EPAM Systems Inc

EPAM Systems reported second quarter revenue of $1.41 billion, a 4.5% year-on-year increase that matched analyst estimates, while adjusted EPS of $3.38 beat expectations by 7.6%. CEO Balazs Fejes acknowledged that North America is not growing fast enough and said the company owns the issue, citing rapid client budget shifts to AI modernization and sales execution gaps. The company guided third quarter revenue to $1.42 billion at the midpoint, below analyst estimates of $1.44 billion, but slightly raised its full-year adjusted EPS guidance to $13.16 at the midpoint. Operating margin improved to 10.8% from 9.3% a year earlier, and constant currency revenue rose 3.4% year on year. EPAM shares traded at $100.16, down from $109.87 before the earnings release.

IT services and consulting stocks tracked by the publication fell an average of 18% since their latest earnings reports, even as first-quarter revenues broadly met analyst expectations. IBM led the group with revenue of 15.92 billion dollars, up 9.5 percent year on year and beating estimates by 1.3 percent, but its stock still dropped 15.7 percent. Gartner posted revenue of 1.51 billion dollars, down 1.5 percent, while Everforth reported flat revenue of 968.3 million dollars and issued weak guidance that sent its shares down 53.7 percent. Grid Dynamics grew revenue 3.7 percent to 104.1 million dollars and raised its full-year outlook, and EPAM Systems recorded 1.4 billion dollars in revenue, up 7.6 percent, though its stock fell 17.8 percent. Next-quarter revenue guidance for the group came in 2.3 percent below consensus, contributing to the broad share-price declines.

Innodata shares have dropped 33% over the past month, far underperforming the Zacks Engineering - R and D Services industry's 3.5% decline and the S&P 500's 0.7% gain. The company reported record first-quarter 2026 revenue of $90.1 million, up 54% year over year, with adjusted gross margin expanding to 47% and adjusted EBITDA nearly doubling to $25 million. Management raised its 2026 revenue growth outlook to approximately 40% or more, citing stronger customer demand and new engagements, including a Big Tech customer expected to generate roughly $51 million in 2026 revenue. Despite the strong fundamentals, the stock still trades at a forward 12-month price-to-earnings multiple of 45.96, well above the industry average of 29.81, leading Zacks to maintain a Hold rating. Competitors TaskUs, Cognizant Technology Solutions, and EPAM Systems continue to expand their AI services, intensifying competitive pressure.

Shares of Accenture cratered about 18% on June 18, its worst single-day drop on record, after the consulting giant trimmed its full-year revenue growth outlook to 3% to 4% in local currency from a prior range of 3% to 5%. EPAM Systems slid about 9% the same day without reporting its own results, while Cognizant fell about 10% to a 52-week low, and IBM slipped about 5%. The sell-off was driven by fears that artificial intelligence could structurally shrink demand for IT services, even though Accenture posted a solid fiscal third quarter with revenue up 6% to $18.7 billion and earnings per share up 9%, and Cognizant reported a 21% jump in first-quarter bookings. Accenture CEO Julie Sweet said AI will be a tailwind for the industry, but the market remains skeptical, with Accenture trading at about 10 times earnings, EPAM at about 11 times earnings, and Cognizant at around 9 times earnings. IBM, which derives only about a third of its revenue from consulting and saw software revenue rise 11% to $7.1 billion last quarter, commands a higher valuation of about 22 times earnings, reflecting investor confidence in its recurring software and hardware base.

Shares of IT services companies EPAM, Gartner, and Accenture fell in the afternoon session after the Federal Reserve held its benchmark rate at 3.5% to 3.75% and its dot plot signaled the easing cycle might reverse. EPAM dropped 4.9%, Gartner fell 4%, and Accenture declined 4.2%. The FOMC's message was unfavorable for firms relying on multi-year enterprise transformation contracts, as CFOs who had been loosening IT budgets in anticipation of further rate relief now face a financing environment pointing in the opposite direction. Discretionary IT spend is typically one of the first budget lines to compress when the rate outlook hardens, and the dollar's strengthening on the session's yield surge reduces the value of US-dollar earnings for offshore-heavy firms.