting Standards
There were no recently adopted accounting standards which had a material impact on the Company’s consolidated financial statements.
Pending Accounting Standards
From time to time, new accounting pronouncements are issued by the FASB or other standards-setting bodies that the Company will adopt according to the various timetables the FASB specifies. Unless otherwise discussed below, the Company believes the impact of recently issued standards that are not yet effective will not have a material impact on its consolidated financial statements upon adoption.
During the three months ended March 31, 2026, there have been no material updates regarding pending accounting standards as reported in the Company’s Annual Report on Form 10-K for the year ended December 31, 2025.
2. IMPACT OF THE INVASION OF UKRAINE
On February 24, 2022, Russian forces attacked Ukraine and its people, and through the issuance date of these interim financial statements, there has been no resolution to this attack. As of March 31, 2026, the Company had $60.4 million of Property and equipment, net in Ukraine consisting of a building classified as construction-in-progress located in Kyiv with a net book value of $52.4 million, laptops with a net book value of $6.4 million, most of which are in the possession of employees, and various office furniture, equipment and supplies with a net book value of $1.6 million. Additionally, as of March 31, 2026, the Company had Operating lease right-of-use assets located throughout Ukraine with a net book value of $2.3 million. Through the issuance date of these interim financial statements, the Company is not aware of any significant damage to its long-lived assets in Ukraine and the Company expects to continue to use these assets as part of its global delivery model.
On March 4, 2022, the Company announced a $100.0 million humanitarian commitment to support its employees and their families in and displaced from Ukraine. This humanitarian commitment is in addition to donations from EPAM's clients and employees and the work of EPAM volunteers on the ground. The Company’s spending under this commitment included special cash payments to support impacted employees, financial and medical support for impacted families, and donations to third-party humanitarian organizations. During the three months ended March 31, 2026, the Company expensed $3.0 million related to this commitment. Of the expensed amounts for the three months ended March 31, 2026, $0.6 million is classified in Cost of revenues (exclusive of depreciation and amortization), and $2.4 million is classified in Selling, general and administrative expenses in the condensed consolidated financial statements. During the three months ended March 31, 2025, the Company expensed $4.4 million related to this commitment. Of the expensed amounts for the three months ended March 31, 2025, $0.6 million is classified in Cost of revenues (exclusive of depreciation and amortization), and $3.8 million is classified in Selling, general and administrative expenses in the condensed consolidated financial statements. As of March 31, 2026, the Company has approximately $7.1 million remaining to be expensed under this humanitarian commitment.
10
3.GOODWILL
Goodwill by reportable segment was as follows:
| Americas | Europe | Total | |||||||||||||||
Balance as of January 1, 2026 | $ | 652,575 | $ | 557,989 | $ | 1,210,564 | |||||||||||
| Effect of net foreign currency exchange rate changes | (237) | (5,750) | (5,987) | ||||||||||||||
Balance as of March 31, 2026 | $ | 652,338 | $ | 552,239 | $ | 1,204,577 | |||||||||||
There were no accumulated goodwill impairment losses in the Americas or Europe reportable segments as of March 31, 2026 or December 31, 2025.
4.FAIR VALUE MEASUREMENTS
The Company carries certain assets and liabilities at fair value on a recurring basis on its condensed consolidated balance sheets. The following table presents the fair values of the Company’s financial assets and liabilities measured at fair value on a recurring basis as of March 31, 2026:
| As of March 31, 2026 | ||||||||||||||||||||||||||
| Balance | Level 1 | Level 2 | Level 3 | |||||||||||||||||||||||
| Foreign exchange derivative assets | $ | 1,184 | $ | — | $ | 1,184 | $ | — | ||||||||||||||||||
| Total assets measured at fair value on a recurring basis | $ | 1,184 | $ | — | $ | 1,184 | $ | — | ||||||||||||||||||
| Foreign exchange derivative liabilities | $ | 13,129 | $ | — | $ | 13,129 | $ | — | ||||||||||||||||||
| Contingent consideration liabilities | 13,381 | — | — | 13,381 | ||||||||||||||||||||||
Total liabilities measured at fair value on a recurring basis | $ | 26,510 | $ | — | $ | 13,129 | $ | 13,381 | ||||||||||||||||||
The following table presents the fair values of the Company’s financial assets and liabilities measured at fair value on a recurring basis as of December 31, 2025:
| As of December 31, 2025 | ||||||||||||||||||||||||||
| Balance | Level 1 | Level 2 | Level 3 | |||||||||||||||||||||||
| Foreign exchange derivative assets | $ | 1,981 | $ | — | $ | 1,981 | $ | — | ||||||||||||||||||
| Total assets measured at fair value on a recurring basis | $ | 1,981 | $ | — | $ | 1,981 | $ | — | ||||||||||||||||||
| Foreign exchange derivative liabilities | $ | 4,602 | $ | — | $ | 4,602 | $ | — | ||||||||||||||||||
| Contingent consideration liabilities | 22,835 | — | — | 22,835 | ||||||||||||||||||||||
Total liabilities measured at fair value on a recurring basis | $ | 27,437 | $ | — | $ | 4,602 | $ | 22,835 | ||||||||||||||||||
The foreign exchange derivatives are valued using pricing models and discounted cash flow methodologies based on observable foreign exchange data at the measurement date. See Note 5 “Derivative Financial Instruments” for additional information regarding derivative financial instruments.
The fair value of the contingent consideration liabilities was determined using a probability-weighted expected return method and is based on the expected future payments to be made to the sellers of the acquired businesses in accordance with the provisions outlined in the respective purchase agreements. Although there is significant judgment involved, the Company believes its estimates and assumptions are reasonable. In determining fair value, the Company considered a variety of factors, including future performance of the acquired businesses using financial projections developed by the Company and market risk assumptions that were derived for revenue growth and earnings before interest and taxes. The Company estimated future payments using the earnout formula and performance targets specified in the purchase agreements and adjusted those estimates to reflect the probability of their achievement. Those weighted average estimated future payments were then discounted to present value using a rate based on the weighted average cost of capital of guideline companies. The discount rates used to determine the fair value of contingent consideration for the Company’s acquisitions were between 12% and 20%.
11
Changes in financial projections, market risk assumptions, discount rates or probability assumptions related to achieving the various earnout criteria would result in a change in the fair value of the recorded contingent liabilities. Such changes, if any, are recorded within Interest and other income, net in the Company’s condensed consolidated statements of income.
A reconciliation of the beginning and ending balances of Level 3 contingent consideration liabilities using significant unobservable inputs for the three months ended March 31, 2026 is as follows:
| Amount | ||||||||
Contingent consideration liabilities as of January 1, 2026 | $ | 22,835 | ||||||
| Changes in fair value of contingent consideration included in Interest and other income, net | 985 | |||||||
| Payment of contingent consideration for previously acquired businesses | (10,424) | |||||||
| Effect of foreign currency exchange rate changes, net | (15) | |||||||
Contingent consideration liabilities as of March 31, 2026 | $ | 13,381 | ||||||
Financial Assets and Liabilities Not Measured at Fair Value on a Recurring Basis
The following tables present the estimated fair values of the Company’s financial assets and liabilities not measured at fair value on a recurring basis as of the dates indicated:
| Fair Value Hierarchy | ||||||||||||||||||||||||||||||||
| Balance | Estimated Fair Value | Level 1 | Level 2 | Level 3 | ||||||||||||||||||||||||||||
| March 31, 2026 | ||||||||||||||||||||||||||||||||
| Financial Assets: | ||||||||||||||||||||||||||||||||
| Cash equivalents: | ||||||||||||||||||||||||||||||||
| Time deposits | $ | 14,233 | $ | 14,233 | $ | — | $ | 14,233 | $ | — | ||||||||||||||||||||||
| Financial Liabilities: | ||||||||||||||||||||||||||||||||
Borrowings under the 2025 Credit Agreement | $ | 165,000 | $ | 165,000 | $ | — | $ | 165,000 | $ | — | ||||||||||||||||||||||
| Deferred consideration for asset acquisitions | $ | 18,066 | $ | 18,066 | $ | — | $ | 18,066 | $ | — | ||||||||||||||||||||||
| Fair Value Hierarchy | ||||||||||||||||||||||||||||||||
| Balance | Estimated Fair Value | Level 1 | Level 2 | Level 3 | ||||||||||||||||||||||||||||
| December 31, 2025 | ||||||||||||||||||||||||||||||||
| Financial Assets: | ||||||||||||||||||||||||||||||||
| Cash equivalents: | ||||||||||||||||||||||||||||||||
| Money market funds | $ | 5,402 | $ | 5,402 | $ | 5,402 | $ | — | $ | — | ||||||||||||||||||||||
| Time deposits | 37,441 | 37,441 | — | 37,441 | — | |||||||||||||||||||||||||||
| Total cash equivalents | $ | 42,843 | $ | 42,843 | $ | 5,402 | $ | 37,441 | $ | — | ||||||||||||||||||||||
| Financial Liabilities: | ||||||||||||||||||||||||||||||||
Borrowings under the 2025 Credit Agreement | $ | 25,000 | $ | 25,000 | $ | — | $ | 25,000 | $ | — | ||||||||||||||||||||||
| Deferred consideration for asset acquisitions | $ | 29,532 | $ | 29,532 | $ | — | $ | 29,532 | $ | — | ||||||||||||||||||||||
Non-Marketable Securities Without Readily Determinable Fair Values
The Company holds investments in equity securities that do not have readily determinable fair values. These investments are recorded at cost and are remeasured to fair value based on certain observable price changes or impairment events as they occur. The carrying amount of these investments was $36.7 million as of March 31, 2026 and December 31, 2025 and is classified as Other noncurrent assets in the Company’s condensed consolidated balance sheets.
12
5.DERIVATIVE FINANCIAL INSTRUMENTS
In the normal course of business, the Company uses derivative financial instruments to manage the risk of fluctuations in foreign currency exchange rates. The Company has a hedging program whereby it enters into a series of foreign exchange forward contracts with durations of twelve months or less that are designated as cash flow hedges of forecasted Polish zloty, Indian rupee, Hungarian forint, Colombian peso, and Mexican peso transactions.
As of March 31, 2026, all of the Company’s foreign exchange forward contracts were designated as hedges and there is no financial collateral (including cash collateral) required to be posted by the Company related to the foreign exchange forward contracts.
The fair value of derivative instruments on the Company’s condensed consolidated balance sheets as of March 31, 2026 and December 31, 2025 were as follows:
| As of March 31, 2026 | As of December 31, 2025 | |||||||||||||||||||||||||||||||
| Balance Sheet Classification | Asset Derivatives | Liability Derivatives | Asset Derivatives | Liability Derivatives | ||||||||||||||||||||||||||||
| Foreign exchange forward contracts designated as hedging instruments | Prepaid expenses and other current assets | $ | 1,184 | $ | 1,981 | |||||||||||||||||||||||||||
| Accrued expenses and other current liabilities | $ | 13,129 | $ | 4,602 | ||||||||||||||||||||||||||||
6.DEBT
Revolving Credit Facility — On October 3, 2025, the Company replaced its 2021 Credit Agreement with an amended and restated credit agreement (the “2025 Credit Agreement”) with a syndicate of lenders. The 2025 Credit Agreement provides for a revolving credit facility (the “2025 Revolving Facility”) with a borrowing capacity of $700.0 million, with the potential to increase the borrowing capacity up to $1,200.0 million if lenders agree to increase their commitments and the Company satisfies certain conditions. The 2025 Credit Agreement matures on October 3, 2030.
Borrowings under the 2025 Revolving Facility may be denominated in U.S. dollars or up to a maximum of $250.0 million equivalent in British pounds sterling, Canadian dollars, euros or Swiss francs and other currencies as may be approved by the lenders. Borrowings under the 2025 Revolving Facility bear interest at either a base rate or an alternative benchmark index for borrowings in currencies other than U.S. dollars. The base rate is equal to the highest of (a) the Overnight Bank Funding Rate, plus 0.5%, (b) the Prime Rate, or (c) the Daily Simple SOFR Rate, plus 1.0%, so long as the Daily Simple SOFR Rate is offered, ascertainable and not unlawful. The 2025 Credit Agreement includes customary business and financial covenants that may restrict the Company’s ability to make or pay dividends (other than certain intercompany dividends) if a potential or actual event of default has occurred or would be triggered. As of March 31, 2026, the Company was in compliance with all covenants contained in the 2025 Credit Agreement.
The following table presents the outstanding debt and borrowing capacity of the Company under the 2025 Credit Agreement:
| As of March 31, 2026 | As of December 31, 2025 | ||||||||||
| Outstanding debt | $ | 165,000 | $ | 25,000 | |||||||
| Interest rate | 4.5 | % | 4.6 | % | |||||||
| Available borrowing capacity | $ | 535,000 | $ | 675,000 | |||||||
| Maximum borrowing capacity | $ | 700,000 | $ | 700,000 | |||||||
7.COST OPTIMIZATION PROGRAMS
During the quarter ended June 30, 2025, the Company initiated the 2025 Cost Optimization Program to improve utilization and profitability. This program has and is expected to continue to include workforce reductions. The Company expects to complete all restructuring actions commenced under the 2025 Cost Optimization Program by the end of the second quarter of 2026 and to incur additional charges of approximately $13 million. The actual amount and timing of severance and other costs are dependent in part upon local country processes and regulations and may differ from our current expectations and estimates.
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During the quarter ended June 30, 2024, the Company initiated the 2024 Cost Optimization Program to streamline operations and optimize corporate functions. This program included workforce reductions and contract terminations. As of June 30, 2025, the Company had completed all restructuring actions commenced under the 2024 Cost Optimization Program.
The total costs related to the Cost Optimization Programs are classified in in the condensed consolidated statements of income. The Company did not allocate these charges to individual segments as they are not considered by the chief operating decision maker during the review of segment results. Accordingly, such expenses are presented in our segment reporting as part of “Other unallocated expenses” (See Note 14 “Segment Information”).
Activity in the Company’s restructuring reserves was as follows:
| Balance at December 31, 2025 | Charges | Payments Made | Balance at March 31, 2026 | ||||||||||||||||||||
| 2025 Cost Optimization Program | |||||||||||||||||||||||
| Employee separation costs | $ | 5,143 | $ | 13,396 | $ | (12,637) | $ | 5,902 | |||||||||||||||
| 2024 Cost Optimization Program | |||||||||||||||||||||||
| Employee separation costs | 554 | — | — | 554 | |||||||||||||||||||
| Total | $ | 5,697 | $ | 13,396 | $ | (12,637) | $ | 6,456 | |||||||||||||||
| Balance at December 31, 2024 | Charges | Payments Made | Balance at March 31, 2025 | ||||||||||||||||||||
| 2024 Cost Optimization Program | |||||||||||||||||||||||
| Employee separation costs | $ | 1,763 | $ | 5,311 | $ | (5,060) | $ | 2,014 | |||||||||||||||
| Total | $ | 1,763 | $ | 5,311 | $ | (5,060) | $ | 2,014 | |||||||||||||||
8.REVENUES
Disaggregation of Revenues
The following tables present the disaggregation of the Company’s revenues by client location, including a reconciliation of the disaggregated revenues with the reportable segments (Note 14 “Segment Information”) for the periods indicated:
| Three Months Ended March 31, 2026 | |||||||||||||||||
| Reportable Segments | |||||||||||||||||
| Americas | Europe | Consolidated Revenues | |||||||||||||||
| Client Locations | |||||||||||||||||
| Americas | $ | 748,501 | $ | 50,968 | $ | 799,469 | |||||||||||
| EMEA | 46,426 | 529,586 | 576,012 | ||||||||||||||
| APAC | 469 | 24,111 | 24,580 | ||||||||||||||
| Revenues | $ | 795,396 | $ | 604,665 | $ | 1,400,061 | |||||||||||
| Three Months Ended March 31, 2025 | |||||||||||||||||
| Reportable Segments | |||||||||||||||||
| Americas | Europe | Consolidated Revenues | |||||||||||||||
| Client Locations | |||||||||||||||||
| Americas | $ | 742,052 | $ | 38,233 | $ | 780,285 | |||||||||||
| EMEA | 34,916 | 462,199 | 497,115 | ||||||||||||||
| APAC | 200 | 24,092 | 24,292 | ||||||||||||||
| Revenues | $ | 777,168 | $ | 524,524 | $ | 1,301,692 | |||||||||||
14
The following tables present the disaggregation of the Company’s revenues by industry vertical, including a reconciliation of the disaggregated revenues with the reportable segments (Note 14 “Segment Information”) for the periods indicated:
| Three Months Ended March 31, 2026 | |||||||||||||||||
| Reportable Segments | |||||||||||||||||
| Americas | Europe | Consolidated Revenues | |||||||||||||||
| Industry Verticals | |||||||||||||||||
| Financial Services | $ | 165,446 | $ | 184,754 | $ | 350,200 | |||||||||||
| Consumer Goods, Retail & Travel | 122,190 | 151,687 | 273,877 | ||||||||||||||
| Software & Hi-Tech | 132,822 | 77,898 | 210,720 | ||||||||||||||
| Business Information & Media | 115,897 | 49,482 | 165,379 | ||||||||||||||
| Life Sciences & Healthcare | 125,033 | 39,101 | 164,134 | ||||||||||||||
| Emerging Verticals | 134,008 | 101,743 | 235,751 | ||||||||||||||
| Revenues | $ | 795,396 | $ | 604,665 | $ | 1,400,061 | |||||||||||
| Three Months Ended March 31, 2025 | |||||||||||||||||
| Reportable Segments | |||||||||||||||||
| Americas | Europe | Consolidated Revenues | |||||||||||||||
| Industry Verticals | |||||||||||||||||
| Financial Services | $ | 149,350 | $ | 164,615 | $ | 313,965 | |||||||||||
| Consumer Goods, Retail & Travel | 114,675 | 140,837 | 255,512 | ||||||||||||||
| Software & Hi-Tech | 135,662 | 54,411 | 190,073 | ||||||||||||||
| Business Information & Media | 113,220 | 53,327 | 166,547 | ||||||||||||||
| Life Sciences & Healthcare | 125,979 | 28,975 | 154,954 | ||||||||||||||
| Emerging Verticals | 138,282 | 82,359 | 220,641 | ||||||||||||||
| Revenues | $ | 777,168 | $ | 524,524 | $ | 1,301,692 | |||||||||||
The following tables present the disaggregation of the Company’s revenues by contract type including a reconciliation of the disaggregated revenues with the Company’s reportable segments (Note 14 “Segment Information”) for the periods indicated:
| Three Months Ended March 31, 2026 | |||||||||||||||||
| Reportable Segments | |||||||||||||||||
| Americas | Europe | Consolidated Revenues | |||||||||||||||
| Contract Types | |||||||||||||||||
| Time-and-materials | $ | 630,569 | $ | 458,459 | $ | 1,089,028 | |||||||||||
| Fixed-price | 158,094 | 145,614 | 303,708 | ||||||||||||||
| Licensing and other revenues | 6,733 | 592 | 7,325 | ||||||||||||||
| Revenues | $ | 795,396 | $ | 604,665 | $ | 1,400,061 | |||||||||||
| Three Months Ended March 31, 2025 | |||||||||||||||||
| Reportable Segments | |||||||||||||||||
| Americas | Europe | Consolidated Revenues | |||||||||||||||
| Contract Types | |||||||||||||||||
| Time-and-materials | $ | 641,173 | $ | 400,539 | $ | 1,041,712 | |||||||||||
| Fixed-price | 129,378 | 122,784 | 252,162 | ||||||||||||||
| Licensing and other revenues | 6,617 | 1,201 | 7,818 | ||||||||||||||
| Revenues | $ | 777,168 | $ | 524,524 | $ | 1,301,692 | |||||||||||
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Performance Obligations
During the three months ended March 31, 2026, the Company recognized $24.0 million of revenues from performance obligations satisfied in previous periods compared to $12.6 million during the three months ended March 31, 2025.
The following table includes the estimated revenues expected to be recognized in the future related to performance obligations that are partially or fully unsatisfied as of March 31, 2026. The Company applies a practical expedient and does not disclose the value of unsatisfied performance obligations for contracts (i) that have an original expected duration of one year or less and (ii) for which it recognizes revenues at the amount to which it has the right to invoice for services provided.
| Less than 1 year | 1 Year | 2 Years | 3 Years | Total | |||||||||||||||||||||||||
| Contract Type | |||||||||||||||||||||||||||||
| Fixed-price | $ | 43,432 | $ | 1,840 | $ | — | $ | — | $ | 45,272 | |||||||||||||||||||
The Company applies a practical expedient and does not disclose the amount of the transaction price allocated to the remaining performance obligations nor provide an explanation of when the Company expects to recognize that amount as revenue for certain variable consideration.
Contract Balances
The following table provides information on the classification of contract assets and liabilities in the condensed consolidated balance sheets:
| As of March 31, 2026 | As of December 31, 2025 | ||||||||||
| Contract assets included in trade receivables and contract assets, net | $ | 69,859 | $ | 58,513 | |||||||
Contract assets included in other noncurrent assets | $ | 1,909 | $ | 246 | |||||||
| Contract liabilities included in accrued expenses and other current liabilities | $ | 88,162 | $ | 104,219 | |||||||
| Contract liabilities included in other noncurrent liabilities | $ | 1,076 | $ | 674 | |||||||
Contract assets comprise amounts where the Company’s right to bill is contingent on something other than the passage of time such as achievement of contractual milestones. Contract assets have increased from December 31, 2025 primarily due to contracts where the Company’s right to bill is contingent upon achievement of contractual milestones. Contract liabilities comprise amounts collected from the Company’s clients for revenues not yet earned and such amounts are anticipated to be recorded as revenues when services are performed in subsequent periods. Contract liabilities included $38.2 million and $51.2 million from a single customer at March 31, 2026 and December 31, 2025, respectively. Contract liabilities have decreased from December 31, 2025 primarily due to lower levels of advance collections.
During the three months ended March 31, 2026, the Company recognized $43.3 million of revenues that were included in Accrued expenses and other current liabilities at December 31, 2025. During the three months ended March 31, 2025, the Company recognized $26.3 million of revenues that were included in Accrued expenses and other current liabilities at December 31, 2024.
9.POLAND RESEARCH AND DEVELOPMENT INCENTIVES
The Company is eligible for research and development (“R&D”) tax relief in Poland which allows the Company to reduce its tax base through bonus deductions for specific costs, such as salaries and social security contributions for employees working on R&D projects. The Company is able to utilize the tax relief by first offsetting its corporate income tax liability and then, to the extent the tax relief exceeds its corporate income tax liability, reducing future remittances of personal income tax withholding for qualified employees.
16
During the three months ended March 31, 2026, the Company recognized benefits of $12.2 million related to R&D activities completed in Poland which were recorded as a reduction to in the condensed consolidated statement of income. During the three months ended March 31, 2025, the Company recognized benefits of $12.1 million related to R&D activities completed in Poland which were recorded as a reduction to in the condensed consolidated statement of income. As of March 31, 2026, $16.1 million of benefits were included in prepaid and other current assets and $84.7 million of benefits were included in other noncurrent assets on the condensed consolidated balance sheet related to the Poland R&D incentive. As of December 31, 2025, $21.6 million of benefits were included in prepaid and other current assets and $75.3 million of benefits were included in other noncurrent assets on the condensed consolidated balance sheet related to the Poland R&D incentive.
10.STOCKHOLDERS’ EQUITY
2025 Long-Term Incentive Plan — On May 22, 2025, the Company's stockholders approved the EPAM Systems, Inc. 2025 Long Term Incentive Plan (the “2025 Plan”) to be used to issue equity grants to Company personnel. The 2025 Plan is a new plan that replaced the EPAM Systems, Inc. 2015 Long Term Incentive Plan (the “2015 Plan”). The 2025 Plan reserves up to 1,585,970 shares of the Company’s common stock for issuance, plus any shares subject to outstanding awards granted under the 2015 Plan and any predecessor plans that return to the share pool as a result of cancellation or forfeiture. The 2025 Plan will expire 10 years after the approval date and is administered by the Compensation Committee of the Company’s Board of Directors.
Stock-Based Compensation
The following table summarizes the components of stock-based compensation expense recognized in the Company’s condensed consolidated statements of income for the periods indicated:
| Three Months Ended March 31, | |||||||||||
| 2026 | 2025 | ||||||||||
| Cost of revenues (exclusive of depreciation and amortization) | $ | 22,853 | $ | 23,923 | |||||||
| Selling, general and administrative expenses | 27,066 | 24,533 | |||||||||
| Total | $ | 49,919 | $ | 48,456 | |||||||
Restricted Stock Units
Service-Based Awards
The table below summarizes activity related to the Company’s equity-classified and liability-classified service-based awards for the three months ended March 31, 2026:
Equity-Classified Equity-Settled Restricted Stock Units | Liability-Classified Cash-Settled Restricted Stock Units | ||||||||||||||||||||||
Number of Shares | Weighted Average Grant Date Fair Value Per Share | Number of Shares | Weighted Average Grant Date Fair Value Per Share | ||||||||||||||||||||
Unvested service-based awards outstanding at January 1, 2026 | 1,467 | $ | 230.75 | 106 | $ | 238.64 | |||||||||||||||||
| Awards granted | 1,114 | $ | 137.30 | 83 | $ | 137.14 | |||||||||||||||||
| Awards modified | (5) | $ | 224.44 | 5 | $ | 141.00 | |||||||||||||||||
| Awards vested | (435) | $ | 245.19 | (42) | $ | 250.04 | |||||||||||||||||
| Awards forfeited/cancelled | (21) | $ | 223.24 | (1) | $ | 244.80 | |||||||||||||||||
Unvested service-based awards outstanding at March 31, 2026 | 2,120 | $ | 178.76 | 151 | $ | 176.97 | |||||||||||||||||
As of March 31, 2026, $301.7 million of total remaining unrecognized stock-based compensation cost related to service-based equity-classified restricted stock units (“RSUs”), net of estimated forfeitures, is expected to be recognized over the weighted-average remaining requisite service period of 2.9 years.
17
As of March 31, 2026, $17.2 million of total remaining unrecognized stock-based compensation cost related to service-based liability-classified cash-settled RSUs, net of estimated forfeitures, is expected to be recognized over the weighted-average remaining requisite service period of 3.3 years.
The liability associated with the service-based liability-classified RSUs as of March 31, 2026 and December 31, 2025, was $0.6 million and $5.7 million, respectively, and was classified as accrued compensation and benefits expenses in the condensed consolidated balance sheets.
Performance-Based Awards
The table below summarizes activity related to the Company’s performance-based awards for the three months ended March 31, 2026:
Equity-Classified Equity-Settled Restricted Stock Units | |||||||||||
Number of Shares | Weighted Average Grant Date Fair Value Per Share | ||||||||||
Unvested performance-based awards outstanding at January 1, 2026 | 138 | $ | 240.97 | ||||||||
| Awards granted | 122 | $ | 127.45 | ||||||||
| Awards vested | (4) | $ | 269.87 | ||||||||
| Awards forfeited/cancelled | (15) | $ | 231.48 | ||||||||
Unvested performance-based awards outstanding at March 31, 2026 | 241 | $ | 183.76 | ||||||||
As of March 31, 2026, $26.2 million of total remaining unrecognized stock-based compensation cost related to performance-based equity-classified RSUs is expected to be recognized over the weighted-average remaining requisite service period of 1.9 years.
The majority of the Company’s performance-based equity-classified RSU awards are granted to its named executive officers and certain other members of senior management. These awards vest after 3 years, contingent on meeting certain financial performance targets, market conditions and continued service conditions. The financial performance targets are set by the Compensation Committee of the Board of Directors at the beginning of each year. For the portion of the awards subject to market conditions, fair value was determined using a Monte Carlo valuation model. The portion of the awards associated with financial performance in future years for which the financial performance targets have not yet been determined are not considered granted for accounting purposes.
As of March 31, 2026, the Company has issued 115 thousand performance-based equity-classified RSUs which are not considered granted for accounting purposes as the future vesting conditions have not yet been determined and these awards are not reflected in the table above.
Stock Options
Stock option activity under the Company’s plans is set forth below:
| Number of Options | Weighted Average Exercise Price | Aggregate Intrinsic Value | Weighted Average Remaining Contractual Term (in years) | ||||||||||||||||||||
Options outstanding at January 1, 2026 | 701 | $ | 212.59 | ||||||||||||||||||||
| Options exercised | (56) | $ | 72.37 | ||||||||||||||||||||
| Options expired | (8) | $ | 296.62 | ||||||||||||||||||||
Options outstanding at March 31, 2026 | 637 | $ | 223.77 | $ | 5,872 | 4.5 | |||||||||||||||||
Options vested and exercisable as of March 31, 2026 | 580 | $ | 216.40 | $ | 5,872 | 4.2 | |||||||||||||||||
Options expected to vest as of March 31, 2026 | 55 | $ | 298.55 | $ | — | 7.5 | |||||||||||||||||
As of March 31, 2026, $4.7 million of total remaining unrecognized stock-based compensation cost related to unvested stock options, net of estimated forfeitures, is expected to be recognized over the weighted-average remaining requisite service period of 1.6 years.
18
Employee Stock Purchase Plan
The 2021 Employee Stock Purchase Plan (“ESPP”) enables eligible employees to purchase shares of EPAM’s common stock at a discount at the end of each designated offering period, which occurs every six months ending April 30th and October 31st. The purchase price is equal to 85% of the fair market value of a share of EPAM’s common stock on the first date of an offering or the date of purchase, whichever is lower. During the three months ended March 31, 2026 and 2025, no purchases of common stock have been made under the ESPP.
The Company recognizes compensation expense related to share issuances pursuant to the ESPP on a straight-line basis over the six-month offering period. For the three months ended March 31, 2026, the Company recognized $2.2 million of stock-based compensation expense related to the ESPP. For the three months ended March 31, 2025, the Company recognized $2.5 million of stock-based compensation expense related to the ESPP. As of March 31, 2026, total unrecognized stock-based compensation cost related to the ESPP was $0.7 million, which is expected to be recognized over a period of 0.1 years.
Share Repurchases
On October 16, 2025, the Board of Directors authorized a share repurchase program (the “2025 Repurchase Program”) for up to $1,000 million of the Company’s outstanding common stock. The Company may repurchase shares of its common stock on a discretionary basis from time to time through open-market purchases, privately negotiated transactions or other means, including through the use of trading plans intended to qualify under Rule 10b5-1 under the Securities Exchange Act of 1934, as amended. The timing and total amount of stock repurchases will depend upon business, economic and market conditions, corporate and regulatory requirements, prevailing stock prices, and other considerations. The share repurchase program has a term of 24 months, may be suspended or discontinued at any time, and does not obligate the Company to acquire any amount of common stock. Prior to the authorization of the 2025 Repurchase Program, the Company repurchased common stock under the 2024 Repurchase Program and exhausted the $500 million authorized under that program as of September 30, 2025.
On March 4, 2026, the Company entered into a $300 million Accelerated Share Repurchase Agreement (the “ASR”) with Morgan Stanley & Co. LLC (“Morgan Stanley”). The ASR was consummated under the 2025 Repurchase Program. Under the terms of the ASR, the Company made a payment of $300 million to Morgan Stanley on March 4, 2026 and received from Morgan Stanley an initial delivery of 1,703 thousand shares of its common stock, or $240 million worth based on the closing price on March 4, 2026. During the three months ended March 31, 2026, the shares in the initial delivery were retired and recorded as a reduction of retained earnings and the remaining $60 million was recorded as a reduction of additional paid-in capital. Final settlement of the ASR occurred on April 17, 2026, when Morgan Stanley delivered 537 thousand additional shares of the Company’s common stock. All shares repurchased under the ASR were immediately retired upon receipt by the Company. The final number of shares repurchased was based on the volume-weighted average price of the Company’s common stock during the term of the ASR, less a discount pursuant to the terms and conditions of the ASR.
In addition to the ASR, the Company repurchased 132 thousand shares of its common stock during the three months ended March 31, 2026, resulting in a total of 1,835 thousand shares repurchased during the quarter valued at $264.0 million. During the three months ended March 31, 2025, the Company repurchased a total of 796 thousand shares of its common stock for $160.0 million in cash. All of the repurchased shares have been retired.
11.INCOME TAXES
In determining its interim provision for income taxes, the Company uses an estimated annual effective tax rate, which is based on expected annual profit before tax, statutory tax rates and tax planning opportunities available in the various jurisdictions in which the Company operates. Certain significant or unusual items are separately recognized in the quarter in which they occur and can be a source of variability in the effective tax rates from quarter to quarter.
The Company’s worldwide effective tax rate for the three months ended March 31, 2026 and 2025 was 31.6% and 22.2%, respectively. The Company recorded a tax shortfall upon vesting or exercise of stock awards of $9.8 million during the three months ended March 31, 2026 as compared to excess tax benefits upon vesting or exercise of stock awards of $0.5 million during the three months ended March 31, 2025.
19
12.EARNINGS PER SHARE
Basic earnings per share is computed by dividing net income available to common shareholders by the weighted-average number of shares of common stock outstanding during the period. Diluted earnings per share is computed by dividing net income available to common shareholders by the weighted-average number of shares of common stock outstanding during the period increased to include the number of additional shares of common stock that would have been outstanding if the potentially dilutive securities had been issued. Potentially dilutive securities include outstanding stock options, unvested equity-settled RSUs and the stock to be issued under the Company’s ESPP. The dilutive effect of potentially dilutive securities is reflected in diluted earnings per share by application of the treasury stock method.
The following table sets forth the computation of basic and diluted earnings per share of common stock as follows:
| Three Months Ended March 31, | |||||||||||
| 2026 | 2025 | ||||||||||
| Numerator for basic and diluted earnings per share: | |||||||||||
| Net income | $ | 82,521 | $ | 73,482 | |||||||
| Numerator for basic and diluted earnings per share | $ | 82,521 | $ | 73,482 | |||||||
| Denominator: | |||||||||||
| Weighted average common shares for basic earnings per share | 53,793 | 56,780 | |||||||||
| Net effect of dilutive equity awards and stock issuable under the ESPP | 390 | 482 | |||||||||
Weighted average common shares for diluted earnings per share | 54,183 | 57,262 | |||||||||
| Net income per share: | |||||||||||
| Basic | $ | 1.53 | $ | 1.29 | |||||||
| Diluted | $ | 1.52 | $ | 1.28 | |||||||
The number of shares underlying equity-based awards that were excluded from the calculation of diluted earnings per share as their effect would be anti-dilutive was 846 thousand and 989 thousand during the three months ended March 31, 2026 and 2025, respectively. The calculation of diluted earnings per share was not affected by the 492 thousand shares that would have been received if the ASR discussed in Note 10 “Stockholders’ Equity” was settled as of March 31, 2026 as their effect would have been anti-dilutive.
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13.COMMITMENTS AND CONTINGENCIES
Indemnification Obligations — In the normal course of business, the Company is a party to a variety of agreements under which it may be obligated to indemnify the other party for certain matters. These obligations typically arise in contracts where the Company customarily agrees to hold the other party harmless against losses arising from a breach of representations or covenants for certain matters, infringement of third-party intellectual property rights, data privacy violations, and certain tortious conduct in the course of providing services. The duration of these indemnifications varies, and in certain cases, is indefinite.
The Company is unable to reasonably estimate the maximum potential amount of future payments under these or similar agreements due to the unique facts and circumstances of each agreement and the fact that certain indemnifications provide for no limitation to the maximum potential future payments under the indemnification. Management is not aware of any such matters that would have a material effect on the condensed consolidated financial statements of the Company.
Litigation — From time to time, the Company is involved in litigation, claims or other contingencies arising in the ordinary course of business. The Company accrues a liability when a loss is considered probable and the amount can be reasonably estimated. When a material loss contingency is reasonably possible but not probable, the Company does not record a liability but instead discloses the nature and the amount of the claim, and an estimate of the loss or range of loss, if such an estimate can be made. Legal fees are expensed as incurred. In the opinion of management, the outcome of any existing claims and legal or regulatory proceedings, if decided adversely, is not expected to have a material effect on the Company’s business, financial condition, results of operations or cash flows.
Ukraine Humanitarian Commitment — On March 4, 2022, EPAM announced that it has established a $100.0 million humanitarian commitment to support its employees in Ukraine and their families. As of March 31, 2026, the Company has $7.1 million remaining to be expensed related to this humanitarian commitment. See Note 2 “Impact of the Invasion of Ukraine” for more information regarding commitment to humanitarian aid for Ukraine.
Deferred Consideration — During the year ended December 31, 2022, the Company purchased software licenses for use in the regular course of business in exchange for an upfront payment and fixed, subsequent annual payments due over the next 4 years. This agreement was modified during the years ended December 31, 2023, 2024 and 2025. As of March 31, 2026, the undiscounted deferred consideration amounts owed totaled approximately $18.5 million and are expected to be paid in 2026.
Contractual Commitment — On March 31, 2023, the Company entered into a 5-year agreement for cloud services through which it committed to spending at least $75.0 million over the term of the agreement. As of March 31, 2026, $42.9 million remains to be spent under this contractual commitment. The Company has the ability to cancel the commitment whereby it would incur a cancellation penalty of 20% of the remaining contractual commitment.
14.SEGMENT INFORMATION
The Company determines its business segments and reports segment information in accordance with how the Company’s chief operating decision maker (“CODM”) organizes the segments to evaluate performance, allocate resources and make business decisions. The Company’s CODM is the chief executive officer. The Company manages its business primarily based on the managerial responsibility for its client base and market. As managerial responsibility for a particular client relationship generally correlates with the client’s geographic location, there is a high degree of similarity between client locations and the geographic boundaries of the Company’s reportable segments. In some cases, managerial responsibility for a particular client is assigned to a management team in another region and is usually based on the strength of the relationship between client executives and particular members of EPAM’s senior management team. In such cases, the client’s activity would be reported through the management team’s reportable segment.
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Segment results are based on the segment’s revenues and operating profit, where segment operating profit is defined as segment income from operations before unallocated costs. Expenses included in segment operating profit consist principally of direct selling and delivery costs as well as an allocation of certain shared services expenses. Intersegment transactions are excluded from the segment’s revenues and operating profit on the basis that they are neither included in the measure of a segment’s profit and loss results, nor considered by the CODM during the review of segment results. Certain corporate expenses are not allocated to specific segments as these expenses are not controllable at the segment level. Such expenses include certain types of professional fees, certain taxes included in operating expenses, compensation to non-employee directors and certain other general and administrative expenses, including compensation of specific groups of non-production employees. In addition, the Company does not allocate amortization of intangible assets acquired through business combinations, goodwill and other asset impairment charges, stock-based compensation expenses, acquisition-related costs and certain other one-time charges and benefits. These unallocated amounts are combined with total segment operating profit to arrive at consolidated income from operations as reported below in the reconciliation of segment operating profit to consolidated income before provision for income taxes. Additionally, management has determined that it is not practical to allocate identifiable assets by segment since such assets are used interchangeably among the segments.
The Company’s CODM considers the operating results of each segment on a quarterly basis and uses segment operating profit predominantly to assess the performance of each segment by comparing the results of each segment with one another and to historical performance. When combined with certain other financial information, this enables the CODM to make decisions about the reporting structure, allocation of operating and capital resources, and compensation of certain employees.
Segment revenues from external clients and segment operating profit, as well as a reconciliation of segment operating profit to consolidated income before provision for income taxes is presented below:
| For the Three Months Ended March 31, 2026 | ||||||||||||||||||||
| Americas | Europe | Total | ||||||||||||||||||
| Segment revenues | $ | 795,396 | $ | 604,665 | $ | 1,400,061 | ||||||||||||||
| Less: | ||||||||||||||||||||
| Cost of revenues (exclusive of depreciation and amortization) | 549,905 | 436,702 | 986,607 | |||||||||||||||||
| Selling, general and administrative expenses | 104,344 | 80,695 | 185,039 | |||||||||||||||||
| Depreciation and amortization expense | 8,901 | 4,921 | 13,822 | |||||||||||||||||
| Segment operating profit | $ | 132,246 | $ | 82,347 | $ | 214,593 | ||||||||||||||
| Unallocated costs: | ||||||||||||||||||||
| Stock-based compensation expense | (49,919) | |||||||||||||||||||
| Amortization of purchased intangibles | (17,718) | |||||||||||||||||||
| Other unallocated costs | (30,188) | |||||||||||||||||||
| Income from operations | 116,768 | |||||||||||||||||||
| Interest and other income, net | 1,582 | |||||||||||||||||||
| Foreign exchange gain | 2,298 | |||||||||||||||||||
| Income before provision for income taxes | $ | 120,648 | ||||||||||||||||||
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| For the Three Months Ended March 31, 2025 | ||||||||||||||||||||
| Americas | Europe | Total | ||||||||||||||||||
| Segment revenues | $ | 777,168 | $ | 524,524 | $ | 1,301,692 | ||||||||||||||
| Less: | ||||||||||||||||||||
| Cost of revenues (exclusive of depreciation and amortization) | 550,849 | 375,463 | 926,312 | |||||||||||||||||
| Selling, general and administrative expenses | 101,518 | 73,516 | 175,034 | |||||||||||||||||
| Depreciation and amortization expense | 9,573 | 4,208 | 13,781 | |||||||||||||||||
| Segment operating profit | $ | 115,228 | $ | 71,337 | $ | 186,565 | ||||||||||||||
| Unallocated costs: | ||||||||||||||||||||
| Stock-based compensation expense | (48,456) | |||||||||||||||||||
| Amortization of purchased intangibles | (17,656) | |||||||||||||||||||
| Other acquisition-related expenses | (576) | |||||||||||||||||||
| Other unallocated costs | (20,547) | |||||||||||||||||||
| Income from operations | 99,330 | |||||||||||||||||||
| Interest and other income, net | 5,814 | |||||||||||||||||||
| Foreign exchange loss | (10,727) | |||||||||||||||||||
| Income before provision for income taxes | $ | 94,417 | ||||||||||||||||||
For each reportable segment, selling, general and administrative expenses include the costs of salaries, bonuses, fringe benefits, bad debt, travel, employee relocations, legal and accounting services, insurance, facilities and overhead including operating leases, advertising and other promotional activities.
There were no clients that accounted for more than 10% of total segment revenues during the three months ended March 31, 2026 and 2025. See Note 8 “Revenues” for additional disclosures of the Company’s disaggregated revenues reconciled with the revenues from the Company’s reportable segments.
Geographic Area Information
Long-lived assets presented in the table below include property and equipment, net of accumulated depreciation and amortization, and management has determined that it is not practical to allocate these assets by segment since such assets are used interchangeably among the segments. Physical locations and values of the Company’s long-lived assets are presented below:
| As of March 31, 2026 | As of December 31, 2025 | ||||||||||
| Ukraine | $ | 60,382 | $ | 59,381 | |||||||
| Belarus | 44,509 | 44,483 | |||||||||
| United States | 23,487 | 26,085 | |||||||||
| India | 18,273 | 17,365 | |||||||||
| Poland | 11,395 | 10,947 | |||||||||
| Hungary | 4,180 | 4,495 | |||||||||
| Other | 40,600 | 39,631 | |||||||||
| Total | $ | 202,826 | $ | 202,387 | |||||||
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The table below presents information about the Company’s revenues by client location for the three months ended March 31, 2026 and 2025:
15.ACCUMULATED OTHER COMPREHENSIVE LOSS
The following table summarizes the changes in the accumulated balances for each component of accumulated other comprehensive income (loss):
| Three Months Ended March 31, | ||||||||||||||
| 2026 | 2025 | |||||||||||||
| Foreign currency translation | ||||||||||||||
| Beginning balance | $ | 30,191 | $ | (103,975) | ||||||||||
| Foreign currency translation | (33,619) | 49,685 | ||||||||||||
| Income tax benefit (expense) | 8,077 | (8,815) | ||||||||||||
| Foreign currency translation, net of tax | (25,542) | 40,870 | ||||||||||||
| Ending balance | $ | 4,649 | $ | (63,105) | ||||||||||
| Cash flow hedging instruments | ||||||||||||||
| Beginning balance | $ | (2,016) | $ | (11,265) | ||||||||||
| Unrealized gain (loss) in fair value | (11,191) | 16,332 | ||||||||||||
| Net loss reclassified into Cost of revenues (exclusive of depreciation and amortization) | 1,867 | 1,671 | ||||||||||||
| Net loss reclassified into Foreign exchange loss | — | 145 | ||||||||||||
| Income tax benefit (expense) | 2,154 | (4,192) | ||||||||||||
| Cash flow hedging instruments, net of tax | (7,170) | 13,956 | ||||||||||||
Ending balance(1) | $ | (9,186) | $ | 2,691 | ||||||||||
| Defined benefit plans | ||||||||||||||
| Beginning balance | $ | (9,630) | $ | (1,624) | ||||||||||
| Actuarial gains | 421 | 221 | ||||||||||||
| Income tax expense | (19) | (36) | ||||||||||||
| Defined benefit plans, net of tax | 402 | 185 | ||||||||||||
| Ending balance | $ | (9,228) | $ | (1,439) | ||||||||||
| Accumulated other comprehensive loss | $ | (13,765) | $ | (61,853) | ||||||||||
(1) As of March 31, 2026, the ending balance of net unrealized loss related to derivatives designated as cash flow hedges is expected to be reclassified into Cost of revenues (exclusive of depreciation and amortization) in the next twelve months.
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16.SUBSEQUENT EVENTS
Accelerated Share Repurchase — On April 17, 2026, the final settlement of the ASR occurred, as Morgan Stanley delivered to the Company 537 thousand additional shares of the Company’s common stock. See Note 10 “Stockholders' Equity” for further information.
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
You should read the following discussion and analysis of our financial condition and results of operations together with our Annual Report on Form 10-K for the year ended December 31, 2025 and the unaudited condensed consolidated financial statements and the related notes included elsewhere in this quarterly report. In addition to historical information, this discussion contains forward-looking statements that involve risks, uncertainties and assumptions that could cause actual results to differ materially from management’s expectations. Factors that could cause such differences are discussed in the sections entitled “Forward-Looking Statements” in this item and in “Part I. Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2025. We assume no obligation to update any of these forward-looking statements.
In this quarterly report, “EPAM,” “EPAM Systems, Inc.,” the “Company,” “we,” “us” and “our” refer to EPAM Systems, Inc. and its consolidated subsidiaries.
“EPAM®” is a trademark of EPAM Systems, Inc. All other trademarks and service marks used herein are the property of their respective owners.
Executive Summary
We have used our software engineering expertise to become a leading global provider of digital engineering, cloud and AI-enabled transformation services, as well as a leading business and experience consulting partner for global enterprises and ambitious startups. We address our clients’ transformation challenges by fusing EPAM Continuum’s integrated strategy, experience and technology consulting with our 30+ years of engineering execution to speed our clients’ time to market and drive greater value from their digital investments.
We leverage AI to deliver transformative solutions that accelerate our clients' digital innovation and enhance their competitive edge. Through platforms like EPAM AI/RUN™ and initiatives like DIALX Lab™, we integrate advanced AI technologies into tailored business strategies, driving significant industry impact and fostering continuous innovation.
Through increased specialization in focused verticals and a continued emphasis on strategic partnerships, we are able to deliver technology transformation from start to finish, leveraging agile methodologies, proven client collaboration frameworks, engineering excellence tools, hybrid teams and our award-winning proprietary global delivery platform.
Our clients depend on us to solve their complex technical challenges and rely on our expertise in core engineering, advanced technologies, digital design and intelligent enterprise development. We combine our software engineering heritage with strategic business and innovation consulting, design thinking, and physical-digital capabilities to deliver end-to-end digital transformation services for our clients. We focus on building long-term partnerships with our clients in a market that is constantly challenged by the pressures of digitization through our innovative strategy and scalable software solutions, integrated advisory, business consulting and experience design, and a continually evolving mix of advanced capabilities.
Our global delivery model and centralized support functions, combined with the benefits of scale from the shared use of fixed-cost resources, enhance our productivity levels and enable us to better manage the efficiency of our global operations. As a result, we have created a delivery base whereby our applications, tools, methodologies and infrastructure allow us to seamlessly deliver services and solutions from our global delivery centers to our clients across the world. Our teams of consultants, designers, architects, engineers and trainers have the capabilities and skill sets to deliver business results.
Business Update Regarding the War in Ukraine
Russia’s attack on Ukraine has had, and could continue to have, a material adverse effect on our operations. As of March 31, 2026, Ukraine continues to be a significant delivery location with a large number of delivery professionals operating from safe locations at levels of productivity consistent with those achieved prior to the attack. We have maintained our $100 million humanitarian aid commitment to our people in Ukraine, and as of March 31, 2026, we have $7.1 million remaining to be expensed under this humanitarian commitment.
Our Board of Directors and its committees continue their oversight of our strategic, geopolitical, and cybersecurity risks and the risks related to our geographic locations and expansion. Our Board has received updates from management during both regular and special meetings, while also providing oversight of the risks associated with Russia’s invasion of Ukraine and other strategic areas of importance related to the war.
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We continue to monitor and respond to the difficult conditions in Ukraine while maintaining a focus on our clients and long-term growth. We execute on our business continuity plans and our global delivery centers have sufficient resources, including infrastructure and capital, to support ongoing operations while continuing to focus on the safety and security of our employees and their families in Ukraine as well as in the broader region. The implementation and execution of our business continuity plans, our humanitarian commitment to our people in Ukraine, and other costs related to the war resulted in materially increased expenses. Some of these expenses continued during this year and we expect some of these expenses will continue to occur in subsequent quarters for some time in the future. The information contained in this section is accurate as of the date hereof but may become outdated due to changing circumstances beyond our control or present awareness.
For additional information on the various risks posed by the attack against Ukraine and the impact in the region as well as other risks to our business, please read “Part I. Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2025 and “Part II. Item 1A. Risk Factors” in this quarterly report.
Year-to-Date 2026 Developments and Trends
For the first three months of 2026, our revenues were $1.400 billion, an increase of 7.6% from $1.302 billion reported for the same period of 2025. Revenues have been positively impacted by improving demand for our services and foreign exchange fluctuations. Income from operations as a percentage of revenues increased to 8.3% for the three months ended March 31, 2026 as compared to 7.6% for the three months ended March 31, 2025, largely driven by a decrease in cost of revenues (exclusive of depreciation and amortization) as a percentage of revenues. Diluted earnings per share increased to $1.52 for the three months ended March 31, 2026 from $1.28 for the three months ended March 31, 2025, principally resulting from an increase in income from operations as well as reduced common shares outstanding resulting from share repurchases, including repurchases made under the Accelerated Share Repurchase Agreement (“ASR”) in connection with the 2025 Repurchase Program. See Note 10 “Stockholders’ Equity” of our condensed consolidated financial statements in “Part I. Item 1. Financial Statements (Unaudited)” for information regarding the ASR.
Critical Accounting Policies
The discussion and analysis of our financial position and results of operations is based on our unaudited condensed consolidated financial statements which have been prepared in accordance with U.S. GAAP. The preparation of these condensed consolidated financial statements in accordance with U.S. GAAP requires us to make estimates and judgments that may affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On a recurring basis, we evaluate our estimates and judgments, including those related to revenue recognition and related allowances, impairments of long-lived assets including intangible assets, goodwill and right-of-use assets, income taxes including the valuation allowance for deferred tax assets, and stock-based compensation. Actual results may differ materially from these estimates under different assumptions and conditions. In addition, our reported financial condition and results of operations could vary due to a change in the application of a particular accounting standard.
During the three months ended March 31, 2026, there have been no material changes to our critical accounting policies as reported in our Annual Report on Form 10-K for the year ended December 31, 2025.
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Results of Operations
The following table presents a summary of our consolidated results of operations for the periods indicated. This information should be read together with our unaudited condensed consolidated financial statements and related notes included elsewhere in this quarterly report. The operating results in any period are not necessarily indicative of the results that may be expected for any future period.
| Three Months Ended March 31, | |||||||||||||||||||||||
| 2026 | 2025 | ||||||||||||||||||||||
| (in thousands, except percentages and per share data) | |||||||||||||||||||||||
| Revenues | $ | 1,400,061 | 100.0 | % | $ | 1,301,692 | 100.0 | % | |||||||||||||||
| Operating expenses: | |||||||||||||||||||||||
Cost of revenues (exclusive of depreciation and amortization)(1) | 1,012,052 | 72.3 | % | 952,008 | 73.1 | % | |||||||||||||||||
Selling, general and administrative expenses(2) | 239,702 | 17.1 | % | 218,917 | 16.8 | % | |||||||||||||||||
| Depreciation and amortization expense | 31,539 | 2.3 | % | 31,437 | 2.5 | % | |||||||||||||||||
| Income from operations | 116,768 | 8.3 | % | 99,330 | 7.6 | % | |||||||||||||||||
| Interest and other income, net | 1,582 | 0.1 | % | 5,814 | 0.5 | % | |||||||||||||||||
| Foreign exchange gain (loss) | 2,298 | 0.2 | % | (10,727) | (0.8) | % | |||||||||||||||||
| Income before provision for income taxes | 120,648 | 8.6 | % | 94,417 | 7.3 | % | |||||||||||||||||
| Provision for income taxes | 38,127 | 2.7 | % | 20,935 | 1.7 | % | |||||||||||||||||
| Net income | $ | 82,521 | 5.9 | % | $ | 73,482 | 5.6 | % | |||||||||||||||
| Effective tax rate | 31.6 | % | 22.2 | % | |||||||||||||||||||
| Diluted earnings per share | $ | 1.52 | $ | 1.28 | |||||||||||||||||||
(1)Includes $22,853 and $23,923 of stock-based compensation expense for the three months ended March 31, 2026 and 2025, respectively.
(2)Includes $27,066 and $24,533 of stock-based compensation expense for the three months ended March 31, 2026 and 2025, respectively.
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Consolidated Results Review
Revenues
During the three months ended March 31, 2026, our total revenues increased by 7.6% to $1.400 billion compared to the corresponding period in 2025. During the three months ended March 31, 2026 as compared to the same period last year, revenues have been positively impacted by improving demand for our services and fluctuations in foreign currency exchange rates which contributed 3.9% to revenue growth.
Revenues by client location for the three months ended March 31, 2026 and 2025 were as follows:
| Three Months Ended March 31, | |||||||||||||||||||||||
| 2026 | 2025 | ||||||||||||||||||||||
| (in thousands, except percentages) | |||||||||||||||||||||||
Americas(1) | $ | 799,469 | 57.1 | % | $ | 780,285 | 59.9 | % | |||||||||||||||
EMEA(2) | 576,012 | 41.1 | % | 497,115 | 38.2 | % | |||||||||||||||||
APAC(3) | 24,580 | 1.8 | % | 24,292 | 1.9 | % | |||||||||||||||||
| Revenues | $ | 1,400,061 | 100.0 | % | $ | 1,301,692 | 100.0 | % | |||||||||||||||
(1)Americas includes revenues from clients in North, Central and South America.
(2)EMEA includes revenues from clients in Europe and the Middle East.
(3)APAC includes revenues from clients in East Asia, Southeast Asia and Australia.
During the three months ended March 31, 2026, the United States continued to be our largest client location. During the three months ended March 31, 2026, revenues in the United States increased 3.4% to $711.8 million from $688.5 million in the first quarter of 2025, largely due to increased spending at certain large accounts in the region.
During the three months ended March 31, 2026, the top three revenue contributing countries by client location in EMEA were the United Kingdom, Switzerland, and the Netherlands, generating $158.5 million, $114.3 million and $63.2 million in revenues, respectively compared to $144.6 million, $104.9 million, and $47.0 million, respectively, in the corresponding period last year. Revenues in the EMEA region were positively impacted by increased spending at certain large accounts and changes in foreign currency exchange rates during the three months ended March 31, 2026 as compared to the same period in the previous year.
During the three months ended March 31, 2026, revenues from clients in the APAC region increased by $0.3 million or 1.2% compared to the corresponding period of 2025.
Cost of Revenues (Exclusive of Depreciation and Amortization)
The principal components of our cost of revenues (exclusive of depreciation and amortization) are salaries, bonuses, fringe benefits, stock-based compensation, project-related travel costs and fees for subcontractors who are assigned to client projects. Salaries and other compensation expenses of our delivery professionals are reported as cost of revenues regardless of whether the employees are actually performing services for clients during a given period. Additionally, government incentives and assistance related to services performed by delivery professionals assigned to client projects are reported in cost of revenues. Our employees are a critical asset, necessary for our continued success and therefore we expect to continue hiring talented employees and providing them with competitive compensation programs.
During the three months ended March 31, 2026, cost of revenues (exclusive of depreciation and amortization) was $1,012.1 million representing an increase of 6.3% from $952.0 million in the corresponding period of 2025. The increase primarily resulted from increased compensation expense due to salary increases and promotions implemented during the prior year annual compensation cycle, a 2.2% increase in the average number of production professionals in the first quarter of 2026 compared to the first quarter of 2025, and foreign exchange fluctuations. Expressed as a percentage of revenues, cost of revenues (exclusive of depreciation and amortization) was 72.3% and 73.1% in the first quarter of 2026 and 2025, respectively. This year-over-year decrease is primarily due to a decrease in compensation expense, including stock-based compensation expense, as a percentage of revenues, partially offset by the negative impact from foreign currency fluctuations.
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Selling, General and Administrative Expenses
Selling, general and administrative expenses represent expenditures associated with promoting and selling our services and general and administrative functions of our business. These expenses include the costs of salaries, bonuses, fringe benefits, stock-based compensation, severance, bad debt, travel, legal and accounting services, insurance, facilities including operating leases, advertising, and other promotional activities. Additionally, selling, general and administrative expenses include costs of relocating our employees and various one-time and unusual expenses such as impairment charges.
During the three months ended March 31, 2026, selling, general and administrative expenses were $239.7 million representing a 9.5% increase as compared to $218.9 million in the corresponding period of 2025. The increase was mainly driven by increased personnel-related costs, which included impacts from salary increases and promotions implemented during the prior year annual compensation cycle, increases in stock-based compensation expense, and severance, which reflects the impact from cost optimization programs, and foreign exchange fluctuations. See Note 7 “Cost Optimization Programs” for more information regarding the Company’s restructuring programs. Expressed as a percentage of revenues, selling, general and administrative expenses increased by 0.3% to 17.1% for the three months ended March 31, 2026 as compared to the same period from the prior year, primarily driven by an increase in personnel-related costs as a percentage of revenues.
Depreciation and Amortization Expense
During the three months ended March 31, 2026, depreciation and amortization expense was $31.5 million as compared to $31.4 million in the corresponding period last year. The composition of depreciable and amortizable assets has not changed significantly since the first quarter of 2025.
Interest and Other Income, Net
Interest and other income, net includes interest earned on cash and cash equivalents and short-term investments, gains and losses from certain financial instruments, interest expense related to our borrowings, and changes in the fair value of contingent consideration. Interest and other income, net was $1.6 million during the three months ended March 31, 2026, compared to $5.8 million during the three months ended March 31, 2025. The decrease in Interest and other income, net during the three months ended March 31, 2026 as compared to the three months ended March 31, 2025 was largely driven by a $2.7 million difference in the change in fair value of contingent consideration and a $0.8 million decrease in interest income from our cash, cash equivalents and short-term investments.
Foreign Exchange Gain (Loss)
During the three months ended March 31, 2026, foreign exchange gain was $2.3 million compared to a loss of $10.7 million reported in the corresponding period last year. Exchange rate movements impact the reported value of our assets and liabilities denominated in currencies other than the U.S. dollar or where the currency of such items is different than the functional currency of the entity where these items were recorded.
Provision for Income Taxes
In determining our interim provision for income taxes, we use an estimated annual effective tax rate, which is based on expected annual profit before tax, statutory tax rates and tax planning opportunities available in the various jurisdictions in which we operate. Certain significant or unusual items are separately recognized in the quarter in which they occur and can be a source of variability in the effective tax rates from quarter to quarter.
Determining the consolidated provision for income tax expense, deferred income tax assets and liabilities and any potential related valuation allowances involves judgment. We consider factors that may contribute, favorably or unfavorably, to the overall effective tax rate in the current year as well as the future. These factors include statutory tax rates and tax law changes in the countries where we operate and excess tax benefits or shortfalls upon vesting or exercise of stock awards as well as consideration of any significant or unusual items.
Our effective tax rate was 31.6% for the three months ended March 31, 2026, and 22.2% for the three months ended March 31, 2025. The increase in the effective tax rate is largely attributable to a tax shortfall upon vesting or exercise of stock awards of $9.8 million during the three months ended March 31, 2026 as compared to excess tax benefits of $0.5 million during the corresponding period of the prior year.
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Results by Business Segment
We determine our business segments and report segment information in accordance with how the Company’s chief operating decision maker (“CODM”) organizes the segments to evaluate performance, allocate resources and make business decisions. Our CODM is the chief executive officer. We manage our business primarily based on the managerial responsibility for our client base and market. As managerial responsibility for a particular client relationship generally correlates with the client’s geographic location, there is a high degree of similarity between client locations and the geographic boundaries of our reportable segments. In some cases, managerial responsibility for a particular client is assigned to a management team in another region and is usually based on the strength of the relationship between client executives and particular members of EPAM’s senior management team. In such cases, the client’s activity would be reported through the management team’s reportable segment.
Segment results are based on the segment’s revenues and operating profit, where segment operating profit is defined as segment income from operations before unallocated costs. Expenses included in segment operating profit consist principally of direct selling and delivery costs as well as an allocation of certain shared services expenses. Intersegment transactions are excluded from the segment’s revenues and operating profit on the basis that they are neither included in the measure of a segment’s profit and loss results, nor considered by the CODM during the review of segment results. Certain corporate expenses are not allocated to specific segments as these expenses are not controllable at the segment level. Such expenses include certain types of professional fees, certain taxes included in operating expenses, compensation to non-employee directors and certain other general and administrative expenses, including compensation of specific groups of non-production employees. In addition, we do not allocate amortization of intangible assets acquired through business combinations, goodwill and other asset impairment charges, stock-based compensation expenses, acquisition-related costs and certain other one-time charges and benefits. These unallocated amounts are combined with total segment operating profit to arrive at consolidated income from operations.
Our CODM considers the operating results of each segment on a quarterly basis and uses segment operating profit predominantly to assess the performance of each segment by comparing the results of each segment with one another and to historical performance. When combined with certain other financial information, this enables the CODM to make decisions about the reporting structure, allocation of operating and capital resources, and compensation of certain employees.
See Note 14 “Segment Information” in the notes to our condensed consolidated interim financial statements in this Form 10-Q for more information related to our reportable segments.
Americas Segment
The following table summarizes revenues from external clients and operating profit, before unallocated expenses, for the Americas segment for the three months ended March 31, 2026, and 2025:
| Three Months Ended March 31, | ||||||||||||||
| 2026 | 2025 | |||||||||||||
| Americas segment revenues | $ | 795,396 | $ | 777,168 | ||||||||||
| Less: | ||||||||||||||
| Cost of revenues (exclusive of depreciation and amortization) | 549,905 | 550,849 | ||||||||||||
| Selling, general and administrative expenses | 104,344 | 101,518 | ||||||||||||
| Depreciation and amortization expense | 8,901 | 9,573 | ||||||||||||
| Americas segment operating profit | $ | 132,246 | $ | 115,228 | ||||||||||
During the three months ended March 31, 2026, revenues for the Americas segment increased $18.2 million, or 2.3%, compared to the same period last year and segment operating profit increased $17.0 million, or 14.8%, compared to the same period last year. During the three months ended March 31, 2026, revenues from our Americas segment were 56.8% of total revenues, a decrease from 59.7% reported in the corresponding period of 2025. As a percentage of Americas segment revenues, the Americas segment’s operating profit increased to 16.6% during the first quarter of 2026 from 14.8% in the first quarter of 2025. This increase is primarily attributable to improved profitability as a result of our cost optimization initiatives, partially offset by the impact of changes in foreign currency exchange rates.
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The following table presents Americas segment revenues by industry vertical for the periods indicated:
| Three Months Ended March 31, | Change | ||||||||||||||||||||||
| 2026 | 2025 | Dollars | Percentage | ||||||||||||||||||||
| Industry Vertical | (in thousands, except percentages) | ||||||||||||||||||||||
| Financial Services | $ | 165,446 | $ | 149,350 | $ | 16,096 | 10.8 | % | |||||||||||||||
| Software & Hi-Tech | 132,822 | 135,662 | (2,840) | (2.1) | % | ||||||||||||||||||
| Life Sciences & Healthcare | 125,033 | 125,979 | (946) | (0.8) | % | ||||||||||||||||||
| Consumer Goods, Retail & Travel | 122,190 | 114,675 | 7,515 | 6.6 | % | ||||||||||||||||||
| Business Information & Media | 115,897 | 113,220 | 2,677 | 2.4 | % | ||||||||||||||||||
| Emerging Verticals | 134,008 | 138,282 | (4,274) | (3.1) | % | ||||||||||||||||||
| Revenues | $ | 795,396 | $ | 777,168 | $ | 18,228 | 2.3 | % | |||||||||||||||
During the three months ended March 31, 2026, Financial Services was the largest industry vertical in the Americas segment and grew 10.8% compared to the corresponding period of 2025, primarily due to increased spend at a large wealth management client and growth in fintech, insurance, and payment processing clients. Software & Hi-Tech declined 2.1% during the three months ended March 31, 2026, which was a result of lower spend from our technology clients. Life Sciences & Healthcare declined 0.8% during the three months ended March 31, 2026. Consumer Goods, Retail & Travel grew 6.6% during the three months ended March 31, 2026, primarily due to growth from our consumer goods clients. Business Information & Media grew 2.4% during the three months ended March 31, 2026, primarily due to improvement in demand from information services clients. Emerging Verticals declined 3.1% during the three months ended March 31, 2026, primarily due to lower revenues from clients in industrial materials, telecommunications, and real estate, which were partially offset by increased revenues from clients in the energy sector.
Europe Segment
The following table summarizes revenues from external clients and operating profit, before unallocated expenses, for the Europe segment for the three months ended March 31, 2026, and 2025:
| Three Months Ended March 31, | ||||||||||||||
| 2026 | 2025 | |||||||||||||
| Europe segment revenues | $ | 604,665 | $ | 524,524 | ||||||||||
| Less: | ||||||||||||||
| Cost of revenues (exclusive of depreciation and amortization) | 436,702 | 375,463 | ||||||||||||
| Selling, general and administrative expenses | 80,695 | 73,516 | ||||||||||||
| Depreciation and amortization expense | 4,921 | 4,208 | ||||||||||||
| Europe segment operating profit | $ | 82,347 | $ | 71,337 | ||||||||||
During the three months ended March 31, 2026, Europe’s segment revenues were $604.7 million, representing an increase of $80.1 million, or 15.3%, from the same period last year. Revenues were positively impacted by changes in foreign currency exchange rates during the first quarter of 2026 and had our Europe segment revenues been expressed in constant currency terms using the exchange rates in effect during the first quarter of 2025, we would have reported revenue growth of 7.8%. Europe’s segment revenues accounted for 43.2% and 40.3% of total segment revenues during the three months ended March 31, 2026 and 2025, respectively. During the first quarter of 2026, the segment’s operating profit increased 15.4% to $82.3 million compared to the first quarter of 2025. Expressed as a percentage of revenues, Europe’s segment operating profit remained consistent at 13.6% compared to the same period of the prior year.
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The following table presents Europe segment revenues by industry vertical for the periods indicated:
| Three Months Ended March 31, | Change | ||||||||||||||||||||||
| 2026 | 2025 | Dollars | Percentage | ||||||||||||||||||||
| Industry Vertical | (in thousands, except percentages) | ||||||||||||||||||||||
| Financial Services | $ | 184,754 | $ | 164,615 | $ | 20,139 | 12.2 | % | |||||||||||||||
| Consumer Goods, Retail & Travel | 151,687 | 140,837 | 10,850 | 7.7 | % | ||||||||||||||||||
| Software & Hi-Tech | 77,898 | 54,411 | 23,487 | 43.2 | % | ||||||||||||||||||
| Business Information & Media | 49,482 | 53,327 | (3,845) | (7.2) | % | ||||||||||||||||||
| Life Sciences & Healthcare | 39,101 | 28,975 | 10,126 | 34.9 | % | ||||||||||||||||||
| Emerging Verticals | 101,743 | 82,359 | 19,384 | 23.5 | % | ||||||||||||||||||
| Revenues | $ | 604,665 | $ | 524,524 | $ | 80,141 | 15.3 | % | |||||||||||||||
During the three months ended March 31, 2026, Financial Services was the largest industry vertical in the Europe segment and grew 12.2% compared to the corresponding period of 2025, primarily due to improved demand from clients in asset management and insurance. During the three months ended March 31, 2026, revenues in Consumer Goods, Retail & Travel grew 7.7% primarily due to improved demand from clients in the retail and consumer goods industries. During the three months ended March 31, 2026, revenues in Software & Hi-Tech grew 43.2% primarily due to increased demand at a large hardware client and several technology services clients. During the three months ended March 31, 2026, revenues in Business Information & Media declined 7.2% primarily due to decreased demand from information services clients. Revenues in Life Sciences & Healthcare grew 34.9% during the three months ended March 31, 2026, primarily due to the growth experienced from clients in the pharmaceutical sector. Revenues in Emerging Verticals grew 23.5% during the three months ended March 31, 2026, due to the growth from various clients in the energy and government sectors.
Effects of Inflation
Economies in many countries where we operate have periodically experienced high rates of inflation. Periods of higher inflation may affect various economic sectors in those countries and increase our cost of doing business there. We do not believe that inflation has had a material impact on our business, results of operations or financial condition to date. We continue to track the impact of inflation, particularly on wages, while attempting to minimize its effects through pricing and cost management strategies. A higher-than-normal rate of inflation in the future could adversely affect our operations and financial condition. For a discussion of our potential risks and uncertainties, including those related to inflation, see “Part I. Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2025.
Liquidity and Capital Resources
Capital Resources
Our cash generated from operations has been our primary source of liquidity to fund operations, to repurchase shares and make investments to support the growth of our business. As of March 31, 2026, our principal sources of liquidity were cash and cash equivalents totaling $1.037 billion, short-term investments totaling $4.3 million, and $535.0 million of available borrowings under our revolving credit facility. During the quarter ended March 31, 2026, we drew an additional $140 million on this facility to partially fund our $300 million ASR. As of March 31, 2026, $165.0 million was outstanding under this facility and we were in compliance with all covenants contained in the facility. See Note 6 “Debt” of our condensed consolidated financial statements in “Part I. Item 1. Financial Statements (Unaudited)” for information regarding drawdowns on our revolving credit facility.
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Cash Flows
The following table summarizes our cash flows for the periods indicated:
| Three Months Ended March 31, | |||||||||||
| 2026 | 2025 | ||||||||||
| (in thousands) | |||||||||||
| Condensed Consolidated Statements of Cash Flow Data: | |||||||||||
| Net cash provided by (used in) operating activities | $ | (36,360) | $ | 24,162 | |||||||
| Net cash used in investing activities | (15,646) | (5,308) | |||||||||
| Net cash used in financing activities | (192,199) | (149,514) | |||||||||
| Effect of exchange rate changes on cash, cash equivalents and restricted cash | (14,555) | 18,770 | |||||||||
| Net decrease in cash, cash equivalents and restricted cash | (258,760) | (111,890) | |||||||||
| Cash, cash equivalents and restricted cash, beginning of period | 1,301,377 | 1,290,392 | |||||||||
| Cash, cash equivalents and restricted cash, end of period | $ | 1,042,617 | $ | 1,178,502 | |||||||
Operating Activities
Our largest source of cash provided by operating activities is cash generated from our professional services that we provide to our clients. Our primary uses of cash from operating activities include compensation to our employees and related costs, payments for leased facilities, various general corporate expenditures and income tax payments. The first three months of 2026 were negatively impacted by higher payments for variable compensation as compared to the first three months of 2025, attributable to a higher level of financial performance for the year ended December 31, 2025.
Investing Activities
Our primary uses of cash in investing activities consist of purchases of computer hardware, software and office equipment, as well as investments into office buildings and new businesses. We also use cash for short-term investments and time deposits and receive cash upon maturity of these deposits. Most of our investments are typically short-term and cash equivalent in nature but we may invest in longer term deposits if the terms are favorable. The cash used in investing activities during the three months ended March 31, 2026 was primarily attributable to $17.9 million used for capital expenditures compared to $9.3 million used for capital expenditures in the corresponding period of 2025.
Financing Activities
Cash used in financing activities mainly consists of repurchases of shares of EPAM common stock under our share repurchase programs, payments of withholding taxes related to net share settlements of restricted stock units, repayments of debt, and settlements of the acquisition-date fair value of contingent consideration related to acquisitions of businesses. Cash provided by financing activities mainly consists of the proceeds from the purchases of shares under our ESPP and exercises of stock options issued under our long-term incentive plans as well as proceeds from debt. We typically do not rely on debt to supplement our cash flows. During the first three months of 2026, our main use of cash in financing activities consisted of $324.0 million of payments to repurchase our common stock, including $300 million related to the accelerated share repurchase, compared to $160.0 million in the corresponding period of 2025. The cash outflows during the first three months of 2026 were partially offset by $140.0 million of proceeds from a drawdown on our revolving credit facility.
Future Capital Requirements
We believe that our existing cash, cash equivalents and short-term investments, combined with our expected cash flow from operations will be sufficient to meet our projected operating and capital expenditure requirements for at least the next twelve months and that we possess the financial flexibility to execute our strategic objectives, including the ability to make acquisitions and strategic investments in the foreseeable future. However, the invasion of Ukraine, other various geopolitical events, and the related measures implemented to contain their impact, have caused and may continue to cause material disruptions in financial markets and economies. These disruptions may increase our costs of capital, decrease returns on investment, and otherwise adversely affect our business, results of operations, financial condition and liquidity.
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Our ability to generate cash is subject to our performance, general economic conditions, industry trends and other factors including the impact of the invasion of Ukraine, as described elsewhere in this Management’s Discussion and Analysis of Financial Condition and Results of Operations. We may require additional cash resources due to changed business conditions or other future developments, including any investments, acquisitions, or share repurchases we may decide to pursue. To the extent that existing cash, cash equivalents, short-term investments, and operating cash flows are insufficient to fund our future activities and requirements, we may need to raise additional funds through public or private equity or debt financing. If we issue equity securities in order to raise additional funds, substantial dilution to existing stockholders may occur. If we raise cash through the issuance of additional indebtedness, we may be subject to additional contractual restrictions on our business and there is no assurance that we would be able to raise additional funds on favorable terms or at all. Our ability to expand and grow our business in accordance with current plans and to meet our long-term capital requirements will depend on many factors, including the rate at which our cash flows increase or decrease and the availability of public and private debt and equity financing.
See Note 13 “Commitments and Contingencies” of our condensed consolidated financial statements in “Part I. Item 1. Financial Statements (Unaudited)” of this Quarterly Report and “Part II. Item 7. Future Capital Requirements” of our Annual Report on Form 10-K for the year ended December 31, 2025 for information regarding contractual obligations.
Off-Balance Sheet Commitments and Arrangements
We do not have any material obligations under guarantee contracts or other contractual arrangements other than as disclosed in Note 13 “Commitments and Contingencies” of our condensed consolidated financial statements in “Part I. Item 1. Financial Statements (Unaudited).” We have not entered into any transactions with unconsolidated entities where we have financial guarantees, subordinated retained interests, derivative instruments, or other contingent arrangements that expose us to material continuing risks, contingent liabilities, or any other obligation under a variable interest in an unconsolidated entity that provides financing, liquidity, market risk, or credit risk support to us, or engages in leasing, hedging, or research and development services with us.
Recent Accounting Pronouncements
See Note 1 “Organization and Summary of Significant Accounting Policies” to our unaudited condensed consolidated financial statements in “Part I. Item 1. Financial Statements (Unaudited)” for additional information.
Forward-Looking Statements
This quarterly report on Form 10-Q contains estimates and forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, principally in “Part I. Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Part II. Item 1A. Risk Factors.” Our Annual Report on Form 10-K for the year ended December 31, 2025 also contains estimates and forward-looking statements, principally in “Part I. Item 1A. Risk Factors” and “Part II. Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Our estimates and forward-looking statements are based on our current expectations and estimates of future events and trends, which affect or may affect our businesses and operations. Those future events and trends may relate to, among other things, developments relating to the war in Ukraine and escalation of the war in the surrounding region, political and civil unrest or military action in the geographies where we conduct business and operate, difficult conditions in global capital markets, foreign exchange markets, global trade and the broader economy, the adoption and implementation of artificial intelligence technologies by EPAM and its clients and prospective clients, and the effect that these events may have on client demand, our revenues, operations, access to capital and profitability. Although we believe that these estimates and forward-looking statements are based upon reasonable assumptions, they are subject to several risks, uncertainties and assumptions as to future events that may not prove to be accurate and are made in light of information currently available to us. Important factors, in addition to the factors described in this quarterly report and in our Annual Report, may materially and adversely affect our results. You should read this quarterly report, our Annual Report and the documents that we have filed as exhibits hereto completely and with the understanding that our actual future results may be materially different from what we expect.
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The words “may,” “will,” “should,” “could,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “intend,” “potential,” “might,” “would,” “continue” or the negative of these terms or other comparable terminology and similar words are intended to identify estimates and forward-looking statements. Estimates and forward-looking statements speak only as of the date they were made and, except to the extent required by law, we undertake no obligation to update, to correct, to revise or to review any estimate and/or forward-looking statement because of new information, future events or other factors. Estimates and forward-looking statements involve risks and uncertainties and are not guarantees of future performance. As a result of the risks and uncertainties described above, the estimates and forward-looking statements discussed in this quarterly report and our Annual Report on Form 10-K for the year ended December 31, 2025 might not occur and our future results, level of activity, performance or achievements may differ materially from those expressed in these forward-looking statements due to, including, but not limited to, the factors mentioned above, and the differences may be material and adverse. Because of these uncertainties, you should not place undue reliance on these forward-looking statements.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
We are exposed to certain market risks in the ordinary course of our business. These risks primarily result from changes in concentration of credit risks, foreign currency exchange rates and interest rates. In addition, our global operations are subject to risks related to differing economic conditions, global trade, civil unrest, political instability or uncertainty, military activities, broad-based sanctions, differing tax structures, and other changing regulations and restrictions.
Concentration of Credit and Other Credit Risks
Financial instruments that potentially subject us to significant concentrations of credit risk consist primarily of cash, cash equivalents, restricted cash, short-term investments and trade receivables.
We maintain our cash, cash equivalents and short-term investments with financial institutions. We believe that our credit policies reflect normal industry terms and business risk. We do not anticipate non-performance by the counterparties.
We have cash in several countries, including Ukraine and Belarus, where the banking sector remains subject to periodic instability; banking and other financial systems in these countries generally do not meet the banking standards of more developed markets, and bank deposits made by corporate entities are not insured. As of March 31, 2026, we had $63.5 million of cash and cash equivalents in banks in Ukraine and $50.0 million of cash and cash equivalents in banks in Belarus. We regularly monitor cash held in these countries and, to the extent the cash held exceeds amounts required to support our operations in these countries, we distribute the excess funds into markets with more developed banking sectors to the extent it is possible to do so. In April 2024, Belarus instituted restrictions on distributing dividends from Belarus to shareholders in certain countries, including the U.S. The restrictions are scheduled to remain in place until the end of 2026 and may prevent EPAM from distributing excess funds, if any, out of Belarus. We do not expect these restrictions to have a material impact on our ability to meet our worldwide cash obligations during this period. We place our cash and cash equivalents with financial institutions considered stable, limit the amount of credit exposure with any one financial institution and conduct ongoing evaluations of the credit worthiness of the financial institutions with which we do business. However, a banking crisis, bankruptcy or insolvency of banks that process or hold our funds, or sanctions may result in the loss of our deposits or adversely affect our ability to complete banking transactions, which could adversely affect our business and financial condition.
Trade receivables are generally dispersed across many clients operating in different industries and geographies; therefore, concentration of credit risk is limited and we do not believe significant credit risk existed as of March 31, 2026. Though our results of operations depend on our ability to successfully collect payment from our clients for work performed, historically, credit losses and write-offs of trade receivables have not been material to our condensed consolidated financial statements. If our clients enter bankruptcy protection or otherwise take steps to alleviate their financial distress, our credit losses and write-offs of trade receivables could increase, which would negatively impact our results of operations.
Interest Rate Risk
We are exposed to market risk from changes in interest rates. Exposure to interest rate risk results primarily from variable rates related to cash and cash equivalent deposits, short-term investments, and our borrowings, mainly under our 2025 Credit Agreement, which is subject to a variety of rates depending on the currency and timing of funds borrowed. We do not believe we are exposed to material direct risks associated with changes in interest rates related to these deposits, investments and borrowings.
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Foreign Exchange Risk
Our global operations are conducted predominantly in U.S. dollars. Other than U.S. dollars, we generate revenues principally in euros, British pounds, and Swiss francs. During the three months ended March 31, 2026, approximately 40.0% of consolidated revenues were denominated in currencies other than the U.S. dollar. Other than U.S. dollars, we incur expenditures principally in euros, Polish zlotys, Indian rupees, British pounds, and Mexican pesos. The majority of our expenditures are in currencies other than the U.S. dollar. As a result, exchange rate fluctuations in any of these currencies relative to the U.S. dollar could negatively impact our results of operations.
To manage the risk of fluctuations in foreign currency exchange rates and hedge a portion of our forecasted foreign currency denominated operating expenses incurred in the normal course of business, we implemented a hedging program through which we enter into a series of foreign exchange forward contracts with durations of twelve months or less that are designated as cash flow hedges of forecasted Polish zloty, Indian rupee, Hungarian forint, Colombian peso, and Mexican peso transactions. As of March 31, 2026, all of EPAM’s foreign exchange forward contracts were designated as hedges and there is no financial collateral (including cash collateral) required to be posted related to the foreign exchange forward contracts.
Management supplements results reported in accordance with United States generally accepted accounting principles, referred to as GAAP, with non-GAAP financial measures. Management believes these measures help illustrate underlying trends in our business and uses the measures to establish budgets and operational goals, communicated internally and externally, for managing our business and evaluating our performance. When important to management’s analysis, operating results are compared on the basis of “constant currency,” which is a non-GAAP financial measure. This measure excludes the effect of foreign currency exchange rate fluctuations by translating the current period revenues and expenses into U.S. dollars at the weighted average exchange rates of the prior period of comparison.
During the first quarter of 2026, we reported revenue growth of 7.6% compared to the first quarter of 2025. Had our consolidated revenues been expressed in constant currency terms using the exchange rates in effect during the first quarter of 2025, we would have reported revenue growth of 3.7%. Our revenues denominated in euros, British pounds, and Swiss francs experienced the most impact from the movements in foreign currencies. During the first quarter of 2026, we reported an increase in income from operations of 17.6% compared to the first quarter of 2025. Had our consolidated results been expressed in constant currency terms using the exchange rates in effect during the first quarter of 2025, we would have reported an increase in income from operations of 29.7%. Income from operations was most significantly impacted by the movements of Polish zloty, euro, Hungarian forint, Indian rupee, and Mexican peso exchange rates during the first quarter of 2026 compared to the same period in the prior year.
Item 4. Controls and Procedures
Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures
Based on management’s evaluation, with the participation of our Chief Executive Officer and Chief Financial Officer, as of the end of the period covered by this report, these officers have concluded that our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), are effective to provide reasonable assurance that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and is accumulated and communicated to management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.
Changes in Internal Control Over Financial Reporting
There has been no change in our internal control over financial reporting during the quarter ended March 31, 2026 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
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PART II. OTHER INFORMATION
Item 1. Legal Proceedings
From time to time, we are involved in litigation and claims arising out of our business and operations in the normal course of business. We are not currently a party to any material legal proceeding, nor are we aware of any material legal or governmental proceedings pending or contemplated to be brought against us.
Item 1A. Risk Factors
For a discussion of our potential risks and uncertainties, including the role of AI technologies in our business and workforce and as competition to the services that we sell, and our significant operations in Belarus and Ukraine and the material adverse effect the invasion of Ukraine by Russia has had and may have on our operations, business, and financial results, see the risk factors disclosed under the heading “Part I. Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2025.
The risks and uncertainties that we face are not limited to those set forth in our Annual Report on Form 10-K. Additional risks and uncertainties not presently known to us or that we currently believe to be immaterial may also adversely affect our business and the trading price of our common stock.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Issuer Purchases of Equity Securities
On October 16, 2025, the Board of Directors authorized a share repurchase program (the “2025 Repurchase Program”) for up to $1,000 million of the Company’s outstanding common stock. The Company may repurchase shares of its common stock on a discretionary basis from time to time through open-market purchases, privately negotiated transactions or other means, including through the use of trading plans intended to qualify under Rule 10b5-1 under the Securities Exchange Act of 1934, as amended. See Note 10 “Stockholders’ Equity” in the notes to our condensed consolidated interim financial statements in this Form 10-Q for more information related to the program.
The following table provides information about the purchases of shares of our common stock during the three months ended March 31, 2026:
| Period | Total Number of Shares Purchased | Average Price Paid per Share (1) | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs | ||||||||||||||||||||||
| (in thousands, except per share amounts) | ||||||||||||||||||||||||||
| January 1 to January 31, 2026 | — | $ | — | — | $ | 776,453 | ||||||||||||||||||||
| February 1 to February 28, 2026 | 132 | $ | 181.81 | 132 | $ | 752,491 | ||||||||||||||||||||
| March 1 to March 31, 2026 | 1,703 | $ | 140.90 | 1,703 | $ | 512,491 | ||||||||||||||||||||
| Total | 1,835 | $ | 143.84 | 1,835 | ||||||||||||||||||||||
(1) Average price paid per share in the period includes commission and excludes excise tax. Our share repurchases in excess of issuances during the taxable year are subject to a 1% excise tax. Any excise tax incurred is recognized as part of the cost basis of the shares acquired in the condensed consolidated statements of changes in equity.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not Applicable.
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Item 5. Other Information
Insider Adoption or Termination of Trading Arrangements:
On March 13, 2026, Arkadiy Dobkin, Executive Chair, through a revocable trust that he controls, entered into a trading arrangement for the sale of securities of the Company’s common stock that is intended to satisfy the affirmative defense conditions of Securities Exchange Act Rule 10b5-1(c) (a “Rule 10b5-1 Trading Plan”). Mr. Dobkin’s Rule 10b5-1 Trading Plan provides for the sale of up to 150,000 shares of common stock before its expiration on March 15, 2028.
Item 6. Exhibits
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
Date: May 7, 2026
| EPAM SYSTEMS, INC. | ||||||||
| By: | /s/ Balazs Fejes | |||||||
| Name: Balazs Fejes | ||||||||
Title: Chief Executive Officer, President and Director (principal executive officer) | ||||||||
| By: | /s/ Jason Peterson | |||||||
| Name: Jason Peterson | ||||||||
| Title: Senior Vice President, Chief Financial Officer and Treasurer (principal financial officer) | ||||||||
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