Shares of technology consulting firm EPAM Systems (EPAM 2.48%) fell 16.4% this week through Thursday trading, according to data from S&P Global Market Intelligence.
EPAM reported earnings on Thursday morning and sold off, even though the company beat expectations on both the top and bottom lines. However, investors appeared less enthusiastic about the company's 2026 forward guidance.
Still, after today's sell-off, the consulting firm trades at a very low multiple. Is it an opportunity or a value trap?
NYSE: EPAM
Key Data Points
EPAM gives solid results, but AI disruption fears loom
In the fourth quarter, EPAM grew revenue 12.8% to $1.41 billion and adjusted (non-GAAP) EPS 14.8% to $3.26 per share, both beating expectations. That growth may look pretty good; however, EPAM has also been acquisitive in recent years. Stripping out the effects of acquisitions, EPAM's "organic" revenue growth was only 5.6% in the fourth quarter and 4.9% for the full year.
Management also guided for 2026 revenue growth to be between 4.5% and 7.5%, and organic growth between 3% and 6%, marking a deceleration at the midpoint. That may have disappointed some investors and fueled fears that AI may be putting pricing pressure on human consultants.
For the record, management maintained that it was not seeing any pricing pressure due to AI, but rather that enterprises embarking on AI journeys are taking their time with their IT plans, slowing things down. That being said, EPAM did admit that the largest client at NOERIS, a large consulting subsidiary firm EPAM bought in late 2024, was ramping down business with the company, which will detract about a full percentage point from EPAM's 2026 growth rate. That may have sparked some additional concern for that new acquisition.
Image source: Getty Images.
EPAM looks cheap after the sell-off
At the price of $139 at the end of Thursday, EPAM now trades at a multiple of just under 11 times this year's adjusted EPS guidance. While that does appear cheap, many consulting firms have recently sold off to low valuations, as investors weigh whether AI will be able to replace or at least put pricing pressure on human consultants.
Unsurprisingly, most management teams say they aren't seeing those impacts. If that's true, EPAM and similar consulting company stocks may be great buys today. However, if, in one, two, or several more years, AI can do some of the work these companies do, there may be some disruption. Only time will tell for this mid-cap tech stock.
