EPAM Systems: AI Is Eating The Old Business, But 8.7x Earnings Is Too Cheap

EPAM Systems (EPAM) customers are cutting back on manual testing, user-experience work and other task-based services because of AI. These are just the areas investors were worried about, and these are the areas it is getting hit. This work can be replaced by EPAM Systems: AI Is Eating The Old Business, But 8.7x Earnings Is Too Cheap Summary - EPAM Systems faces near-term revenue headwinds as AI cannibalizes legacy services, but trades at just 8.7x forward non-GAAP earnings. - AI-native revenue now exceeds 11% of EPAM, growing double-digit sequentially, while margins and adjusted EPS are improving despite flat topline growth. - Engine Capital's activist push for a $750M buyback leverages EPAM's strong balance sheet and could materially shrink the share count at current valuations. - I rate EPAM a Buy: the stock is priced for too much permanence in the current transition, with upside if AI-native work fills the legacy gap by 2027. This article was written by Analyst’s Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article. Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.