Epam Systems (E3M) AI Stock Analysis

Company Guidance

EPAM expects at least $650 million in AI-native revenues in 2026, compared with its original target of $600 million, and full-year 2026 revenue growth in the range of 3.5%-3.7%, with foreign exchange expected to have a positive impact of approximately 1% and organic constant currency growth in the range of 2.5%-2.7%; GAAP income from operations is expected in the range of 10.7%-10.9%, non-GAAP income from operations in the range of 15.9%-16.1%, GAAP effective tax rate at 27%, non-GAAP effective tax rate at 24%, GAAP diluted EPS in the range of $8.41-$8.49, non-GAAP diluted EPS in the range of $13.23-$13.31, and weighted average share count of 52 million fully diluted shares outstanding. Q4 revenue is expected in the range of $1.405 billion-$1.420 billion, with year-over-year growth in the range of -0.2% to positive 0.9%, approximately 0.7% negative foreign exchange impact, organic constant currency growth positive and in the range of 0.5%-1.6%, GAAP income from operations in the range of 11.5%-12.5%, non-GAAP income from operations in the range of 16%-17%, GAAP effective tax rate approximately 26%, non-GAAP effective tax rate approximately 24%, GAAP diluted EPS in the range of $2.43-$2.51, non-GAAP diluted EPS in the range of $3.50-$3.58, and weighted average share count of 49.9 million diluted shares outstanding; free cash flow conversion rate is forecasted to be above 100%. For 2027, non-GAAP income from operations is currently expected to operate in the 15%-16% range, with large deals ramping in Q1 and greater contributions in Q2, while the company is not expecting a further increase in gross margin and may operate at modestly lower levels of gross margin.