How did EPAM's Q4 earnings surprise impact its annual performance?

EPAM's Q4 earnings surprise had a positive impact on its annual performance, contributing to a stronger financial outcome for the year.

1. **Q4 Earnings Surprise**: EPAM reported an EPS surprise of $0.09 for Q4 2024, with a diluted EPS of $1.8. This exceeded market expectations, as evidenced by the company's EPS guidance of $2.700-2.780 for the period, compared to the consensus EPS estimate of $2.700.

|code|Ticker|Name|Date|Total Revenue|Diluted EPS|market_code|
|---|---|---|---|---|---|---|
|EPAM|EPAM.N|Epam Systems|2024 Q1|1.165465E9|1.97|169|
|EPAM|EPAM.N|Epam Systems|2024 Q2|1.146597E9|1.7|169|
|EPAM|EPAM.N|Epam Systems|2024 Q3|1.167527E9|2.37|169|
|EPAM|EPAM.N|Epam Systems|2024 Q4|1.248351E9|1.8|169|

|code|Ticker|Name|Date|Diluted EPS YoY|market_code|
|---|---|---|---|---|---|
|EPAM|EPAM.N|Epam Systems|2024 Q1|13.872832369942195|169|
|EPAM|EPAM.N|Epam Systems|2024 Q2|-16.256157635467975|169|
|EPAM|EPAM.N|Epam Systems|2024 Q3|43.636363636363654|169|
|EPAM|EPAM.N|Epam Systems|2024 Q4|8.433734939759043|169|

2. **Annual Performance Impact**:
- **Revenue Growth**: EPAM's Q4 revenue guidance was set at $1.2 billion, which aligned with the consensus revenue estimate. This indicates a continuation of the company's revenue growth trajectory, despite a slight year-over-year increase of 1.3% in Q3 revenues.
- **Earnings Per Share (EPS) Impact**: The Q4 EPS surprise contributed to a stronger annual EPS performance. EPAM updated its FY 2024 guidance to $10.730-10.810 EPS, which suggests that the Q4 earnings surprise will have a positive impact on the company's annual EPS figure.
- **Profit Margins**: The company's non-GAAP operating margin expanded to 19.1% in Q3 2024, primarily due to the recognition of incentives related to research and development activities. This improvement in margins, coupled with the Q4 earnings surprise, indicates a stronger profitability trend for the year.
- **Cash Flow and Balance Sheet**: As of September 30, 2024, EPAM had cash, cash equivalents, and restricted cash, which is a positive indicator of the company's financial health and its ability to invest in growth opportunities.
3. **Market Reaction and Future Outlook**: Despite underperforming the market so far in the year, EPAM's Q3 earnings beat and strong FY24 view have positively influenced the stock. The company's shares have seen a modest increase, and its outlook for the next three years is forecasted to grow at an average rate of 8.1% for revenue, which is in line with the IT industry's growth forecast of 9.2%.

In conclusion, EPAM's Q4 earnings surprise has had a positive ripple effect on its annual performance, bolstering revenue growth, enhancing profit margins, and contributing to a stronger EPS figure. This, in turn, has had a favorable impact on investor sentiment and the company's future growth prospects.