EPAM Systems (EPAM) Q2 2026 earnings summary

Executive summary

• Q2 2026 revenue reached $1.415 billion, up 4.5% year-over-year, with organic constant currency growth of 3.4%.

• AI-native revenues accelerated, surpassing $160 million and now represent over 11% of total revenue, with double-digit sequential growth for the sixth consecutive quarter.

• Profitability improved, with GAAP income from operations up 20.4% and non-GAAP income from operations up 14.7% year-over-year; GAAP diluted EPS was $1.97, up 26.3%, and non-GAAP diluted EPS was $3.38, up 22%.

• EMEA led growth with double-digit gains (10.9%), while Americas saw minimal growth (0.5%) due to North American headwinds.

• Strategic focus remains on AI-native transformation, commercial discipline, and expanding go-to-market capabilities, especially in North America.

Financial highlights

• GAAP gross margin improved to 30.4% (from 28.8% last year); non-GAAP gross margin rose to 32%.

• Cash flow from operations was negative $2 million in Q2, impacted by timing of client payments and higher variable compensation; free cash flow was negative $18 million.

• Cash and equivalents stood at $800 million at quarter end; available borrowing capacity was $675 million.

• DSO increased to 82 days from 78 days a year ago.

• Net income for Q2 was $103.0 million (7.3% margin), up from $88.0 million (6.5%) in Q2 2025.

Outlook and guidance

• Full-year 2026 revenue growth expected at 3.2%-4.2%, with organic constant currency growth of 2%-3%.

• GAAP income from operations forecasted at 10.5%-11%; non-GAAP at 15.5%-16%.

• GAAP diluted EPS guidance: $8.22-$8.38; non-GAAP diluted EPS: $13.08-$13.24.

• Q3 2026 revenue expected at $1.410-$1.425 billion, with 1.7% year-over-year growth.

• Free cash flow conversion for 2026 expected at 70%, below typical 80%-90%, but anticipated to normalize in 2027; long-term cumulative free cash flow target of $1.8B+ from 2026–2028.