EPAM Systems, Inc.
For the period ended Mar 31, 2026. Filed May 7, 2026.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Mar 31, 2026 · Filed May 7, 2026
EPAM$159.31-3.9%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2025-09-30; filed 2025-11-06.
0001352010-25-000056
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2026-03-31; filed 2026-05-07.
0001352010-26-000029
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 98 previous paragraphs and 89 current paragraphs.
53 unchanged; 32 reworded; 4 added; 12 removed; 1 previous and 0 current paragraphs rearranged.
Tables are not compared: 7 previous and 7 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (4)
Current report
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.
Current report
Foreign Exchange Gain (Loss)
Current report
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.
Current report
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.
Removed paragraphs (12)
Previous report
Moving Forward
Previous report
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 report
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 report
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 report
Foreign Exchange Loss
Previous report
For discussion of the impact of foreign exchange fluctuations see “Item 3. Quantitative and Qualitative Disclosures About Market Risk.”
Previous report
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 report
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 report
Starting in 2025, we renamed our North America segment to Americas. The new name reflects the evolving geographic footprint and growth of operations within the segment, particularly in Latin America. This constitutes a naming change only and no changes were made to amounts reported.
Previous report
During the year ended December 31, 2024, the Company revised its CODM report to enhance the presentation of segment expenses by category and to revise the allocation methodology for certain types of shared expenses. The following prior period amounts presented have been revised to align with the current methodology. No changes were made to historically reported segment revenues.
Previous report
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 report
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.
Reworded paragraphs (32)
Previous wording
We leverage AI and GenAI 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.
Current wording
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.
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 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.
Current wording
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.
Previous wording
The impact of Russia’s invasion of Ukraine on our operations, personnel, and physical assets in Ukraine has had, and, along with any escalation of the war that includes Belarus’ territory or military, could continue to have a material adverse effect on our operations. Actions taken by other countries, including new and stricter sanctions by Canada, the United Kingdom, the European Union, the U.S. and other companies and organizations against officials, individuals, regions, and industries in Belarus, and Belarus’ responses to those sanctions, including counter-sanctions and other actions, have had and could continue to have a material adverse effect on our operations. Clients have and may continue to seek altered terms, conditions, and delivery locations for the performance of services, delay planned work or seek services from alternate providers, or suspend, terminate, fail to renew, or reduce existing contracts or services, which could have a material adverse effect on our financial condition. Some of our clients have implemented steps to block internet communications with Ukraine and Belarus to protect against potential cyberattacks or other information security threats, which has caused a material adverse effect on our ability to deliver our services to these clients from those locations. Such material adverse effects disrupt our delivery of services, cause us to shift all or portions of our work occurring in the region to other countries, restrict our ability to engage in certain projects in the region and serve certain clients in or from the region, and could negatively impact our personnel, operations, financial results and business outlook. Our Board of Directors and its committees continue their oversight of our strategic, geopolitical, and cybersecurity risks and the risks related to our geographic 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.
Current wording
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.
Previous wording
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 adapt to developments as they occur to protect the safety of our people and address impacts on our delivery infrastructure, including reallocating work to other geographies within our global footprint. We engage with both our personnel and our clients when navigating delivery challenges while operating productively in a multitude of locations and providing consistent high-quality delivery to our clients. 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.
Current wording
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.
Previous wording
We have no way to predict the progress or outcome of the war in Ukraine because the conflict and government reactions change quickly and are beyond our control. Prolonged military activities, broad-based sanctions and counter-sanctions, or escalation of the war that includes Belarus’ territory or military could have a material adverse effect on our operations and financial condition. 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, 2024 and “Part II. Item 1A. Risk Factors” in this quarterly report.
Current wording
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.
Previous 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.
Current wording
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.
Previous 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.
Current wording
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.
Previous wording
The following table sets forth 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.
Current wording
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.
Previous 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.
Current wording
(1)Includes $22,853 and $23,923 of stock-based compensation expense for the three months ended March 31, 2026 and 2025, respectively.
Previous 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.
Current wording
(2)Includes $27,066 and $24,533 of stock-based compensation expense for the three months ended March 31, 2026 and 2025, respectively.
Previous 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.
Current wording
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.
Previous wording
Revenues by client location for the three and nine months ended September 30, 2025 and 2024 were as follows:
Current wording
Revenues by client location for the three months ended March 31, 2026 and 2025 were as follows:
Previous 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.
Current wording
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.
Previous 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.
Current wording
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.
Previous 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.
Current wording
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.
Previous wording
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. 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. Additionally, government incentives and assistance related to services performed by delivery professionals and contractors assigned to client projects are reported in cost of revenues.
Current wording
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.
Previous 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.
Current wording
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.
Previous 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.
Current wording
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.
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 $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.
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 $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.
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 stock 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 or shortfalls upon vesting or exercise of stock awards as well as consideration of any significant or unusual items.
Previous 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:
Current wording
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:
Previous 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.
Current wording
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.
Previous 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.
Current wording
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.
Previous 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:
Current wording
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:
Previous 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.
Current wording
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.
Previous 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.
Current wording
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.
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 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.
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 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.
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 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.
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. 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.
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 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.
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 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.
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 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.
Current wording
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.
Previous wording
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 or acquisitions 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.
Current wording
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.
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 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.
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, 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.
Rearranged previous paragraphs (1)
Previous report — wording carried elsewhere
The implementation and execution of our business continuity plans, relocation costs, our humanitarian commitment to our people in Ukraine, and the cost of our phased exit from Russia resulted in materially increased expenses. Some of these expenses continued during this quarter and we expect some of these expenses will continue to occur in subsequent quarters for some time in the future.