EPAM Sets Sight on Generative AI Growth After Q4 Earnings Outperform Analyst Predictions

EPAM Systems, Inc EPAM reported a fourth-quarter FY23 sales decline of 6.0% year-on-year to $1.16 billion, beating the analyst consensus estimate of $1.14 billion.

Adjusted EPS of $2.75 beat the consensus of $2.50.

On an organic constant currency basis, excluding the impact of the exit from Russia, revenues were down 7.1% Y/Y.

Adjusted income from operations was $200.4 million, down 8.7% Y/Y. The adjusted operating margin contracted 50 bps to 17.3%.

EPAM held $2.04 billion in cash and equivalents as of December 31, 2023. Cash provided by operating activities for the quarter was $171.4 million.

Arkadiy Dobkin, CEO: “After rebalancing the majority of our delivery platforms across Europe, India, Asia and Latin America, and refining our growth strategy, we are now focused on harmonizing our delivery quality, optimizing cost-effectiveness, and proactively leveraging our extensive data, engineering and consulting experience to capitalize on Generative AI opportunities.”

Outlook: For the first quarter, EPAM expects revenues of $1.155 billion-$1.165 billion, against the consensus of $1.15 billion, and an adjusted EPS of $2.26 – $2.34 versus an estimated $2.39.

EPAM expects 2024 revenue growth of 1% – 4% or $4.74 billion – $4.88 billion versus an estimate of $4.86 billion.

EPAM projects 2024 adjusted EPS of $10.00 – $10.40 with an estimated $10.56.

Analyst Reaction: Needham maintained a Buy rating on EPAM and raised the Price Target to $350.

Piper Sandler maintained an Overweight rating on EPAM and raised the Price Target to $369.

Price Action: EPAM shares are trading higher by 7.77% at $299.75 on the last check Thursday.