EPAM Q3 2025 Earnings: Strong Revenue Growth Masks Shrinking Profit Margins

EPAM Systems, a major player in the global IT consulting and software engineering world, just released its financial results for the third quarter of 2025. For anyone following the tech services industry, these reports are a great way to gauge the health of corporate IT spending and project demand. Let's dive into the key takeaways from EPAM's latest 10-Q filing with the SEC.

At first glance, the company's growth engine is firing on all cylinders. Revenue for the third quarter hit $1.39 billion, a robust 19.4% increase from the $1.17 billion reported in the same period last year. This growth wasn't confined to one region; both of EPAM's primary segments showed strong performance.

• Americas: The company's largest market grew 13.5% year-over-year to $800 million in revenue.
• Europe: This segment was the standout, with revenues surging an impressive 28.4% to reach $595 million.

This top-line performance shows that demand for EPAM's services—which range from custom software development to digital platform engineering for industries like finance, healthcare, and retail—remains high.

The Margin Squeeze

However, growing revenue is only half the story. As we look further down the income statement, a different picture emerges: one of shrinking profitability.

Despite the higher sales, EPAM's income from operations fell to $145 million, a significant drop from $177 million in Q3 2024. This pushed the company's operating margin down from a healthy 15.2% to 10.4%. The main driver behind this was a sharp increase in the Cost of Revenues, which is what EPAM spends to deliver its services, primarily on employee salaries and benefits. This cost grew to 70.5% of revenue, up from 65.4% last year, indicating that projects are becoming more expensive to deliver or that pricing power has weakened.

Ultimately, this pressure trickled down to the bottom line, with net income declining to $107 million from $136 million a year ago.

The flow of revenue through the company's costs for the quarter is visualized below.

In its financial reporting, EPAM does not allocate certain corporate-level expenses, such as stock-based compensation and the amortization of intangible assets from acquisitions, to its individual business segments. These are managed centrally and accounted for after segment profits are calculated.

Returning Value to Shareholders

While managing costs, EPAM has remained committed to returning capital to its shareholders. During the third quarter, the company spent approximately $83 million to repurchase 493,000 shares of its common stock. For the first nine months of 2025, share buybacks totaled a substantial $439 million. Share repurchases can help support a company's stock price by reducing the number of shares outstanding.

What's Next?

EPAM's Q3 2025 results highlight a common challenge in the competitive IT services landscape. The company is clearly succeeding at winning new business and expanding its footprint, especially in Europe. However, this growth is currently coming at the expense of profitability.

The key question for investors and market watchers is whether this margin compression is a temporary issue or a sign of a more persistent trend. Moving forward, the focus will undoubtedly be on EPAM's ability to translate its impressive sales growth into stronger earnings, balancing its expansion efforts with disciplined cost management in a market where talent and pricing are constant pressures.