Revenue Growth Is Coming Back for EPAM in 2024

EPAM Systems is a moaty IT services firm, in our view, that has ample runway for solid growth and moderate margin expansion ahead. The firm sets itself apart from companies like Accenture or Tata Consultancy Services with its deep concentration in engineering services, which pertains to the creation of custom enterprise software or code. The demand for engineering services has accelerated since the COVID-19 pandemic, which shed light on the need for an agile and flexible information technology landscape – enabled by custom software. Yet, we think demand for such services is here to stay, as digital transformation projects require hefty software engineering to lift systems to the cloud and finetuning thereafter is inevitable. Altogether, EPAM’s bread and butter of engineering services is a more discretionary type of IT enterprise spending, which means its mix has proved extremely favorable in good macroeconomic times but compounded vulnerability in weaker macroeconomic times. While near-term revenue growth has been challenged, we think the long-term trajectory is solid, and we are pleased to see a focus on increasing consulting revenues which can further drive demand in EPAM’s engineering services.