Preliminary brief— based on press release only. Full analysis including management tone and Q&A will be added when the transcript is available.

EPAM · Q1 2026 Earnings

EPAM Systems

Reported May 7, 2026

30-second summary

30-second take: Q1 FY2026 revenue of $1.40B (+7.6% YoY) and non-GAAP EPS of $2.86 cleared the high end of prior guidance, with organic constant-currency growth of 3.7% beating the 2.9% midpoint by 80bps. But management lowered the FY26 organic CC growth range to 2.5–5.0% from 3.0–6.0% — the first cut to an EPAM full-year organic growth guide in this coverage cycle — citing Middle East geopolitical uncertainty and North America underperformance delaying client decisions. Non-GAAP EPS guidance was raised in offset ($12.98–$13.28 from $12.60–$12.90), but the topline cut breaks the three-guide-up FY25 pattern the Street had extrapolated into FY26. Pure AI-native revenue exceeded $125M in Q1, up ~20% sequentially, keeping the >$600M FY26 target on track.

Headline numbers

EPS

Q1 FY2026

$2.86

+4.0% vs est.

Revenue

Q1 FY2026

$1.40B

+7.6% YoY

+0.7% vs est.

Gross margin

Q1 FY2026

27.8%

Operating margin

Q1 FY2026

8.3%

Key financials

Q1 FY2026

Metric	Q1 FY2026	YoY	Q4 FY2025	QoQ
Revenue	$1.40B	+7.6%	$1.41B	-0.6%
EPS	$2.86	—	$3.26	-12.3%
Gross margin	27.8%	—	30.1%	-230bps
Operating margin	8.3%	—	10.6%	-230bps

Guidance

Guidance is issued for both next quarter and the full year. Both may appear below.

Actuals vs prior guidance

Metric	Period	Prior guide	Actual	Δ	Result
Revenue	Q1 FY2026	$1.385 billion to $1.400 billion	$1.400 billion	at the high end of guide	Beat
Revenue YoY growth	Q1 FY2026	7.0% at midpoint	7.6%	+60bps above guide midpoint	Beat
Non-GAAP Diluted EPS	Q1 FY2026	$2.70 to $2.78	$2.86	+$0.08 above the high end of guide	Beat
Organic Constant Currency Revenue Growth	Q1 FY2026	approximately 2.9% at midpoint	3.7%	+80bps above guide midpoint	Beat

New guidance

Metric	Period	Guide	YoY
Revenue	Q2 FY2026	$1.400 billion to $1.415 billion	+3.7% to +4.8% YoY
Revenue YoY growth	Q2 FY2026	4.0% at midpoint	—
GAAP Diluted EPS	Q2 FY2026	$1.79 to $1.87	—
Non-GAAP Diluted EPS	Q2 FY2026	$3.10 to $3.18	—
Organic Constant Currency Revenue Growth	Q2 FY2026	—	—

Changes to prior guidance

Metric	Period	Prior guide	New guide	Δ	Result
GAAP Diluted EPS	FY2026	$7.95 to $8.25	$8.29 to $8.59	+$0.34–$0.64 at range boundaries	Raised
Non-GAAP Diluted EPS	FY2026	$12.60 to $12.90	$12.98 to $13.28	+$0.38–$0.68 at range boundaries	Raised
Revenue YoY growth	FY2026	4.5% to 7.5%	4.0% to 6.5%	-50bps at both ends	Lowered
Organic Constant Currency Revenue Growth	FY2026	3% to 6%	2.5% to 5.0%	-50bps at both ends	Lowered

Platform metrics

Q1 FY2026

Segment	Q1 FY2026
Total Headcount	62,750
Delivery Professionals	56,500
Organic Constant Currency Growth (Full Year Guidance Midpoint)	3.75%

Profitability

Q1 FY2026

Segment	Q1 FY2026
Non-GAAP Operating Margin	14.3%
Full Year Non-GAAP EPS Guidance Midpoint	$13.13

Other KPIs

Q1 FY2026

Segment	Q1 FY2026
Share Repurchases (Q1)	$324 million

Management tone

Q1'25 stabilizing → Q2'25 acceleration validated → Q3'25 consolidation winner → Q4'25 AI-native pivot with growth reset → Q1'26 macro hesitation overrides AI momentum

Three quarters ago management was raising the FY25 organic CC midpoint by 60bps mid-cycle; this quarter management is cutting the FY26 organic CC midpoint by 75bps mid-cycle. The reversal is the cleanest data point in the print. CEO Balazs Fejes framed the North America issue directly: "There's a more macro uncertainty today compared to 90 days ago...we are particularly seeing underperformance in North America, and this is contributing to lower visibility in the second half." The Middle East catalyst was introduced separately by CFO Jason Peterson in his guidance framing: "we are seeing the ongoing uncertainty in the Middle East begin to have an impact on client decision-making...this behavior became more apparent early in Q2 as we worked through April and moved into May." The Q4 framing of "slower decision-making at the start of 2026" has hardened into a named geographic problem (North America) and a named external catalyst (Middle East). The reset is no longer a base effect — it is a demand signal.

The AI narrative is intact and quantified. Pure AI-native revenue exceeded $125M in Q1, up ~20% sequentially from a ~$105M Q4 baseline — the fifth consecutive quarter of sequential double-digit growth — and management explicitly tied this momentum to the >$600M FY26 target. Management's anchor: "We remain confident in our long-term strategy and vision in transforming ourselves into a global leader in AI transformation services...our underlining AI native and AI foundational readiness momentum remains strong." AI is what's holding up while the broader demand environment softens.

The large-deal pipeline framing has shifted from cadenced wins to risk-adjusted optionality. On the call, management quantified the opportunity set at close to 10 large vendor-consolidation/transformation deals that they are working to close in Q3 and Q4, with non-T&M commercial models. Management's framing: "The full potential of these deals is not yet reflected in our outlook...we're just capturing a small subset and then that helps contribute to the growth in the second half." This is the inverse of the Q3'25 framing where consolidation wins were already in the run-rate. Pulling these deals out of the guide and into upside narrative is honest, but it concentrates 2H26 acceleration on transaction events that are not fully under EPAM's control.

Tokenomics emerged as a new structural uncertainty — the first time pricing/delivery models have been called out as a multi-quarter overhang. Management's anchor: "As the industry works through the models, we intend to be ahead of the curve as we continue to evolve our approach to AI investment, pricing, client engagement, and delivery models for some quarters to come." For a company that for two years has framed AI as pure tailwind, "for some quarters to come" is the most explicit acknowledgment yet that AI-era pricing carries margin execution risk. The Q1 non-GAAP operating margin of 14.3% — below the FY26 15–16% guide band — is the first data point.

Capital allocation tone is steady rather than opportunistic. The headline $324M of Q1 repurchases is dominated by the previously announced $300M ASR; open-market activity was $264M (1.8M shares at $143.84). The EPS guide raise in the face of a revenue guide cut is partly real margin/tax mechanics and partly ASR share-count benefit — investors should disaggregate before extrapolating the EPS strength.

Recurring themes management leaned on this quarter:

AI native revenue momentum (125M+ quarterly, 20% sequential growth)Macro uncertainty and client decision-making delays, especially in North AmericaLarge vendor consolidation opportunities (10+ in pipeline) with uncertain conversion timingTokenomics complexity requiring multi-sourcing and model-blending capabilitiesGross margin expansion (Q1 YoY improvement, first in long period)Anthropic partnership as proof of engineering expertise and AI readiness

Risks management surfaced:

Geopolitical volatility (Middle East) impacting client spending decisions and budget prioritizationNorth America market weakness and underperformance relative to expectationsLarge deal conversion risk—10 pipeline opportunities are risk-adjusted and may not close or ramp as expectedTokenomics and pricing model uncertainty with clients, creating margin execution riskTravel and consumer goods vertical weakness spreading to broader portfolio

Answers to last quarter's watch list

Q1'26 organic CC vs. the 2.9% midpoint guide — Printed 3.7%, +80bps above guide. But the Q2 guide of 2.7% midpoint and the FY26 cut to 3.75% midpoint suggest the Q1 beat was a quarter-specific outperformance, not a leading indicator of FY recovery. Status: Resolved positively (Q1 specific) / Continue monitoring (FY trajectory)

FY26 guidance revision pattern — The prior watch asked whether FY26 would be raised or held at Q1. The answer is worse than either option: the FY26 organic CC range was cut by 50bps at both ends, breaking the FY25 three-guide-up pattern. The EPS raise is real but does not offset the topline cut. Status: Resolved negatively

AI-native revenue Q1 disclosure — Disclosed at >$125M, up ~20% sequentially from the ~$105M Q4 baseline, comfortably above the $115M+ threshold flagged. Management explicitly reaffirmed the >$600M FY26 target on the strength of this print and the fifth straight quarter of sequential double-digit growth. Status: Resolved positively

Delivery headcount in Q1 — Net ~-100 to 56,500, the first outright decline in this coverage cycle. Management attributed the sequential decline to reductions in Mexico and targeted cost-optimization reductions in certain geographies. Confirms the prior watch's downside scenario: the demand environment does not support the capacity build management signaled in Q2'25. Status: Resolved negatively

Non-GAAP operating margin Q1 vs. the FY26 15–16% guide — Q1 printed 14.3%, below the 15% FY26 floor and the explicit downside threshold flagged. This confirms the prior watch's negative case: margin compression is the trade-off for AI-native investment and junior mix, with material 2H26 expansion required to hit the FY guide. Status: Resolved negatively

Neoris client trajectory — Not specifically addressed. The Middle East and North America commentary suggests the broader customer environment has worsened, making any Neoris-specific stabilization moot. Status: Continue monitoring

What to watch into next quarter

Q2'26 organic CC vs. the 2.7% midpoint guide — Below 2.5% confirms the deceleration is structural and puts the FY26 2.5% low end at risk; above 3.5% suggests Q1's beat extends and the FY26 cut was conservative.

2H26 vendor consolidation conversion — Management explicitly built large-deal closes (close to 10 opportunities in the pipeline) into the 2H26 acceleration narrative. Watch for any named deal wins or pipeline conversion commentary on the Q2 call; absence of progress by Q2 makes the FY26 midpoint difficult.

AI-native revenue trajectory — Q1 printed >$125M, up ~20% sequentially. Sustained sequential growth into Q2 is required to keep the >$600M FY26 target credible; any sequential flattening would be a meaningful negative signal given how heavily management is leaning on the AI narrative.

Non-GAAP operating margin Q2 print vs. the 15–16% FY26 band — Q1's 14.3% leaves a material gap. A Q2 print sub-15% requires 16%+ in 2H to hit FY, which is operationally aggressive given decelerating revenue.

Delivery headcount trajectory — A second consecutive quarter of net declines would signal management is structurally resizing for a slower growth environment, materially reframing the 2H26 acceleration thesis.

Open-market buyback pace — $264M of open-market repurchases in Q1 sits alongside the $300M ASR settlement. Watch whether open-market activity is sustained at an elevated pace post-ASR; that would be the cleanest signal of internal conviction on share value.

North America revenue disclosure — Management called out North America underperformance (Americas grew just 2.5% YoY in Q1 vs. EMEA +15.9%) as a specific driver of the FY26 cut. Geographic detail in the Q2 print is the cleanest read on whether the weakness is broadening or contained.

Sources

EPAM Systems Q1 2026 Press Release (SEC EX-99): https://www.sec.gov/Archives/edgar/data/1352010/000135201026000026/exhibit99_q1x2026.htm
EPAM Systems Q1 FY2026 Earnings Call Transcript (prepared remarks and Q&A, May 7, 2026)

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