Grid Dynamics Holdings, Inc. ((GDYN)) has held its Q3 earnings call. Read on for the main highlights of the call.
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Grid Dynamics Holdings, Inc. recently held its earnings call, revealing a mixed sentiment. While the company celebrated record revenue and strategic growth initiatives, it also faced challenges such as declining retail revenue and currency impacts. Positioned for growth with a strong pipeline and an AI-centric strategy, Grid Dynamics is navigating some headwinds in specific areas.
Record Revenue Driven by AI Demand
Grid Dynamics reported a record third quarter revenue of $104.2 million, driven by a 10% sequential growth in AI demand. This surge in AI demand contributed over 25% of the quarter’s organic revenue, highlighting the company’s successful focus on AI-centric growth.
Share Repurchase Program
The Board authorized a $50 million share repurchase program, representing about 15% of the company’s cash. This move reflects the company’s confidence in its long-term business prospects and commitment to returning value to shareholders.
Strong Pipeline of New Enterprise Logos
Grid Dynamics boasted the strongest pipeline of new large enterprise logos since the beginning of the year. This growth is attributed to increased customer confidence, leading to multi-quarter engagements that extend into 2026.
Increase in Billable Headcount
The company significantly increased its billable engineering headcount, adding five times more engineers in the third quarter compared to the second. This trend is expected to continue into the fourth quarter, supporting the company’s growth trajectory.
Margin Expansion Initiatives
Grid Dynamics is implementing initiatives to improve margins by at least 300 basis points over the next 12 months. These initiatives include efficiency improvements, portfolio rebalancing, and leveraging AI to enhance profitability.
AI-Centric Growth Strategy
The company’s AI-first strategy is transforming its engineering and delivery capabilities. This approach enables faster proof of concepts and improves conversion rates and sales cycles, positioning Grid Dynamics as a leader in AI-driven solutions.
Decline in Retail Revenue
Despite overall growth, revenue from the retail vertical, Grid Dynamics’ largest segment, decreased by 2.1% sequentially and 2.9% year-over-year, posing a challenge for the company.
Currency Fluctuations Impact
The company faced foreign exchange-related headwinds, impacting EBITDA by approximately $0.6 million quarter-over-quarter. This highlights the challenges of operating in a global market.
Decrease in Gross Margin
Non-GAAP gross margin declined to 33.8% from 38% in the year-ago quarter. This decrease was impacted by FX headwinds and a mix shift from a U.K.-based acquisition.
Reduction in Customer Count
Grid Dynamics saw a reduction in its total customer count from 201 in the year-ago quarter to 186. This decrease was driven by efforts to rationalize the portfolio of nonstrategic customers.
Lower GAAP Net Income
GAAP net income decreased to $1.2 million in Q3 2025 from $4.3 million in the year-ago quarter. This decline was attributed to higher operating expenses and FX headwinds.
Forward-Looking Guidance
Looking ahead, Grid Dynamics anticipates continued positive momentum into 2026. The company projects a 300 basis points improvement in margins over the next 12 months, leveraging efficiency improvements and enhanced pricing with AI offerings. For the fourth quarter, revenue is expected to range between $105 million to $107 million, with a non-GAAP EBITDA range of $13 million to $14 million.
In summary, Grid Dynamics Holdings, Inc. presented a mixed but optimistic outlook during its earnings call. While the company faces challenges such as declining retail revenue and currency impacts, it is well-positioned for growth with record revenue, a strong pipeline, and an AI-centric strategy. The company’s forward-looking guidance suggests continued positive momentum, making it an interesting prospect for investors.