Company Announcements

EPAM SYSTEMS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

(In thousands, except per share data)

Three Months Ended
December 31,

Year Ended

December 31,

2025

2024

2025

2024

Revenues

$ 1,407,548

$ 1,248,351

$ 5,457,056

$ 4,727,940

Operating expenses:

Cost of revenues (exclusive of depreciation and
amortization)

984,346

868,314

3,883,535

3,277,497

Selling, general and administrative expenses

243,161

216,969

928,707

816,300

Depreciation and amortization expense

30,787

26,556

124,811

89,559

Income from operations

149,254

136,512

520,003

544,584

Interest and other income (loss), net

(89)

6,451

11,546

46,876

Foreign exchange loss

(5,344)

(5,632)

(25,925)

(7,048)

Income before provision for income taxes

143,821

137,331

505,624

584,412

Provision for income taxes

34,467

34,032

127,946

129,879

Net income

$     109,354

$     103,299

$     377,678

$     454,533

Net income per share:

Basic

$           1.99

$           1.82

$           6.76

$           7.93

Diluted

$           1.98

$           1.80

$           6.72

$           7.84

Shares used in calculation of net income per share:

Basic

54,942

56,818

55,893

57,288

Diluted

55,341

57,435

56,233

57,983

EPAM SYSTEMS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Unaudited)

(In thousands, except par value)

As of 

 December 31, 

 2025

As of 

 December 31, 

 2024

Assets

Current assets

Cash and cash equivalents

$    1,296,077

$    1,286,267

Trade receivables and contract assets, net of allowance of $6,350 and $5,612,
respectively

1,108,201

1,002,175

Prepaid and other current assets

129,610

137,806

Total current assets

2,533,888

2,426,248

Property and equipment, net

202,387

207,667

Operating lease right-of-use assets, net

114,875

128,244

Intangible assets, net

406,586

436,418

Goodwill

1,210,564

1,181,575

Deferred tax assets

295,115

269,799

Other noncurrent assets

138,721

100,522

Total assets

$   4,902,136

$   4,750,473

Liabilities

Current liabilities

Accounts payable

$         55,329

$         44,702

Accrued compensation and benefits expenses

608,232

484,952

Accrued expenses and other current liabilities

250,688

201,356

Income taxes payable, current

25,520

50,395

Operating lease liabilities, current

37,173

39,634

Total current liabilities

976,942

821,039

Long-term debt

25,034

25,194

Operating lease liabilities, noncurrent

81,497

98,426

Deferred tax liabilities, noncurrent

76,969

92,362

Other noncurrent liabilities

63,886

82,301

Total liabilities

1,224,328

1,119,322

Commitments and contingencies

Equity

Stockholders' equity

Common stock, $0.001 par value; 160,000 authorized; 54,274 shares issued and
outstanding at December 31, 2025, and 56,869 shares issued and outstanding at
December 31, 2024

54

57

Additional paid-in capital

1,390,423

1,190,222

Retained earnings

2,268,204

2,555,796

Accumulated other comprehensive income (loss)

18,545

(116,864)

Total EPAM Systems, Inc. stockholders' equity

3,677,226

3,629,211

Noncontrolling interest in consolidated subsidiaries

582

1,940

Total equity

3,677,808

3,631,151

Total liabilities and equity

$   4,902,136

$   4,750,473

EPAM SYSTEMS, INC. AND SUBSIDIARIES

Reconciliations of Non-GAAP Financial Measures to Comparable GAAP Financial Measures

(Unaudited)

(In thousands, except percent and per share amounts)

Three Months Ended
December 31, 2025

Year Ended
December 31, 2025

Revenue growth as reported

12.8 %

15.4 %

Inorganic revenue

(4.6) %

(9.2) %

Foreign exchange rates

(2.6) %

(1.3) %

Revenue growth on an organic constant currency basis

5.6 %

4.9 %

Reconciliation of various income statement amounts from GAAP to non-GAAP for the three months and years ended December 31, 2025 and 2024 is presented in the table below:

Three Months Ended December 31, 2025

Year Ended December 31, 2025

GAAP

Adjustments

Non-GAAP

GAAP

Adjustments

Non-GAAP

Cost of revenues (exclusive of
     depreciation and amortization)⁽¹⁾

$   984,346

$  (23,550)

$ 960,796

$  3,883,535

$  (88,055)

$  3,795,480

Selling, general and administrative
     expenses⁽²⁾

$   243,161

$  (39,574)

$ 203,587

$   928,707

$  (152,070)

$   776,637

Income from operations⁽³⁾

$   149,254

$  80,779

$ 230,033

$   520,003

$ 311,492

$   831,495

Operating margin

10.6 %

5.7 %

16.3 %

9.5 %

5.7 %

15.2 %

Net income⁽⁴⁾

$   109,354

$  70,855

$ 180,209

$   377,678

$ 269,131

$   646,809

Diluted earnings per share

$       1.98

$       3.26

$          6.72

$        11.50

Three Months Ended December 31, 2024

Year Ended December 31, 2024

GAAP

Adjustments

Non-GAAP

GAAP

Adjustments

Non-GAAP

Cost of revenues (exclusive of
     depreciation and amortization)⁽¹⁾

$   868,314

$  (22,040)

$ 846,274

$  3,277,497

$  (59,821)

$  3,217,676

Selling, general and administrative
     expenses⁽²⁾

$   216,969

$  (37,637)

$ 179,332

$   816,300

$  (145,329)

$   670,971

Income from operations⁽³⁾

$   136,512

$  71,675

$ 208,187

$   544,584

$ 234,625

$   779,209

Operating margin

10.9 %

5.8 %

16.7 %

11.5 %

5.0 %

16.5 %

Net income⁽⁴⁾

$   103,299

$  60,066

$ 163,365

$   454,533

$ 175,430

$   629,963

Diluted earnings per share

$       1.80

$       2.84

$          7.84

$        10.86

Items (1) through (4) above are detailed in the following table with the specific cross-reference noted in the appropriate item.

Three Months Ended 

 December 31,

Year Ended 

 December 31,

2025

2024

2025

2024

Stock-based compensation expenses

$     23,019

$     22,074

$     86,252

$     80,944

Poland R&D incentives^(a)

—

(556)

(505)

(23,473)

Humanitarian support in Ukraine^(b)

531

522

2,308

2,350

Total adjustments to GAAP cost of revenues⁽¹⁾

23,550

22,040

88,055

59,821

Stock-based compensation expenses

22,127

22,624

90,512

86,353

Cost Optimization charges^(c)

15,279

4,837

47,893

31,270

Other acquisition-related expenses

234

7,031

1,160

15,808

Humanitarian support in Ukraine^(b)

1,861

3,127

12,250

10,821

Geographic repositioning^(d)

—

(4)

—

849

One-time charges

73

22

255

228

Total adjustments to GAAP selling, general and administrative
      expenses⁽²⁾

39,574

37,637

152,070

145,329

Amortization of purchased intangible assets

17,655

11,998

71,367

29,475

Total adjustments to GAAP income from operations⁽³⁾

80,779

71,675

311,492

234,625

Foreign exchange loss

5,344

5,632

25,925

7,048

Change in fair value of contingent consideration included in
Interest and other income, net

3,878

1,673

3,465

5,700

One-time benefits included in Interest and other income (loss),
net

—

(1,331)

(700)

(3,143)

Provision for income taxes:

Tax effect on non-GAAP adjustments

(18,631)

(15,640)

(74,086)

(44,522)

Tax shortfall (excess tax benefit) related to stock-based
     compensation

1,175

(1,943)

1,926

(22,448)

Net discrete charge (benefit) from tax planning^(e)

(1,690)

—

1,109

(1,830)

Total adjustments to GAAP net income⁽⁴⁾

$     70,855

$     60,066

$   269,131

$   175,430

(a)

We have excluded from non-GAAP results the portion of the benefit from Poland R&D incentives related to qualifying activities performed in 2023 as it represents a nonrecurring one-time benefit.

(b)

Humanitarian support in Ukraine includes expenses related to EPAM's $100 million humanitarian commitment in response to Russia's invasion of Ukraine to support EPAM professionals and their families in and displaced from Ukraine. These expenses are incremental to those expenses incurred prior to the crisis, clearly separable from normal operations, and not expected to recur once the crisis has subsided and operations return to normal.

(c)

Cost Optimization charges include severance, facilities and contract termination charges incurred in connection with the programs initiated in the third quarter of 2023, second quarter of 2024, and second quarter of 2025. Consistent with the Company's historical non-GAAP policy, costs incurred in connection with formal restructuring initiatives have been excluded from non-GAAP results as these are attributable to targeted restructuring efforts and not expected to recur once the respective Cost Optimization program is completed.

(d)

Geographic repositioning includes expenses associated with the relocation to other countries of employees based outside of Ukraine impacted by the war and geopolitical instability in the region, and includes the cost of accommodations, travel and food. These expenses are incremental to those expenses incurred prior to the crisis, clearly separable from normal operations, and not expected to recur once the crisis has subsided and operations return to normal.

(e)

Net discrete charge or benefit related to the implementation of tax planning to disregard certain foreign subsidiaries as separate entities for U.S. income tax purposes. Consistent with the Company's historical non-GAAP policy, the charge or benefit related to the implementation of tax planning has been excluded from non-GAAP results as it is one-time and unusual in nature.

EPAM SYSTEMS, INC. AND SUBSIDIARIES

Reconciliations of Guidance Non-GAAP Financial Measures to Comparable GAAP Financial Measures

(Unaudited)

The below guidance constitutes forward-looking statements within the meaning of the federal securities laws and is based on a number of assumptions that are subject to change and many of which are outside the control of the Company. Actual results may differ materially from the Company's expectations depending on factors discussed in the Company's filings with the Securities and Exchange Commission.

Reconciliation of expected revenue growth on a GAAP basis to expected revenue growth on an organic constant currency
basis is presented in the table below:

First Quarter 2026

Full Year 2026

(at midpoint of 
range)

Revenue growth

7.0 %

4.5% to 7.5%

Foreign exchange rates

(4.0) %

(1.5) %

Inorganic revenue

(0.1) %

— %

Revenue growth on an organic constant currency basis

2.9 %

3.0% to 6.0%

Reconciliation of expected GAAP to non-GAAP income from operations as a percentage of revenues is presented in the
table below:

First Quarter 2026

Full Year 2026

GAAP income from operations as a percentage of revenues

7.0% to 8.0%

10.0% to 11.0%

Stock-based compensation expenses

3.9 %

3.4 %

Included in cost of revenues (exclusive of depreciation and amortization)

1.9 %

1.7 %

Included in selling, general and administrative expenses

2.0 %

1.7 %

Humanitarian support in Ukraine^(b)

0.2 %

0.1 %

Cost Optimization charges^(c)

1.1 %

0.3 %

Amortization of acquired intangible assets

1.3 %

1.2 %

Non-GAAP income from operations as a percentage of revenues^(f)

13.5% to 14.5%

15.0% to 16.0%

(f)

EPAM has not included the impact of potential future one-time charges including asset impairments, unusual gains and losses, expenses incurred in connection with future cost optimization actions, and other acquisition-related expenses because the Company is unable to predict these amounts with reasonable certainty.

Reconciliation of expected GAAP to non-GAAP effective tax rate is presented in the table below:

First Quarter 2026

Full Year 2026

GAAP effective tax rate (approximately)

30.0 %

26.0 %

Tax shortfall related to stock-based compensation

(3.9) %

(0.6) %

Tax effect on non-GAAP adjustments

(2.1) %

(1.4) %

Non-GAAP effective tax rate (approximately)

24.0 %

24.0 %

Reconciliation of expected GAAP to non-GAAP diluted earnings per share is presented in the table below:

First Quarter 2026

Full Year 2026

GAAP diluted earnings per share

$1.32 to $1.40

$7.95 to $8.25

Stock-based compensation expenses

0.97

3.71

Included in cost of revenues (exclusive of depreciation and amortization)

0.47

1.81

Included in selling, general and administrative expenses

0.50

1.90

Humanitarian support in Ukraine^(b)

0.06

0.22

Cost Optimization charges^(c)

0.25

0.45

Amortization of acquired intangible assets

0.32

1.27

Foreign exchange loss

0.05

0.22

Provision for income taxes:

     Tax effect on non-GAAP adjustments

(0.35)

(1.28)

Tax shortfall related to stock-based compensation

0.08

0.06

Non-GAAP diluted earnings per share^(f)

$2.70 to $2.78

$12.60 to $12.90