EPAM Systems, Inc. 10-Q Summary: Q2 2026
Business Context and Reporting Period
This filing covers the quarterly period ended June 30, 2026. EPAM Systems, Inc. is a global provider of digital engineering, cloud, and AI-enabled transformation services. The company operates primarily through two reportable segments: Americas and Europe. As of July 31, 2026, there were 51,586,981 shares of common stock outstanding.
Key Financial Metrics
| Metric | Q2 2026 | Q2 2025 | YTD 2026 | YTD 2025 |
|---|---|---|---|---|
| Revenues | $1.415 billion | $1.353 billion | $2.815 billion | $2.655 billion |
| Net Income | $103.0 million | $88.0 million | $185.5 million | $161.5 million |
| Diluted EPS | $1.97 | $1.56 | $3.49 | $2.84 |
| Operating Margin | 10.8% | 9.3% | 9.6% | 8.5% |
| Cash & Equivalents | $789.4 million | Balance Sheet Data | ||
| Long-term Debt | $25.0 million | |||
| Operating Cash Flow (YTD) | ($38.8 million) | $77.4 million | Cash Flow Data |
Material Changes vs. Prior Period
- Revenue Growth: Revenues increased 4.5% in Q2 and 6.0% YTD compared to 2025. Growth was driven by improving demand and favorable foreign exchange fluctuations (contributing 1.1% in Q2 and 2.5% YTD).
- Profitability Expansion: Operating margin improved to 10.8% in Q2 from 9.3% in the prior year, primarily due to a decrease in cost of revenues as a percentage of revenue.
- Segment Performance:
- Americas: Revenue grew 0.6% QoQ; operating profit increased 15.1% to $149.1 million.
- Europe: Revenue grew 10.0% QoQ; operating profit increased 24.4% to $100.5 million.
- Cash Flow Volatility: Operating cash flow turned negative at ($38.8 million) YTD 2026 compared to positive $77.4 million in 2025. This was driven by higher variable compensation payments and an increase in days sales outstanding.
- Share Repurchases: The company spent $409.0 million on share repurchases YTD 2026, including a $300 million Accelerated Share Repurchase (ASR) agreement settled in April 2026.
Outlook, Risks, and Unusual Items
- Ukraine Impact: The company maintains a $100 million humanitarian commitment for Ukraine, with $4.6 million remaining to be expensed. Operations in Ukraine continue with $62.7 million in long-lived assets at risk, though no significant damage has been reported.
- Geopolitical Risks: Belarus has instituted restrictions on dividend distributions to the U.S. until the end of 2026. The company holds $37.5 million in cash in Belarus and $34.1 million in Ukraine, exposing it to banking instability risks.
- Cost Optimization: The 2025 Cost Optimization Program was completed as of June 30, 2026, contributing to improved operating margins.
- Foreign Exchange: The company faces significant FX risk. Constant currency revenue growth was lower than reported growth (3.4% vs 4.5% in Q2), indicating FX tailwinds.
- Guidance: The filing does not contain specific numerical forward-looking guidance for the full year 2026, though management expects expenses related to the war in Ukraine to continue in subsequent quarters.
Investor Verification Checklist
- Cash Flow Reversal: Verify the sustainability of operations given the shift from positive to negative operating cash flow YTD.
- FX Sensitivity: Assess the impact of potential currency reversals on future margins, given the reliance on FX tailwinds for reported growth.
- Ukraine/Belarus Exposure: Monitor the status of the $71.6 million in cash held in Ukraine and Belarus and the potential impact of Belarusian dividend restrictions.
- Share Count Reduction: Confirm the impact of the aggressive $409 million share repurchase program on future earnings per share.
- Contract Liabilities: Note the decrease in contract liabilities (deferred revenue) from $104.2 million to $64.4 million, which may indicate lower advance collections.