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- **Revenue Momentum**: Q3 organic growth 7.1% YoY, with AI-native revenue up double digits sequentially. Full-year 2025 organic growth raised to 4.6% midpoint.
- **AI Leadership**: AI/RUN Transform strategy drives 60-70% of AI projects expanding into large programs. Agentic QA reduces testing costs by 30%.
- **Financial Strength**: Record Q3 free cash flow ($286M) and $1B share buyback program. Q4 non-GAAP EPS guidance $3.10-$3.18.
- **Client Demand**: 5/6 verticals growing YoY, with Financial Services (+32.7%) and Software & Hi-Tech (+19.1%) leading. Clients redirecting work from failed partners.
- **Future Outlook**: 2026 growth expected higher than 2025, driven by AI foundational build-outs and improved account margins (15%+).

**【CEO Summary】**
- **Revenue Growth**: Q3 organic constant currency revenue grew 7.1% YoY, driven by AI-native services and foundational modernization. 5 out of 6 verticals showed year-over-year growth, with Financial Services (+32.7%), Software & Hi-Tech (+19.1%), and Consumer Goods (+9.9%) leading.
- **AI Strategy**: AI-native revenue grew sequentially for the 3rd quarter, with clients expanding proof-of-concepts into large-scale programs. EPAM's AI/RUN Transform strategy focuses on AI innovation, engineering transformation, and industry-specific solutions. Agentic QA, a new offering, reduces manual testing costs by 30% and covers 90% of manual checks.
- **Client Engagement**: 60-70% of AI projects expand into larger programs, with clients redirecting work from partners who failed to deliver. EPAM's engineering expertise and reliability are key competitive advantages.
- **Internal Transformation**: 90% of employees completed AI literacy training, and internal AI-driven efficiencies (e.g., EPAM AI/RUN Transform) are being scaled.

**【CFO Financial Commentary】**
- **Revenue**: Q3 revenue $1.394B (+19.4% YoY), exceeding guidance. Organic constant currency growth 7.1% YoY. Full-year 2025 organic growth now 4.6% midpoint vs. 4% prior.
- **Profitability**: Non-GAAP EPS $3.08 vs. $3.12 YoY, with Q4 guidance of $3.10-$3.18. Gross margin 31% (vs. 34.3% YoY), impacted by variable compensation and recent acquisitions.
- **Cash Flow**: Q3 free cash flow $286M (record high), with $1B+ cash on hand. $82M share buybacks in Q3 under new $1B program.
- **Headcount**: 56,100 consultants (+17.5% YoY), with net additions of 300 delivery professionals. Utilization 76.5% (flat YoY).
- **Q4 Outlook**: Revenue $1.38B-$1.395B (+11.1% YoY), with organic growth 4.4% at midpoint. Non-GAAP income from operations 15.5-16.5%.

**【Q&A Highlights】**
- **AI BPO Growth**: Early momentum in Agentic BPO, with clients testing AI-driven process automation. Differentiated from RPA by requiring advanced engineering and industry-specific playbooks.
- **2026 Growth**: Expect organic growth higher than 2025's 4.6% midpoint, driven by AI foundational build-outs and pipeline strength.
- **Profitability Focus**: Improved account margins (15%+ in Q4) from selective deal pricing and cost optimization. 2025 GAAP tax rate 25.6%, non-GAAP 24.1%.
- **Headcount Strategy**: Continued hiring to meet demand, with focus on rebalancing delivery pyramid to reduce costs and improve efficiency.
- **AI Project Scale**: Average AI projects evolve from POCs to medium/large-scale engagements, with some top clients investing in multi-million dollar AI programs.

EPAM Systems, Inc. (EPAM) Q3 2025 Earnings Call Transcript

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EPAM

EPAM fundamentals

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