How the tech firm EPAM Systems is using AI as a power-up, not running from it.
"Software is eating the world", Marc Andreessen famously declared in his 2011 Wall Street Journal article.
Andreessen’s pronouncement evokes the classic video game Pac-Man. Picture this: the screen flashes to life, our wide-mouthed yellow glutton navigates a maze filled with dots, ghosts, and the occasional glowing power pellet. But Pac-Man isn’t just eating dots – he’s devouring entire industries. First retail. Then media. Then finance.
Now, a new level of the game has begun.
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As with any investment, your capital is at risk.
Pac-Man has long been pursued by colourful ghosts that float around his feeding ground. Today, many market players are staring at the screen with growing concern, worried that software – once the devouring disruptor – is now being chased by an even hungrier spectre: artificial intelligence (AI).
A popular view suggests that the advent of AI and coding automation tools will spell trouble for software engineers and product developers, threatening to automate away jobs and even entire companies.
But look closer. Not every player in this game is running scared. Some are levelling up. EPAM Systems is one of them.
Playing to win
EPAM isn’t just another IT services firm – it’s a global product development and digital engineering powerhouse. It is the kind of company that helps some of the world’s largest businesses modernise their legacy systems, build customer-centric platforms, and deploy real digital transformation at scale.
As more companies seek to incorporate AI into their systems, demand for sophisticated integration, modernisation, and architecture work is increasing. These are precisely the high-stakes, complex projects where EPAM excels – not the routine coding tasks more easily automated by AI.
This isn’t just theory; EPAM’s clients clearly agree. With a client retention rate consistently above 93 per cent, EPAM remains a trusted partner. Three quarters of EPAM’s top 100 clients are already working with the company on AI-related projects. Far from reducing demand, AI is generating new work streams.
EPAM is also using AI to boost both service delivery and internal productivity. By embedding AI into its software development processes, EPAM’s developers aim to achieve notable productivity gains. Far from reducing the need for EPAM’s expertise, AI could boost margins, offset wage inflation and enhance the speed of delivery, therefore making the company more profitable while reinforcing its value proposition to clients.
Not only is EPAM harnessing the power of AI to fuel its future growth and boost its profitability, but it has also strategically diversified. This includes recent acquisitions of Latin American IT consultancy NEORIS and financial services engineering firm First Derivative. These moves have broadened EPAM’s geographic footprint, enhanced its expertise in areas like enterprise resource planning (ERP) software, and strengthened its offerings for banking and capital markets clients.
Short-term headwinds, long-term opportunity
EPAM’s share price has fallen sharply from its late 2021 highs, dropping roughly 75 per cent from its peak. This reflects disruption from the Russia-Ukraine war, as a large portion of its workforce is based in these two countries. In 2023-24, we also saw a reduction in global IT budgets as clients exercised caution regarding discretionary tech spending in a tougher macro environment.
While near-term challenges have compressed margins, we see this as a transitory phase. EPAM's history of operational excellence and its expanded global delivery network provide a credible path to margin recovery. And global IT spending is recovering. EPAM’s revenues have already begun to reflect this rebound, growing nearly 12 per cent year-over-year in the first quarter of 2025.
Despite this, the current valuation reflects market scepticism about the company’s near-term outlook. This presents an attractive entry point to invest in a high-quality, structurally growing business with significant potential for long-term value creation. Having purchased shares earlier this year, we have since added to the position on increasing conviction.
Pressing go on the next level
Far from being a hungry spectre threatening software developers, AI for EPAM Systems is more like one of the glowing power pellets in Pac-Man’s maze – a tool that turbocharges its core business. In the grand arcade game of technological disruption, we believe EPAM will not just survive the game but score higher. With its global reach, technical depth, and ability to integrate and operationalise AI at scale, we believe that the next level of growth for EPAM is only just beginning.
Annual past performance to 30 June each year (%)
| 2021 | 2022 | 2023 | 2024 | 2025 | |
| Global Alpha Composite* (net) | 45.3 | -32.8 | 17.1 | 13.0 | 15.0 |
| Global Alpha Composite (gross) | 46.3 | -32.4 | 17.9 | 13.7 | 15.7 |
| MSCI ACWI | 39.9 | -15.4 | 17.1 | 19.9 | 16.7 |
Annualised returns to 30 June 2025 (%)
| 1 year | 5 years | 10 years | |
| Global Alpha Composite (net) | 15.0 | 8.2 | 9.7 |
| Global Alpha Composite (gross) | 15.7 | 9.0 | 10.5 |
| MSCI ACWI | 16.7 | 14.2 | 10.5 |
Source: Baillie Gifford, MSCI. US dollars. Returns have been calculated by reducing the gross return by the highest annual management fee for the composite. 1 year figures are not annualised.
Past performance is not a guide to future returns.
*Including Global Alpha, Responsible Global Alpha, Global Alpha Paris Aligned and Responsible Global Alpha Paris Aligned strategies
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