Software provider EPAM forecasts quarterly, annual profit below estimates

(Reuters) -EPAM Systems on Thursday forecast first-quarter and annual profit below Wall Street expectations, as the company plans to increase investments in its technologies and consulting capabilities.

The company, which provides a broad spectrum of IT services, said it plans to spend on retaining talent, and accelerate investments in advanced Gen AI platforms and tools to capture market share.

Shares of Newtown, Pennsylvania-based company fell 10%.

"Compensation increases to retain talent for future growth combined with the limited ability to improve client pricing in the near term, and additional pressure from dilutive impact of recent acquisitions will continue to put pressure on profitability this year," company executives said on a post-earnings call.

For the first quarter, EPAM expects adjusted profit between $2.22 and $2.32 per share, compared with analysts' estimate of $2.59 per share, according to data compiled by LSEG.

It expects full-year adjusted earnings per share in the range of $10.45 to $10.75, while analysts expect $11.32.

EPAM offers services in consulting, cybersecurity, software engineering and product development.

Worldwide IT spending is expected to reach $5.61 trillion in 2025, an increase of 9.8% from a year ago, according to research firm Gartner. However, it adds that nominal spending versus real IT spending will be skewed, with price hikes absorbing some or all of budget growth.

The Newtown, Pennsylvania-based company expects to generate revenue between $1.28 billion and $1.29 billion in the first quarter, above analysts' estimate of $1.27 billion.

EPAM sees 2025 revenue growth rate to be in the range of 10% to 14%, compared to analysts' expectations of 11.4%.

The company reported fourth-quarter revenue of $1.25 billion, beating estimates of $1.21 billion. It posted an adjusted profit per share of $2.84 for the three months ended December 31, compared to estimates of $2.75.