Why EPAM Systems is a High-Conviction Buy Amid AI-Driven Growth and Margin Recovery

In the rapidly evolving IT services and AI landscape, EPAM Systems (NYSE: EPAM) stands out as a compelling investment opportunity. The company's strategic post-Ukraine restructuring, accelerating organic revenue growth, and undervalued long-term potential in AI services position it as a high-conviction buy for investors seeking exposure to the next wave of digital transformation.

Strategic Post-Ukraine Restructuring Stabilizes Operations

EPAM's operational resilience has been a cornerstone of its recent success. Following disruptions caused by the Ukraine conflict, the company completed a comprehensive restructuring of its delivery operations by mid-2025. This repositioning stabilized its global delivery network, enabling a refocus on sales execution, client expansion, and margin improvement. The results are evident: Q2 2025 revenue surged to $1.353 billion, a 18.0% year-over-year increase, with organic constant currency growth of 5.3%.

The restructuring has also unlocked margin recovery. GAAP operating margins for Q2 2025 reached 9.3%, while non-GAAP margins hit 15.0%. Analysts at TD Cowen upgraded EPAM to “Buy” in August 2025, citing the company's stabilized operations and projected gross margin recovery to the low-30% range. With delivery operations fully repositioned, EPAM is now primed to capitalize on its core strengths in digital engineering and AI.

AI-Driven Growth: Bridging the Gap Between Aspiration and Execution

EPAM's 2025 AI Report, “From Hype to Impact: How Enterprises Can Unlock Real Business Value with AI,” reveals a critical market gap: while 49% of enterprises label themselves “advanced” in AI, only 26% of these have delivered scalable AI use cases. EPAM's AI services are designed to bridge this divide, offering end-to-end solutions from strategy to implementation.

The company's AI/RUN™ platform and DIALX Lab enable enterprises to transition from AI experimentation to enterprise-wide deployment. For instance, 30% of the most advanced companies have already implemented AI at scale, and 53% of “disruptor” firms attribute over half of their 2025 profits to AI investments. EPAM's focus on aligning people, data, and technology—key drivers of AI success—positions it as a strategic partner for enterprises navigating this transition.

Undervalued Long-Term Potential in a Booming AI Market

Despite its strong fundamentals, EPAM remains undervalued relative to its growth prospects. The stock trades at a forward P/E of 13.60, far below its 5-year average of 33.61, and a forward EV/EBITDA of 8.55, versus 21.50 historically. Analysts have set an average 1-year price target of $209.67, implying a 34.5% upside from its current price of $157.71. With 10 out of 14 analysts issuing “Buy” ratings, the stock's risk-reward profile is compelling.

The AI market itself is a $244.22 billion industry in 2025, projected to grow at a 26.6% CAGR through 2031. EPAM's AI services, including generative AI, MLOps unification, and computer vision, align directly with this growth. The company's 14% year-over-year AI spending increase and 43% of enterprises planning to hire AI talent in 2025 further underscore its relevance.

Margin Expansion and Capital Allocation Strengthen the Case

EPAM's financial discipline adds to its appeal. The company's Q2 2025 share repurchase program returned $194.9 million to shareholders, while its $1.046 billion in cash reserves provide flexibility for strategic investments. With GAAP operating income expected to remain between 9.0% and 10.0% of revenue in 2025 and non-GAAP margins targeting 14.5%–15.5%, margin expansion is a realistic near-term goal.

Moreover, EPAM's client portfolio—focused on digital transformation rather than legacy outsourcing—ensures recurring revenue streams. As AI adoption accelerates, the company's expertise in cloud, AI, and product engineering will drive long-term value creation.

Conclusion: A High-Conviction Buy for the AI Era

EPAM Systems has emerged from its post-Ukraine challenges stronger and more strategically aligned with the AI-driven future. Its stabilized operations, margin recovery, and leadership in AI services create a robust foundation for growth. With valuation metrics at multi-year lows and a clear path to capturing AI market tailwinds, EPAM offers an attractive entry point for investors.

For those seeking exposure to the AI revolution, EPAM is not just a buy—it's a high-conviction bet on the future of digital transformation.