Q2 2026 Epam Systems Inc Earnings Call Transcript
Key Points
- EPAM Systems Inc (EPAM) delivered strong Q2 results, with revenue growth of 4.5% year-over-year and non-GAAP EPS growth of 22%, outperforming the high end of guidance.
- AI-native revenues accelerated to over $160 million in Q2, marking the sixth consecutive quarter of double-digit sequential growth and representing over 11% of total business.
- Financial Services was the fastest-growing vertical, up 11.5% year-over-year, driven by AI-led modernization and mainframe transformation programs.
- EMEA continued to deliver strong double-digit growth (10.9% year-over-year), supported by proactive go-to-market sales motions and a robust pipeline.
- Strategic partnerships with OpenAI, Google, and Anthropic are expanding, with certifications on track to build a multimodal bench and feed the pipeline for larger multi-year deals.
- North America revenue growth was significantly below expectations, growing only 0.5% year-over-year, with a projected slowdown in the second half of 2026.
- The company lowered its full-year 2026 revenue guidance to 3.2%-4.2% growth (organic constant currency growth of 2%-3%), citing a faster-than-expected shift away from task-based services.
- Software and high-tech vertical declined 1.3% year-over-year due to project ramp-downs in non-AI services, which outweighed growth in AI, cloud, and cybersecurity.
- Free cash flow was negative $18 million in Q2, impacted by higher variable compensation payments and an increase in DSO to 82 days, leading to a lower full-year free cash flow conversion rate of around 70%.
- The company acknowledged a go-to-market capability gap in North America, with a multi-quarter commercial transformation needed to address the growth gap, and expects meaningful revenue contribution from large deals only in early 2027.
(audio in progress) (Operator Instructions)
At this time, I would like to turn the call over to Mike Roeshandel, Head of Investor Relations.
Good morning, everyone, and thank you for joining us today on our second quarter 2026 earnings announcement. As the operator just mentioned, I'm Mike Rowshandel, Head of Investor Relations. We hope you've had an opportunity to review our earnings release we issued earlier today. If you have not, copies are available on epam.com in the Investors section.
With me on today's call are Balazs Fejes, CEO and President; and Jason Peterson, Chief Financial Officer. I would like to remind those listening that some of the comments made on today's call may contain forward-looking statements. These statements are subject to risk and uncertainties as described in the company's earnings release and SEC filings.
Additionally, all references to reporter results that are non-GAAP measures have been reconciled to the comparable GAAP measures and are
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