EPAM Systems, Inc.

Previous wording

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. EPAM’s highest priority is the safety and security of its employees and their families in Ukraine as well as in the broader region, and we have continued to support relocating our employees to lower risk locations, both within Ukraine and to other countries where we operate. The vast majority of our Ukraine employees are in safe locations and operating at levels of productivity consistent with those achieved prior to the attack. As of June 30, 2025, Ukraine continues to be a significant delivery location with a large number of delivery professionals. Furthermore, we have maintained our $100 million humanitarian aid commitment to our people in Ukraine in addition to our other donations and volunteer efforts, and as of June 30, 2025, we have $16.4 million remaining to be expensed under this humanitarian commitment.

Current wording

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. EPAM’s highest priority is the safety and security of its employees and their families in Ukraine as well as in the broader region, and we have continued to support relocating our employees to lower risk locations, both within Ukraine and to other countries where we operate. The vast majority of our Ukraine employees are in safe locations and operating at levels of productivity consistent with those achieved prior to the attack. As of September 30, 2025, Ukraine continues to be a significant delivery location with a large number of delivery professionals. Furthermore, we have maintained our $100 million humanitarian aid commitment to our people in Ukraine in addition to our other donations and volunteer efforts, and as of September 30, 2025, we have $12.5 million remaining to be expensed under this humanitarian commitment.

Previous wording

For the first six months of 2025, our revenues were $2.655 billion, an increase of 14.8% from $2.312 billion reported for the same period of 2024. Revenues have been positively impacted by improving demand for our services, acquisitions completed in 2024, and foreign exchange fluctuations. Income from operations as a percentage of revenues decreased to 8.5% for the six months ended June 30, 2025 as compared to 10.0% for the six months ended June 30, 2024, largely driven by an increase in cost of revenues (exclusive of depreciation and amortization) as a percentage of revenues. Diluted earnings per share decreased to $2.84 for the six months ended June 30, 2025 from $3.67 for the six months ended June 30, 2024, principally resulting from a decrease in income from operations as well as reduced excess tax benefits upon vesting or exercise of equity awards.

Current wording

For the first nine months of 2025, our revenues were $4.050 billion, an increase of 16.4% from $3.480 billion reported for the same period of 2024. Revenues have been positively impacted by improving demand for our services, acquisitions completed in 2024, and foreign exchange fluctuations. Income from operations as a percentage of revenues decreased to 9.2% for the nine months ended September 30, 2025 as compared to 11.7% for the nine months ended September 30, 2024, largely driven by lower government incentives related to conducting R&D activities in Poland and an increase in cost of revenues (exclusive of depreciation and amortization) as a percentage of revenues. Diluted earnings per share decreased to $4.75 for the nine months ended September 30, 2025 from $6.04 for the nine months ended September 30, 2024, principally resulting from a decrease in income from operations as well as reduced excess tax benefits upon vesting or exercise of equity awards.

Previous wording

During the three and six months ended June 30, 2025, 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, 2024.

Current wording

During the three and nine months ended September 30, 2025, 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, 2024.

Previous wording

(1)Includes $18,161 and $16,937 of stock-based compensation expense for the three months ended June 30, 2025 and 2024, respectively, and $42,084 and $39,294 of stock-based compensation expense for the six months ended June 30, 2025 and 2024, respectively.

Current wording

(1)Includes $21,149 and $19,576 of stock-based compensation expense for the three months ended September 30, 2025 and 2024, respectively, and $63,233 and $58,870 of stock-based compensation expense for the nine months ended September 30, 2025 and 2024, respectively.

Previous wording

(2)Includes $20,397 and $18,747 of stock-based compensation expense for the three months ended June 30, 2025 and 2024, respectively, and $44,930 and $41,181 of stock-based compensation expense for the six months ended June 30, 2025 and 2024, respectively.

Current wording

(2)Includes $23,455 and $22,548 of stock-based compensation expense for the three months ended September 30, 2025 and 2024, respectively, and $68,385 and $63,729 of stock-based compensation expense for the nine months ended September 30, 2025 and 2024, respectively.

Previous wording

During the three months ended June 30, 2025, our total revenues increased by 18.0% to $1.353 billion compared to the corresponding period in 2024. During the three months ended June 30, 2025 as compared to the same period last year, revenues have been positively impacted by improving demand for our services, acquisitions completed in 2024, and fluctuations in foreign currency exchange rates which increased our revenue growth by 1.7%.

Current wording

During the three months ended September 30, 2025, our total revenues increased by 19.4% to $1.394 billion compared to the corresponding period in 2024. During the three months ended September 30, 2025 as compared to the same period last year, revenues have been positively impacted by improving demand for our services, acquisitions completed in 2024 which contributed 10.5% to revenue growth, and fluctuations in foreign currency exchange rates which contributed 1.8% to revenue growth.

Previous wording

Revenues by client location for the three and six months ended June 30, 2025 and 2024 were as follows:

Current wording

Revenues by client location for the three and nine months ended September 30, 2025 and 2024 were as follows:

Previous wording

During the three and six months ended June 30, 2025, the United States continued to be our largest client location. During the three months ended June 30, 2025, revenues in the United States increased 7.2% to $710.0 million from $662.6 million in the second quarter of 2024, largely due to increased spending at certain large accounts in the region as well as revenues from our 2024 acquisitions. During the six months ended June 30, 2025, revenues in the United States increased to $1.398 billion as compared to $1.330 billion in the same period of the prior year.

Current wording

During the three and nine months ended September 30, 2025, the United States continued to be our largest client location. During the three months ended September 30, 2025, revenues in the United States increased 7.4% to $716.2 million from $666.9 million in the third quarter of 2024, largely due to increased spending at certain large accounts in the region as well as revenues from our 2024 acquisitions. During the nine months ended September 30, 2025, revenues in the United States increased to $2.115 billion as compared to $1.997 billion in the same period of the prior year.

Previous wording

During the three months ended June 30, 2025, the top three revenue contributing countries by client location in EMEA were the United Kingdom, Switzerland and Netherlands, generating $149.6 million, $110.1 million and $57.1 million in revenues, respectively compared to $127.8 million, $101.3 million, and $45.1 million, respectively, in the corresponding period last year. During the six months ended June 30, 2025, the United Kingdom, Switzerland and Germany performed as EMEA’s top revenue generating locations and contributed $294.2 million, $214.9 million, and $108.1 million, respectively, compared to $263.7 million, $199.8 million, and $100.0 million, respectively, in the corresponding period last year. Revenues in the EMEA region were positively impacted by acquisitions completed in 2024, increased spending at certain large accounts and changes in foreign currency exchange rates during the three and six months ended June 30, 2025 as compared to the same periods in the previous year.

Current wording

During the three months ended September 30, 2025, the top three revenue contributing countries by client location in EMEA were the United Kingdom, Switzerland and Netherlands, generating $153.4 million, $113.3 million and $60.7 million in revenues, respectively compared to $126.0 million, $104.3 million, and $45.8 million, respectively, in the corresponding period last year. During the nine months ended September 30, 2025, the United Kingdom, Switzerland and Germany performed as EMEA’s top revenue generating locations and contributed $447.5 million, $328.2 million, and $168.4 million, respectively, compared to $389.7 million, $304.0 million, and $153.6 million, respectively, in the corresponding period last year. Revenues in the EMEA region were positively impacted by acquisitions completed in 2024, increased spending at certain large accounts and changes in foreign currency exchange rates during the three and nine months ended September 30, 2025 as compared to the same periods in the previous year.

Previous wording

During the three and six months ended June 30, 2025, revenues from clients in the APAC region increased by $3.1 million or 13.0% and $4.1 million or 8.7%, respectively, mainly due to growth in the Consumer Goods, Retail & Travel vertical compared to the corresponding periods of 2024.

Current wording

During the three and nine months ended September 30, 2025, revenues from clients in the APAC region increased by $4.5 million or 17.7% and $8.6 million or 11.8%, respectively, mainly due to growth in the Consumer Goods, Retail & Travel vertical compared to the corresponding periods of 2024.

Previous wording

During the three months ended June 30, 2025, cost of revenues (exclusive of depreciation and amortization) was $964.0 million representing an increase of 18.9% from $810.9 million in the corresponding period of 2024. The increase primarily resulted from the acquisitions of NEORIS and First Derivative in the fourth quarter of 2024 as well as higher levels of variable compensation expense during the second quarter of 2025 as compared to the corresponding period of 2024, partially offset by government incentives totaling $13.0 million recognized in the second quarter of 2025 related to conducting R&D activities in Poland. Expressed as a percentage of revenues, cost of revenues (exclusive of depreciation and amortization) was 71.2% and 70.7% in the second quarter of 2025 and 2024, respectively. The year-over-year increase in the second quarter of 2025 as compared to the corresponding period of the prior year is primarily due to the acquisitions completed in 2024 and higher levels of variable compensation expense, partially offset by the recognition of government incentives related to conducting R&D activities in Poland.

Current wording

During the three months ended September 30, 2025, cost of revenues (exclusive of depreciation and amortization) was $983.2 million representing an increase of 28.7% from $764.0 million in the corresponding period of 2024. The increase primarily resulted from the acquisitions of NEORIS and First Derivative in the fourth quarter of 2024, higher variable compensation expense, and a $38.8 million decrease in government incentives recognized in the third quarter of 2025 compared to the third quarter of 2024 related to conducting R&D activities in Poland. The third quarter of 2024 included a cumulative catch-up benefit related to Poland R&D tax credits. Expressed as a percentage of revenues, cost of revenues (exclusive of depreciation and amortization) was 70.5% and 65.4% in the third quarter of 2025 and 2024, respectively. This year-over-year increase is primarily due to the acquisitions completed in 2024, higher variable compensation expense, and a decrease in government incentives recognized in the third quarter related to conducting R&D activities in Poland.

Previous wording

During the six months ended June 30, 2025, cost of revenues (exclusive of depreciation and amortization) was $1.916 billion representing an increase of 16.5% from $1.645 billion in the corresponding period of 2024. The increase primarily resulted from the acquisitions of NEORIS and First Derivative in the fourth quarter of 2024 as well as higher levels of variable compensation expense during the first half of 2025 as compared to the corresponding period of 2024, partially offset by government incentives totaling $25.0 million recognized in the first six months of 2025 related to conducting R&D activities in Poland. Expressed as a percentage of revenues, cost of revenues (exclusive of depreciation and amortization) was 72.2% and 71.2% for the six months ended June 30, 2025 and 2024, respectively. The year-over-year increase is primarily due to the 2024 compensation increases which we were not able to fully offset through pricing increases, the acquisitions completed in 2024 and higher levels of variable compensation expense, partially offset by the recognition of government incentives related to conducting R&D activities in Poland.

Current wording

During the nine months ended September 30, 2025, cost of revenues (exclusive of depreciation and amortization) was $2.899 billion representing an increase of 20.3% from $2.409 billion in the corresponding period of 2024. The increase primarily resulted from the acquisitions of NEORIS and First Derivative in the fourth quarter of 2024, higher variable compensation expense, and a $13.8 million decrease in government incentives recognized in the first nine months of 2025 compared to the corresponding period of 2024 related to conducting R&D activities in Poland. The first nine months of 2024 included a cumulative catch-up benefit related to Poland R&D tax credits. Expressed as a percentage of revenues, cost of revenues (exclusive of depreciation and amortization) was 71.6% and 69.3% for the nine months ended September 30, 2025 and 2024, respectively. The year-over-year increase is primarily due to the 2024 compensation increases which we were not able to fully offset through pricing increases, the acquisitions completed in 2024, higher variable compensation expense, and a decrease in government incentives recognized in the first nine months of 2025 related to conducting R&D activities in Poland.

Previous wording

During the six months ended June 30, 2025, selling, general and administrative expenses were $450.6 million representing a 14.8% increase as compared to $392.5 million in the corresponding period of 2024. The increase in selling, general and administrative expenses was mainly driven by the acquisitions of NEORIS and First Derivative completed in the fourth quarter of 2024. Expressed as a percentage of revenues, selling, general and administrative expenses remained consistent at 17.0% for the both six months ended June 30, 2025 and 2024.

Current wording

During the three months ended September 30, 2025, selling, general and administrative expenses were $234.9 million representing a 13.6% increase as compared to $206.8 million in the corresponding period of 2024. The increase was mainly driven by the acquisitions of NEORIS and First Derivative completed in the fourth quarter of 2024 and higher variable compensation expense, partially offset by a decrease in professional fee expenses related to our business acquisition efforts. Expressed as a percentage of revenues, selling, general and administrative expenses decreased by 0.9% to 16.8% for the three months ended September 30, 2025 as compared to the same period from the prior year, primarily driven by a decrease in professional fee expenses related to our business acquisition efforts and a decrease in personnel-related costs, including stock-based compensation expense, as a percentage of revenues.

Previous wording

During the three months ended June 30, 2025, selling, general and administrative expenses were $231.7 million representing a 19.4% increase as compared to $194.1 million in the corresponding period of 2024. The increase in selling, general and administrative expenses was mainly driven by the acquisitions of NEORIS and First Derivative completed in the fourth quarter of 2024 as well as higher levels of variable compensation expense during the second quarter of 2025 as compared to the corresponding period of 2024. Expressed as a percentage of revenues, selling, general and administrative expenses increased by 0.2% to 17.1% for the three months ended June 30, 2025 as compared to the same period from the prior year, primarily driven by an increase in severance partially offset by a decrease in personnel-related costs as a percentage of revenues.

Current wording

During the nine months ended September 30, 2025, selling, general and administrative expenses were $685.5 million representing a 14.4% increase as compared to $599.3 million in the corresponding period of 2024. The increase in selling, general and administrative expenses was mainly driven by the acquisitions of NEORIS and First Derivative completed in the fourth quarter of 2024. Expressed as a percentage of revenues, selling, general and administrative expenses decreased by 0.3% to 16.9% for the nine months ended September 30, 2025 as compared to the same period from the prior year, primarily driven by the decrease in personnel-related costs, including stock-based compensation expense, and professional fee expenses related to our business acquisition efforts as a percentage of revenues.

Previous wording

During the three and six months ended June 30, 2025, depreciation and amortization expense was $31.3 million and $62.7 million, respectively, as compared to $21.1 million and $43.3 million, respectively, in the corresponding periods last year. The increase in depreciation and amortization expense during the three and six months ended June 30, 2025 was primarily the result of increased amortization of acquired finite-lived intangible assets largely resulting from the acquisitions of First Derivative and NEORIS in 2024, partially offset by lower depreciation on furniture, fixtures, other equipment and computer hardware. Expressed as a percentage of revenues, depreciation and amortization expense increased to 2.4% during both the three and six months ended June 30, 2025 as compared to 1.9% in both corresponding periods of 2024.

Current wording

During the three and nine months ended September 30, 2025, depreciation and amortization expense was $31.3 million and $94.0 million, respectively, as compared to $19.7 million and $63.0 million, respectively, in the corresponding periods last year. The increase in depreciation and amortization expense during the three and nine months ended September 30, 2025 was primarily the result of increased amortization of acquired finite-lived intangible assets largely resulting from the acquisitions of First Derivative and NEORIS in 2024, partially offset by lower depreciation on furniture, fixtures, other equipment, and computer hardware. Expressed as a percentage of revenues, depreciation and amortization expense increased by 0.6% and 0.5% during the three and nine months ended September 30, 2025, respectively, primarily driven by increased amortization of acquired finite-lived intangible assets largely resulting from the acquisitions of First Derivative and NEORIS in 2024.

Previous wording

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 $3.5 million and $9.3 million during the three and six months ended June 30, 2025, respectively, compared to $12.0 million and $27.1 million during the three and six months ended June 30, 2024, respectively. The decrease in Interest and other income, net during the three months ended June 30, 2025 as compared to the three months ended June 30, 2024 was largely driven by an $11.4 million decrease in interest income from our cash, cash equivalents and short-term investments, partially offset by a $1.7 million gain from the change in fair value of contingent consideration. The decrease in Interest and other income, net during the six months ended June 30, 2025 as compared to the three months ended June 30, 2024 was largely driven by a $23.5 million decrease in interest income from our cash, cash equivalents and short-term investments, partially offset by a $4.5 million gain from the change in fair value of contingent consideration.

Current wording

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 $2.3 million and $11.6 million during the three and nine months ended September 30, 2025, respectively, compared to $13.3 million and $40.4 million during the three and nine months ended September 30, 2024, respectively. The decrease in Interest and other income, net during the three months ended September 30, 2025 as compared to the three months ended September 30, 2024 was largely driven by a $10.1 million decrease in interest income from our cash, cash equivalents and short-term investments. The decrease in Interest and other income, net during the nine months ended September 30, 2025 as compared to the nine months ended September 30, 2024 was largely driven by a $33.6 million decrease in interest income from our cash, cash equivalents and short-term investments, partially offset by a $4.4 million gain from the change in fair value of contingent consideration.

Previous wording

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.

Current wording

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.

Previous wording

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/tax shortfalls upon vesting or exercise of equity awards as well as consideration of any significant or unusual items.

Current wording

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/tax shortfalls upon vesting or exercise of stock awards as well as consideration of any significant or unusual items.

Previous wording

Our effective tax rate was 28.9% and 26.0% for the three and six months ended June 30, 2025, respectively, and 26.3% and 16.5% for the three and six months ended June 30, 2024, respectively. We recorded a tax shortfall upon vesting or exercise of stock awards of $1.1 million and $0.1 million during the three months ended June 30, 2025 and 2024, respectively. We recorded a tax shortfall upon vesting or exercise of stock awards of $0.6 million and an excess tax benefit of $20.8 million during the six months ended June 30, 2025 and 2024, respectively.

Current wording

Our effective tax rate was 25.6% and 25.8% for the three and nine months ended September 30, 2025, respectively, and 28.1% and 21.4% for the three and nine months ended September 30, 2024, respectively. We recorded a tax shortfall upon vesting or exercise of stock awards of $0.2 million and $0.3 million during the three months ended September 30, 2025 and 2024, respectively. We recorded a tax shortfall upon vesting or exercise of stock awards of $0.8 million and an excess tax benefit of $20.5 million during the nine months ended September 30, 2025 and 2024, respectively. The effective tax rate during the three and nine months ended September 30, 2024 was negatively impacted by the accounting treatment of the receipt of government incentives related to conducting R&D activities in Poland, which resulted in a 2.3% and 1.0% increase in the effective tax rate, respectively, and the non-deductibility of certain acquisition costs for tax purposes which resulted in a 1.4% and 0.6% increase in the effective tax rate, respectively.

Previous wording

On July 4, 2025, the U.S. federal government enacted tax reform legislation, commonly referred to as the One Big Beautiful Bill Act, which includes a broad range of tax reform provisions that may affect our financial results. We are currently evaluating the full effects of the legislation on our estimated annual effective tax rate, income taxes payable and deferred taxes and do not expect the legislation to have a material impact on our financial statements.

Current wording

On July 4, 2025, the U.S. federal government enacted tax reform legislation, commonly referred to as the One Big Beautiful Bill Act (“the Act”), which includes a broad range of tax reform provisions. The tax law changes included in the Act did not have a material impact on the Company’s effective tax rate for the three and nine months ended September 30, 2025; however, the Company expects an acceleration of certain deductions resulting in a $26.2 million reduction in cash tax payments associated with the 2025 tax year.

Previous wording

The following table summarizes revenues from external clients and operating profit, before unallocated expenses, for the Americas segment for the three and six months ended June 30, 2025, and 2024:

Current wording

The following table summarizes revenues from external clients and operating profit, before unallocated expenses, for the Americas segment for the three and nine months ended September 30, 2025, and 2024:

Previous wording

During the three months ended June 30, 2025, revenues for the Americas segment increased $88.8 million, or 12.7%, compared to the same period last year and segment operating profit increased $7.4 million, or 6.1%, compared to the same period last year. Acquisitions contributed $65.2 million to Americas segment revenues during the three months ended June 30, 2025. During the three months ended June 30, 2025, revenues from our Americas segment were 58.2% of total segment revenues, a decrease from 60.9% reported in the corresponding period of 2024. As a percentage of Americas segment revenues, the Americas segment’s operating profit decreased to 16.4% during the second quarter of 2025 from 17.5% in the second quarter of 2024. This decrease is primarily attributable to the impact of lower profitability from acquisitions completed in 2024 and an increase in variable compensation expense as a percentage of segment revenues during the second quarter of 2025 compared to the second quarter of 2024, partially offset by the recognition of government incentives related to conducting R&D activities in Poland and improved utilization.

Current wording

During the three months ended September 30, 2025, revenues for the Americas segment increased $95.3 million, or 13.5%, compared to the same period last year and segment operating profit decreased $20.4 million, or 13.0%, compared to the same period last year. Acquisitions contributed $66.3 million to Americas segment revenues during the three months ended September 30, 2025. During the three months ended September 30, 2025, revenues from our Americas segment were 57.4% of total segment revenues, a decrease from 60.4% reported in the corresponding period of 2024. As a percentage of Americas segment revenues, the Americas segment’s operating profit decreased to 17.0% during the third quarter of 2025 from 22.2% in the third quarter of 2024. This decrease is primarily attributable to lower government incentives related to conducting R&D activities in Poland, the impact of lower profitability from acquisitions completed in 2024, and an increase in variable compensation expense as a percentage of segment revenues during the third quarter of 2025 compared to the third quarter of 2024.

Previous wording

During the six months ended June 30, 2025, revenues for the Americas segment increased $161.2 million, or 11.5%, compared to the same period last year and segment operating profit increased $2.5 million, or 1.0%, compared to the same period last year. Acquisitions contributed $145.2 million to Americas segment revenues during the six months ended June 30, 2025. During the six months ended June 30, 2025, revenues from our Americas segment were 58.9% of total segment revenues, a decrease from 60.7% reported in the corresponding period of 2024. As a percentage of Americas segment revenues, the Americas segment’s operating profit decreased to 15.6% during the six months ended June 30, 2025 from 17.3% in the six months ended June 30, 2024. This decrease is primarily attributable to the 2024 compensation increases which we were not able to fully offset through pricing increases, an increase in variable compensation expense as a percentage of segment revenues during the first six months of 2025 compared to the first six months of 2024 as well as the impact of lower profitability from acquisitions completed in 2024, partially offset by the recognition of government incentives related to conducting R&D activities in Poland and improved utilization.

Current wording

During the nine months ended September 30, 2025, revenues for the Americas segment increased $256.5 million, or 12.2%, compared to the same period last year and segment operating profit decreased $17.9 million, or 4.5%, compared to the same period last year. Acquisitions contributed $211.4 million to Americas segment revenues during the nine months ended September 30, 2025. During the nine months ended September 30, 2025, revenues from our Americas segment were 58.4% of total segment revenues, a decrease from 60.6% reported in the corresponding period of 2024. As a percentage of Americas segment revenues, the Americas segment’s operating profit decreased to 16.1% during the nine months ended September 30, 2025 from 18.9% in the nine months ended September 30, 2024. This decrease is primarily attributable to lower government incentives related to conducting R&D activities in Poland, the impact of lower profitability from acquisitions completed in 2024, changes in foreign exchange rates, and an increase in variable compensation expense as a percentage of segment revenues during the first nine months of 2025 compared to the first nine months of 2024.

Previous wording

During the three and six months ended June 30, 2025, Financial Services was the largest industry vertical in the Americas segment and grew 20.4% and 20.3%, respectively, compared to the corresponding periods of 2024, benefiting from new revenues from clients gained through our 2024 acquisitions. Software & Hi-Tech grew 12.5% and 7.1% during the three and six months ended June 30, 2025, respectively, which was a result of the continued focus on engaging with our technology clients. Life Sciences & Healthcare grew 3.6% and 3.5% during the three and six months ended June 30, 2025, respectively, primarily due to increased demand from pharmaceutical, medical device and healthcare companies. Consumer Goods, Retail & Travel grew 4.2% and 0.7% during the three and six months ended June 30, 2025, respectively, primarily due to growth from our travel clients. Business Information & Media grew 7.3% and 6.7% during the three and six months ended June 30, 2025, respectively, primarily due to improvement in demand from clients in the publishing and entertainment sectors. Emerging Verticals grew 29.9% and 33.3% during the three and six months ended June 30, 2025, respectively, primarily due to revenues from clients gained through our 2024 acquisitions as well as growth from various clients in industries such as energy and manufacturing.

Current wording

During the three and nine months ended September 30, 2025, Financial Services was the largest industry vertical in the Americas segment and grew 16.4% and 19.0%, respectively, compared to the corresponding periods of 2024, benefiting from new revenues from clients gained through our 2024 acquisitions. Software & Hi-Tech grew 9.2% and 7.8% during the three and nine months ended September 30, 2025, respectively, which was a result of the continued focus on engaging with our technology clients. Life Sciences & Healthcare grew 3.6% and 3.5% during the three and nine months ended September 30, 2025, respectively, primarily due to increased demand from pharmaceutical, medical device and healthcare companies. Consumer Goods, Retail & Travel grew 13.7% and 4.9% during the three and nine months ended September 30, 2025, respectively, primarily due to growth from our retail clients. Business Information & Media grew 1.5% and 4.9% during the three and nine months ended September 30, 2025, respectively, primarily due to improvement in demand from clients in the publishing and entertainment sectors. Emerging Verticals grew 41.0% and 35.9% during the three and nine months ended September 30, 2025, respectively, primarily due to revenues from clients gained through our 2024 acquisitions as well as growth from various clients in industries such as energy and industrial materials.

Previous wording

The following table summarizes revenues from external clients and operating profit, before unallocated expenses, for the Europe segment for the three and six months ended June 30, 2025, and 2024:

Current wording

The following table summarizes revenues from external clients and operating profit, before unallocated expenses, for the Europe segment for the three and nine months ended September 30, 2025, and 2024:

Previous wording

During the three months ended June 30, 2025, Europe’s segment revenues were $566.0 million, representing an increase of $118.1 million, or 26.4%, from the same period last year. Acquisitions completed in the prior 12 months contributed $58.4 million to Europe segment revenues during the three months ended June 30, 2025. Revenues were positively impacted by changes in foreign currency exchange rates during the second quarter of 2025 and had our Europe segment revenues been expressed in constant currency terms using the exchange rates in effect during the second quarter of 2024, we would have reported revenue growth of 21.3%. Europe’s segment revenues accounted for 41.8% and 39.1% of total segment revenues during the three months ended June 30, 2025 and 2024, respectively. During the second quarter of 2025, the segment’s operating profit increased 51.1% to $80.8 million compared to the second quarter of 2024. Expressed as a percentage of revenues, Europe’s segment operating profit increased to 14.3% compared to 11.9% in the same period of the prior year. Segment operating profit as a percentage of revenues was positively impacted by the recognition of government incentives related to conducting R&D activities in Poland, changes in foreign exchange rates and results of Cost Optimization Programs combined with improved utilization, partially offset by an increase in variable compensation expense as a percentage of segment revenues during the second quarter of 2025 compared to the second quarter of 2024.

Current wording

During the three months ended September 30, 2025, Europe’s segment revenues were $594.5 million, representing an increase of $131.6 million, or 28.4%, from the same period last year. Acquisitions completed in the prior 12 months contributed $55.8 million to Europe segment revenues during the three months ended September 30, 2025. Revenues were positively impacted by changes in foreign currency exchange rates during the third quarter of 2025 and had our Europe segment revenues been expressed in constant currency terms using the exchange rates in effect during the third quarter of 2024, we would have reported revenue growth of 23.8%. Europe’s segment revenues accounted for 42.6% and 39.6% of total segment revenues during the three months ended September 30, 2025 and 2024, respectively. During the third quarter of 2025, the segment’s operating profit decreased 3.3% to $88.9 million compared to the third quarter of 2024. Expressed as a percentage of revenues, Europe’s segment operating profit decreased to 15.0% compared to 19.9% in the same period of the prior year. Segment operating profit as a percentage of revenues was negatively impacted by lower government incentives related to conducting R&D activities in Poland and an increase in variable compensation expense as a percentage of segment revenues, partially offset by changes in foreign exchange rates and results of Cost Optimization Programs during the third quarter of 2025 compared to the third quarter of 2024.

Previous wording

During the six months ended June 30, 2025, Europe’s segment revenues were $1.091 billion, representing an increase of $181.9 million, or 20.0%, from the same period last year. Acquisitions completed in the prior 12 months contributed $109.0 million to Europe segment revenues during the six months ended June 30, 2025. Europe’s segment revenues accounted for 41.1% and 39.3% of total segment revenues during the six months ended June 30, 2025 and 2024, respectively. During the six months ended June 30, 2025, the segment’s operating profit increased 34.5% to $152.1 million compared to the corresponding period of 2024. Expressed as a percentage of revenues, Europe’s segment operating profit increased to 13.9% compared to 12.4% in the same period of the prior year. Segment operating profit as a percentage of revenues was positively impacted by the recognition of government incentives related to conducting R&D activities in Poland, changes in foreign exchange rates and results of Cost Optimization Programs combined with improved utilization, partially offset by an increase in variable compensation expense as a percentage of segment revenues during the first six months of 2025 compared to the first six months of 2024.

Current wording

During the nine months ended September 30, 2025, Europe’s segment revenues were $1.685 billion, representing an increase of $313.5 million, or 22.9%, from the same period last year. Acquisitions completed in the prior 12 months contributed $164.8 million to Europe segment revenues during the nine months ended September 30, 2025. Europe’s segment revenues accounted for 41.6% and 39.4% of total segment revenues during the nine months ended September 30, 2025 and 2024, respectively. During the nine months ended September 30, 2025, the segment’s operating profit increased 17.6% to $241.0 million compared to the corresponding period of 2024. Expressed as a percentage of revenues, Europe’s segment operating profit decreased to 14.3% compared to 14.9% in the same period of the prior year. Segment operating profit as a percentage of revenues was negatively impacted by lower government incentives related to conducting R&D activities in Poland and an increase in variable compensation expense as a percentage of segment revenues, partially offset by changes in foreign exchange rates and results of Cost Optimization Programs during the first nine months of 2025 compared to the first nine months of 2024.

Previous wording

During the three and six months ended June 30, 2025, Financial Services was the largest industry vertical in the Europe segment and grew 48.6% and 43.8%, respectively, compared to the corresponding periods of 2024, benefiting from new revenues from clients that we gained as part of our 2024 acquisitions. During the three and six months ended June 30, 2025, revenues in Consumer Goods, Retail & Travel grew 7.9% and 3.7%, respectively, primarily due to improved demand from clients in the retail and consumer goods industries. During the three and six months ended June 30, 2025, revenues in Software & Hi-Tech grew 48.8% and 42.0%, respectively, primarily due to the expansion of services provided to one of our top 10 clients as well as the addition of several new clients in the past 12 months. During the three and six months ended June 30, 2025, revenues in Business Information & Media declined 6.2% and 11.6%, respectively, primarily due to decreased demand from two clients who were historically included in our top 10 clients. Revenues in Life Sciences & Healthcare grew 62.1% and 59.5%, respectively, during the three and six months ended June 30, 2025, primarily due to the growth experienced from clients in the pharmaceutical and medical devices sectors. Revenues in Emerging Verticals grew 27.0% and 15.6%, respectively, during the three and six months ended June 30, 2025, due to growth from various clients in industries such as energy, professional services and industrial materials. Emerging Verticals also benefited from new revenues from clients gained through our 2024 acquisitions.

Current wording

During the three and nine months ended September 30, 2025, Financial Services was the largest industry vertical in the Europe segment and grew 49.4% and 45.7%, respectively, compared to the corresponding periods of 2024, benefiting from new revenues from clients that we gained as part of our 2024 acquisitions. During the three and nine months ended September 30, 2025, revenues in Consumer Goods, Retail & Travel grew 7.0% and 4.8%, respectively, primarily due to improved demand from clients in the retail and consumer goods industries. During the three and nine months ended September 30, 2025, revenues in Software & Hi-Tech grew 47.0% and 43.9%, respectively, primarily due to the expansion of services provided to one of our top 10 clients as well as the addition of several new clients in the past 12 months. During the three and nine months ended September 30, 2025, revenues in Business Information & Media declined 2.9% and 8.9%, respectively, primarily due to decreased demand from two clients who were historically included in our top 10 clients. Revenues in Life Sciences & Healthcare grew 58.0% and 58.9%, respectively, during the three and nine months ended September 30, 2025, primarily due to the growth experienced from clients in the pharmaceutical and medical devices sectors. Revenues in Emerging Verticals grew 36.0% and 22.2%, respectively, during the three and nine months ended September 30, 2025, due to growth from various clients in industries such as energy, professional services and industrial materials. Emerging Verticals also benefited from new revenues from clients gained through our 2024 acquisitions.

Previous wording

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 June 30, 2025, our principal sources of liquidity were cash and cash equivalents totaling $1.041 billion, short-term investments totaling $5.0 million as well as $675.0 million of available borrowings under our revolving credit facility. See Note 8 “Debt” of our condensed consolidated financial statements in “Part I. Item 1. Financial Statements (Unaudited)” for information regarding our debt.

Current wording

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 September 30, 2025, our principal sources of liquidity were cash and cash equivalents totaling $1.239 billion, short-term investments totaling $5.2 million, and $675.0 million of available borrowings under our revolving credit facility. See Note 8 “Debt” of our condensed consolidated financial statements in “Part I. Item 1. Financial Statements (Unaudited)” for information regarding our debt.

Previous wording

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. Since the invasion of Ukraine in 2022, our operating activities included using cash on humanitarian efforts for Ukraine and geographic repositioning of our workforce. The first six months of 2025 were negatively impacted by a larger increase in days sales outstanding compared to the first six months of 2024 and higher payments for variable compensation as compared to the first six months of 2024, attributable to a higher level of financial performance for the year ended December 31, 2024.

Current wording

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. Since the invasion of Ukraine in 2022, our operating activities included using cash on humanitarian efforts for Ukraine and geographic repositioning of our workforce. The first nine months of 2025 were negatively impacted by a larger increase in days sales outstanding compared to the first nine months of 2024 and higher payments for variable compensation as compared to the first nine months of 2024, attributable to a higher level of financial performance for the year ended December 31, 2024.

Previous wording

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 six months ended June 30, 2025 was primarily attributable to $19.2 million used for capital expenditures compared to $11.5 million used for capital expenditures in the corresponding period of 2024. During the six months ended June 30, 2025, $3.3 million was used for the acquisitions of businesses, net of cash acquired compared to $56.7 million used for the acquisitions of businesses, net of cash acquired in the corresponding period of 2024.

Current wording

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 nine months ended September 30, 2025 was primarily attributable to $27.5 million used for capital expenditures compared to $16.4 million used for capital expenditures in the corresponding period of 2024. During the nine months ended September 30, 2025, $3.3 million was used for the acquisitions of businesses, net of cash acquired compared to $57.1 million used for the acquisitions of businesses, net of cash acquired in the corresponding period of 2024. There were no proceeds from short-term investments during the nine months ended September 30, 2025 compared to $41.5 million in the corresponding period of 2024.

Previous wording

Cash used in financing activities mainly consists of repurchasing 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 six months of 2025, our main use of cash in financing activities consisted of $354.9 million of payments to repurchase our common stock, compared to $335.1 million in the corresponding period of 2024. These cash outflows were partially offset by cash received from the exercises of stock options issued under our long-term incentive plans and proceeds from the purchase of shares under our ESPP of $34.6 million in the first six months of 2025, compared to $32.5 million received in the corresponding period of 2024.

Current wording

Cash used in financing activities mainly consists of repurchasing 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 nine months of 2025, our main use of cash in financing activities consisted of $438.6 million of payments to repurchase our common stock, compared to $385.0 million in the corresponding period of 2024. These cash outflows were partially offset by cash received from the exercises of stock options issued under our long-term incentive plans and proceeds from the purchase of shares under our ESPP of $35.0 million in the first nine months of 2025, compared to $33.8 million received in the corresponding period of 2024.

Previous wording

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, 2024 also contains estimates and forward-looking statements, principally in “Part I. Item 1A. Risk Factors.” 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 customers, 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.

Current wording

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, 2024 also contains estimates and forward-looking statements, principally in “Part I. Item 1A. Risk Factors.” 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 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.