EPAM Pledges to Return 50% of Free Cash Flow Annually and Raises AI Revenue Target
Key Facts
On November 5, 2026, EPAM said it would return at least 50% of its free cash flow to shareholders annually in 2027, 2028 and 2029, while raising its 2026 target for AI-based services revenue to at least $650 million from $600 million. The announcement came with third-quarter results that Chief Executive Officer Balazs Fejes said exceeded the high end of the company’s revenue, profitability and earnings-per-share guidance ranges. Revenue was $1.426 billion, up 2.3% year over year, or 2.5% on an organic constant-currency basis. The company’s strategy combines increased spending on shareholder returns with expansion of its AI-based business. The results also showed improved margins and earnings per share compared with the same period a year earlier.
“The third quarter came in better than expected, exceeding the high end of our guidance ranges for revenue, profitability and earnings per share,” Fejes said on the earnings call. AI-based services revenue exceeded $185 million during the quarter, equivalent to about 13% of total revenue. That share was about 11% in the second quarter, with AI-based services revenue recording double-digit sequential growth. Raising the annual target to $650 million represents an increase of $50 million from the original target. The company said it would continue expanding its strategic partnerships and advanced field engineering network, and launch its new advanced AI services.
On profitability, the non-GAAP operating income margin rose to 16.7% of revenue in the third quarter, compared with 16.0% a year earlier. The GAAP operating income margin was 12.3%, versus 10.4% in the third quarter of 2025. Diluted earnings per share were $2.53 on a GAAP basis, up 32.5% year over year. Non-GAAP diluted earnings per share were $3.51, up 14.0% year over year. According to estimates cited by Investing.com, non-GAAP earnings per share exceeded the analyst estimate of $3.40 by $0.11, while revenue also topped the consensus estimate of $1.42 billion.
EPAM increased its share repurchase authorization by $1.5 billion, bringing the total remaining authorization to $1.8 billion through December 31, 2029. The company said it plans to enter into a $500 million accelerated share repurchase transaction during the week following the announcement. Since starting its repurchase programs in 2023, the company has returned about $1.7 billion to shareholders. During the first nine months of 2026, it spent about $489 million on share repurchases. As of September 30, 2026, cash, cash equivalents and restricted cash totaled $969.9 million, down 25.5% from the end of 2025.
The results follow revenue of $1.415 billion in the second quarter of 2026, up 4.5% year over year. Its third-quarter guidance range, announced on August 6, was between $1.410 billion and $1.425 billion, and actual revenue came in at $1.426 billion. For the fourth quarter, the company expects revenue of between $1.405 billion and $1.420 billion, reflecting a year-over-year change ranging from a 0.2% decline to 0.9% growth. The range points to the possibility of flat revenue or a slight year-over-year decline at year-end. The information presented here did not include other fourth-quarter guidance figures from the company.
EPAM said it would provide detailed guidance for 2027 in February 2027, during its fourth-quarter 2026 earnings call. The timing follows its commitment to return at least half of free cash flow annually during 2027–2029 and its increase to the annual target for AI-based services revenue. The February call will give the company an opportunity to present its detailed outlook for next year. Until then, the company has set its fourth-quarter revenue range at $1.405 billion to $1.420 billion. It also announced that the planned $500 million accelerated share repurchase will begin during the week following the November 5 announcement.