EPAM Beats Expectations in Q3 2024, Reaching $1.17 Billion in Revenue

EPAM Systems, Inc. (NYSE: EPAM) reported a solid performance for the third quarter of 2024, showcasing resilience and growth amidst challenging global conditions. The company reported revenues of $1.168 billion, marking a 1.3% increase year-over-year. This growth was achieved despite a slight decline of 0.3% on an organic constant currency basis, excluding the impact of the exit from Russia.

The company’s GAAP income from operations stood at $177.0 million, reflecting a significant increase of 55.2% from the previous year, largely driven by a $52.0 million benefit from research and development government incentives in Poland. Non-GAAP income from operations also saw a 14.0% increase, reaching $222.9 million.

EPAM’s diluted earnings per share (EPS) on a GAAP basis rose to $2.37, a 43.6% increase compared to the third quarter of 2023. The non-GAAP diluted EPS was reported at $3.12, up by 14.3% from the same period last year. These figures were positively influenced by the Polish incentives, although partially offset by a higher effective tax rate. The company’s strategic acquisition of NEORIS, completed on November 1, 2024, is expected to further enhance its global delivery platform and market reach.

EPAM Beats Revenue and EPS Expectations in Third Quarter

When comparing EPAM’s current performance against market expectations, the company exceeded revenue forecasts, reporting $1.168 billion against the expected $1.15 billion. This slight outperformance underscores EPAM’s ability to navigate economic headwinds and capitalize on strategic opportunities.

However, the company’s GAAP EPS of $2.37 fell short of the expected $2.7, highlighting areas for potential improvement in earnings efficiency. Conversely, the non-GAAP EPS of $3.12 surpassed market predictions, indicating robust operational strength when excluding certain one-time charges and benefits.

The company attributed its revenue growth to strategic acquisitions and the successful integration of advanced technology solutions, particularly in the realm of GenAI. The positive impact of the Polish R&D incentives on the company’s financials cannot be overstated, as it provided a substantial boost to both GAAP and non-GAAP income from operations. However, the higher effective tax rate partially offset these gains, presenting a challenge that the company will need to address in future quarters.

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EPAM Raises Full Year Outlook, Expects Revenues Between $4.685 and $4.695 Billion

EPAM has raised its full-year outlook, reflecting confidence in its strategic initiatives and market positioning. The company now anticipates full-year revenues between $4.685 billion and $4.695 billion, with GAAP diluted EPS expected to range from $7.78 to $7.86 and non-GAAP diluted EPS from $10.73 to $10.81.

This revised guidance incorporates the impact of recent acquisitions, including NEORIS, and suggests flat year-over-year growth at the midpoint of the revenue range. The company expects its GAAP income from operations to be between 11.0% and 11.5% of revenues for the full year, with non-GAAP income from operations ranging from 16.0% to 16.5%.

For the fourth quarter, EPAM projects revenues to fall between $1.205 billion and $1.215 billion, marking a year-over-year growth of 4.6% at the midpoint. The company expects GAAP diluted EPS to range from $1.73 to $1.81 and non-GAAP diluted EPS from $2.70 to $2.78.

These projections are bolstered by an expected $9.0 million benefit from the Poland R&D incentive and reflect the company’s ongoing efforts to optimize its cost structure and enhance operational efficiencies. EPAM’s strategic focus on digital transformation and product engineering positions it well to navigate the evolving market landscape and deliver sustained value to its stakeholders.

Disclaimer: The author does not hold or have a position in any securities discussed in the article.