EPAM’s (NYSE:EPAM) Q2 CY2026 Sales Beat Estimates But Stock Drops

Digital engineering services company EPAM Systems (NYSE:EPAM) reported Q2 CY2026 results beating Wall Street’s revenue expectations, with sales up 4.5% year on year to $1.41 billion. On the other hand, next quarter’s revenue guidance of $1.42 billion was less impressive, coming in 1.8% below analysts’ estimates. Its non-GAAP profit of $3.38 per share was 7.6% above analysts’ consensus estimates.

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"Our second quarter results came in better than expected with continued AI-native momentum and ongoing profitability improvement, reflecting solid execution against our multi-year strategy," said Balazs Fejes, CEO & President, EPAM.

Company Overview

Founded in 1993 during the early days of offshore software development, EPAM Systems (NYSE:EPAM) provides digital engineering, cloud, and AI transformation services to help global enterprises and startups modernize their technology systems and create digital products.

Revenue Growth

A company’s long-term performance is an indicator of its overall quality. Any business can put up a good quarter or two, but many enduring ones grow for years.

With $5.62 billion in revenue over the past 12 months, EPAM is one of the larger companies in the business services industry and benefits from a well-known brand that influences purchasing decisions.

As you can see below, EPAM’s sales grew at an exceptional 13.1% compounded annual growth rate over the last five years. This is an encouraging starting point for our analysis because it shows EPAM’s demand was higher than many business services companies.

Long-term growth is the most important, but within business services, a half-decade historical view may miss new innovations or demand cycles. EPAM’s annualized revenue growth of 10.2% over the last two years is below its five-year trend, but we still think the results suggest healthy demand.

EPAM also reports sales performance excluding currency movements, which are outside the company’s control and not indicative of demand. Over the last two years, its constant currency sales averaged 3.9% year-on-year growth. Because this number is lower than its normal revenue growth, we can see that foreign exchange rates have boosted EPAM’s performance.

This quarter, EPAM reported modest year-on-year revenue growth of 4.5% but beat Wall Street’s estimates by 0.6%. Company management is currently guiding for a 1.7% year-on-year increase in sales next quarter.

Looking further ahead, sell-side analysts expect revenue to grow 4.5% over the next 12 months, a deceleration versus the last two years. This projection is underwhelming and implies its products and services will see some demand headwinds. At least the company is tracking well in other measures of financial health.

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Adjusted Operating Margin

Adjusted operating margin is a key measure of profitability. Think of it as net income (the bottom line) excluding the impact of non-recurring expenses, taxes, and interest on debt - metrics less connected to business fundamentals.

EPAM has been a well-oiled machine over the last five years. It demonstrated elite profitability for a business services business, boasting an average adjusted operating margin of 112%.

Analyzing the trend in its profitability, EPAM’s adjusted operating margin rose significantly over the last five years, as its sales growth gave it immense operating leverage.

This quarter, EPAM generated an adjusted operating margin profit margin of 1,677%, up 1,661.6 percentage points year on year. This increase was a welcome development and shows it was more efficient.

Earnings Per Share

We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.

EPAM’s remarkable 11.4% annual EPS growth over the last five years aligns with its revenue performance. This tells us its incremental sales were profitable.

Like with revenue, we analyze EPS over a more recent period because it can provide insight into an emerging theme or development for the business.

For EPAM, its two-year annual EPS growth of 10% was lower than its five-year trend. This wasn’t great, but at least the company was successful in other measures of financial health.

In Q2, EPAM reported adjusted EPS of $3.38, up from $2.77 in the same quarter last year. This print beat analysts’ estimates by 7.6%. Over the next 12 months, Wall Street expects EPAM’s full-year EPS to grow 8.4% from $12.58 to $13.64.

Key Takeaways from EPAM’s Q2 Results

It was good to see EPAM beat analysts’ EPS expectations this quarter. We were also happy its full-year EPS guidance narrowly outperformed Wall Street’s estimates. On the other hand, its revenue guidance for next quarter missed and its EPS guidance for next quarter fell slightly short of Wall Street’s estimates. Overall, this was a weaker quarter. The stock traded down 6.8% to $102.57 immediately after reporting.

Should you buy the stock or not? We think that the latest quarter is only one piece of the longer-term business quality puzzle. Quality, when combined with valuation, can help determine if the stock is a buy. We cover that in our actionable full research report which you can read here (it’s free).