Key Highlights

  • Second-quarter Revenue was $1.415 billion, up 4.5% year over year (3.4% organic in constant currency).
  • AI-native revenue exceeded $160 million, more than 11% of total business, marking a sixth consecutive quarter of double-digit sequential growth.
  • GAAP diluted EPS rose 26.3% to $1.97 and non-GAAP EPS rose 22% to $3.38, with non-GAAP gross Margin improving to 32%.
  • Management cited a faster-than-expected shift away from task-based services, with North America revenue growing just 0.5%, and acknowledged a capability gap requiring multi-quarter restructuring.

EPAM Systems (NYSE:EPAM), a digital-engineering and software-services company, reported that slow growth in its core North American market and a faster-than-expected shift away from traditional services overshadowed rapid growth in its AI-native offerings. For investors, the question is whether this software and AI company can turn the story around as it restructures and leans into AI-driven services.

EPAM provides software engineering, digital transformation, cloud, modernization and AI services to enterprises across financial services, healthcare, technology and other sectors. Its Business has historically grown by helping large companies build and modernize software, but it now faces both an opportunity and a disruption from AI, which is reshaping Demand for conventional, task-based services while creating new AI-centric revenue streams.

Latest Developments

In its second-quarter 2026 results, EPAM reported revenue of $1.415 billion, up 4.5% year over year (3.4% organic in constant currency). Its AI-native revenue exceeded $160 million, more than 11% of total business, marking a sixth consecutive quarter of double-digit sequential growth. GAAP diluted EPS rose 26.3% to $1.97 and non-GAAP EPS rose 22% to $3.38, with non-GAAP gross margin improving to 32%. However, management cited a faster-than-expected shift away from task-based services, with North America revenue growing just 0.5%, and acknowledged a capability gap in business development that will require a multi-quarter restructuring. It guided full-year 2026 revenue growth of 3.2% to 4.2%.

Financial and Business Position

EPAM's results capture a company in transition: its AI-native business is growing rapidly and its profitability and margins are improving, but its core services, particularly in North America, are under pressure as clients shift away from traditional, task-based engagements. The acknowledged business-development capability gap and the planned multi-quarter restructuring signal that management sees the need to adapt, and the strong AI-native growth suggests it has genuine capabilities in the new model.

Stock-Market Context

The company carries a favorable analyst rating, and the pullback reflects the slow core-market growth and the disclosed restructuring needs despite the AI momentum and margin gains. The case for a turnaround rests on the AI-native business scaling, the North American business stabilizing, and the restructuring improving execution; the cautionary case is that the shift away from task-based services could continue to pressure growth.

What Investors Should Watch

Investors may focus on AI-native revenue growth and its share of the business, whether North American and overall revenue growth stabilizes and reaccelerates, progress on the business-development restructuring, margin trends, and execution against full-year guidance. Evidence that AI-driven revenue is scaling fast enough to offset the decline in traditional services would be central to whether EPAM can turn the story around.

EPAM sits at the epicenter of the disruption that generative AI is bringing to the IT-services industry, and its quarter captured both sides of that upheaval with unusual clarity. On one hand, its AI-native revenue is growing rapidly and now represents a meaningful and rising share of the business. On the other hand, its traditional business, especially in North America, is under real pressure, as clients shift away from the conventional, task-based engagements that AI can increasingly automate. For investors, the case depends on whether the fast-growing AI-native business can scale quickly enough to offset the erosion in traditional services.