Why EPAM Systems Sank This Week

Shares of exertion consulting steadfast EPAM Systems (NYSE: EPAM) fell 16.4% this week done Thursday trading, according to information from S&P Global Market Intelligence.

EPAM reported net connected Thursday greeting and sold off, adjacent though the institution bushed expectations connected some the apical and bottommost lines. However, investors appeared little enthusiastic astir the company's 2026 guardant guidance.

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Still, aft today's sell-off, the consulting steadfast trades astatine a precise debased multiple. Is it an accidental oregon a worth trap?

In the 4th quarter, EPAM grew gross 12.8% to $1.41 cardinal and adjusted (non-GAAP) EPS 14.8% to $3.26 per share, some beating expectations. That maturation whitethorn look beauteous good; however, EPAM has besides been acquisitive successful caller years. Stripping retired the effects of acquisitions, EPAM's "organic" gross maturation was lone 5.6% successful the 4th fourth and 4.9% for the afloat year.

Management besides guided for 2026 gross maturation to beryllium betwixt 4.5% and 7.5%, and integrated maturation betwixt 3% and 6%, marking a deceleration astatine the midpoint. That whitethorn person disappointed immoderate investors and fueled fears that AI whitethorn beryllium putting pricing unit connected quality consultants.

For the record, absorption maintained that it was not seeing immoderate pricing unit owed to AI, but alternatively that enterprises embarking connected AI journeys are taking their clip with their IT plans, slowing things down. That being said, EPAM did admit that the largest lawsuit astatine NOERIS, a ample consulting subsidiary steadfast EPAM bought successful precocious 2024, was ramping down concern with the company, which volition detract astir a afloat percent constituent from EPAM's 2026 maturation rate. That whitethorn person sparked immoderate further interest for that caller acquisition.

At the terms of $139 astatine the extremity of Thursday, EPAM present trades astatine a aggregate of conscionable nether 11 times this year's adjusted EPS guidance. While that does look cheap, galore consulting firms person precocious sold disconnected to debased valuations, arsenic investors measurement whether AI volition beryllium capable to regenerate oregon astatine slightest enactment pricing unit connected quality consultants.

Unsurprisingly, astir absorption teams accidental they aren't seeing those impacts. If that's true, EPAM and akin consulting institution stocks whitethorn beryllium large buys today. However, if, successful one, two, oregon respective much years, AI tin bash immoderate of the enactment these companies do, determination whitethorn beryllium immoderate disruption. Only clip volition archer for this mid-cap tech stock.