NEWTOWN, PA — EPAM Systems Inc. (NYSE: EPAM) expanded its share repurchase authorization by $1.5 billion after third-quarter earnings rose 32.5%, committing to increased shareholder returns as the technology services company pursues growth in artificial intelligence and digital transformation.
The Newtown-based company reported revenue of $1.426 billion for the quarter ended Sept. 30, up 2.3% from a year earlier, while diluted earnings increased to $2.53 per share from $1.91.
EPAM’s board approved the additional repurchase authorization, bringing its remaining authorization to approximately $1.8 billion. The company also outlined plans for a $500 million accelerated share repurchase and committed to returning at least 50% of annual free cash flow to shareholders from 2027 through 2029.
The capital return initiative follows improved operating profitability despite relatively modest revenue growth.
Third-quarter operating income increased 21.4% to $175.9 million from $144.9 million a year earlier. Operating margin rose to 12.3% from 10.4%, an improvement of 1.9 percentage points.
Adjusted operating income increased 7% to $238.4 million, while adjusted operating margin expanded to 16.7% from 16%.
On a non-GAAP basis, diluted earnings rose 14% to $3.51 per share from $3.08.
Revenue increased 2.5% on an organic constant-currency basis, which excludes the effects of acquisitions and foreign exchange movements.
Chief Executive Officer and President Balazs Fejes attributed the results to improved profitability, artificial intelligence initiatives and progress in the company’s broader business strategy.
“We delivered a strong quarter, with better-than-expected results, continued margin expansion, AI-native momentum and traction in our transformation strategy,” Fejes said.
EPAM has expanded its AI-related services, including the introduction of Frontier AI Services, while developing strategic partnerships and its network of engineers working directly with clients.
The company also revised its full-year financial outlook, projecting revenue growth of 3.5% to 3.7% in 2026 and organic constant-currency growth of 2.5% to 2.7%.
EPAM expects full-year GAAP diluted earnings of $8.41 to $8.49 per share and adjusted diluted earnings of $13.23 to $13.31.
Its annual operating margin forecast calls for GAAP profitability of 10.7% to 10.9% of revenue and adjusted operating margins of 15.9% to 16.1%.
For the fourth quarter, EPAM projects revenue of $1.405 billion to $1.420 billion, representing a year-over-year change ranging from a 0.2% decline to a 0.9% increase.
Organic constant-currency revenue growth is expected to range from 0.5% to 1.6%, indicating that underlying sales growth will remain modest through year-end.
Fourth-quarter GAAP diluted earnings are projected at $2.43 to $2.51 per share, with adjusted earnings of $3.50 to $3.58.
The company expects fourth-quarter operating margins of 11.5% to 12.5% on a GAAP basis and 16% to 17% on an adjusted basis.
EPAM’s expanded buyback program represents a significant component of its capital allocation strategy.
Since initiating its share repurchase programs in 2023, the company has returned approximately $1.7 billion to shareholders.
During the first nine months of 2026, EPAM spent approximately $489 million repurchasing shares, including $80 million during the third quarter.
The company planned to enter into the $500 million accelerated repurchase agreement during the week of Nov. 9, financing the transaction through available cash and borrowings under its existing credit facility.
The accelerated repurchase would reduce shares outstanding more quickly than conventional open-market purchases, potentially supporting future per-share earnings.
EPAM generated $288.8 million in operating cash flow during the third quarter, compared with $294.7 million a year earlier.
For the first nine months, operating cash flow declined to $250.1 million from $372 million during the comparable 2025 period.
Cash, cash equivalents and restricted cash totaled $969.9 million at Sept. 30, down $331.4 million, or 25.5%, from $1.301 billion at the end of 2025.
The company employed approximately 63,650 people at the end of September, including 57,350 delivery professionals. Its delivery workforce increased 1.2% from the end of June.
EPAM expects a full-year GAAP effective tax rate of approximately 27% and an adjusted effective tax rate of 24%. Fourth-quarter tax rates are projected at approximately 26% and 24%, respectively.
The company’s financial projections assume approximately 52 million weighted-average diluted shares outstanding for the full year and 49.9 million during the fourth quarter.
The combination of higher operating margins, expanded share repurchases and increased investment in AI services reflects EPAM’s emphasis on profitability and shareholder distributions as it works to accelerate revenue growth.
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