IT consultant EPAM Systems (EPAM 2.33%) stock tumbled 18.4% through 10 a.m. ET Thursday despite beating on both sales and earnings this morning.
Heading into the company's Q4 earnings report, analysts expected EPAM to earn $3.16 per share on sales just under $1.4 billion. EPAM actually earned $3.26 per share, and on sales just over $1.4 billion.
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EPAM Q4 earnings
Earnings may not have been quite as good they seem, however. While sales surged 13% for EPAM in Q4, and the company "beat" on its pro forma profits number (non-GAAP earnings were up 15%), actual earnings calculated under generally accepted accounting principles (GAAP) were only $1.98 per share.
That's 39% less than non-GAAP earnings and only a 10% increase year over year.
For the full year, EPAM reported 15% sales growth to $5.5 billion, non-GAAP profits up only 6%, and GAAP profits down 14% at $6.72 per share.
NYSE: EPAM
Key Data Points
Is EPAM stock a buy?
EPAM CEO Balazs Fejes says EPAM is "scaling and accelerating our AI-native revenues" (that's right, EPAM says it's an artificial intelligence stock), and the revenue growth bears that out. Still, the weak GAAP profit performance in Q4 and the year-over-year decline in profits are concerning.
The good news is that, when turning to guidance, EPAM suggested profits will soon improve. In 2026, the company is looking for sales growth to slow to about 6%, but for earnings to surge ahead to about $8.10 per share -- 20% better than last year, and three times the rate of sales growth.
With EPAM stock trading for just over $136 today, that works out to a price-to-earnings ratio of only 16.8x on a stock growing earnings at 20%. Today's sell-off just might be a buying opportunity for EPAM investors.
