EPAM Systems, Inc.EPAM
EPAM Systems, Inc. Stock Compensation Disclosure
STOCKHOLDERS’ EQUITY
Stock-Based Compensation
The following table summarizes the components of stock-based compensation expense recognized in the Company’s consolidated statements of income for the years indicated:
| For the Years Ended December 31, | ||||||||||||||||||||
| 2025 | 2024 | 2023 | ||||||||||||||||||
| Cost of revenues (exclusive of depreciation and amortization) | $ | 86,252 | $ | 80,944 | $ | 68,797 | ||||||||||||||
Selling, general and administrative expenses | 90,512 | 86,353 | 78,933 | |||||||||||||||||
| Total | $ | 176,764 | $ | 167,297 | $ | 147,730 | ||||||||||||||
Equity Plans
On May 22, 2025, the Company's stockholders approved the EPAM Systems, Inc. 2025 Long Term Incentive Plan (the “2025 Plan”) to be used to issue equity grants to Company personnel. The 2025 Plan is a new plan that replaces the EPAM Systems, Inc. 2015 Long Term Incentive Plan (the “2015 Plan”). The 2025 Plan reserves up to 1,585,970 shares of the Company’s common stock for issuance, plus any shares subject to outstanding awards granted under the 2015 Plan and any predecessor plans that return to the share pool as a result of cancellation or forfeiture. The 2025 Plan will expire 10 years after the effective date and is administered by the Compensation Committee of the Company’s Board of Directors.
Under the Company’s long-term incentive plans, 1.709 million shares of common stock are available for issuance to Company personnel and 487 thousand shares of common stock are available for issuance to non-employee directors as of December 31, 2025. All of the awards issued pursuant to the long-term incentive plans expire 10 years from the date of grant.
In addition, the Company maintains an ESPP to enable eligible employees to purchase shares of EPAM’s common stock at a discount through payroll deductions of up to 10% of their eligible compensation at the end of each designated offering period, which occurs every six months ending April 30th and October 31st. The purchase price is equal to 85% of the fair market value of a share of EPAM’s common stock on the first date of an offering or the date of purchase, whichever is lower. As of December 31, 2025, 213 thousand shares of common stock remained available for issuance under the ESPP.
Restricted Stock Units
The Company grants RSUs to Company personnel and non-employee directors. In addition, the Company has issued in the past, and may issue in the future, equity awards to compensate employees of acquired businesses for future services. Equity settled awards granted in connection with acquisitions of businesses may be issued in the form of service-based awards requiring continuing employment with the Company, restricted stock subject to trading restrictions, and performance-based awards, which would vest only if certain specified performance and service conditions are met. The awards issued in connection with acquisitions of businesses are subject to the terms and conditions contained in the applicable award agreements and acquisition documents.
Service-Based Awards
The table below summarizes activity related to the Company’s equity-classified and liability-classified service-based awards for the years ended December 31, 2025, 2024 and 2023:
Equity-Classified Equity-Settled Restricted Stock Units | Liability-Classified Cash-Settled Restricted Stock Units | ||||||||||||||||||||||
| Number of Shares | Weighted Average Grant Date Fair Value Per Share | Number of Shares | Weighted Average Grant Date Fair Value Per Share | ||||||||||||||||||||
| Unvested service-based awards outstanding as of January 1, 2023 | 916 | $ | 291.19 | 99 | $ | 257.74 | |||||||||||||||||
| Awards granted | 607 | $ | 288.49 | 36 | $ | 298.81 | |||||||||||||||||
| Awards modified | (15) | $ | 278.52 | 15 | $ | 305.59 | |||||||||||||||||
| Awards vested | (329) | $ | 278.25 | (46) | $ | 242.07 | |||||||||||||||||
| Awards forfeited | (105) | $ | 304.91 | (6) | $ | 254.82 | |||||||||||||||||
| Unvested service-based awards outstanding as of December 31, 2023 | 1,074 | $ | 292.45 | 98 | $ | 287.36 | |||||||||||||||||
| Awards granted | 617 | $ | 283.21 | 34 | $ | 298.35 | |||||||||||||||||
| Awards modified | 1 | $ | 366.27 | (1) | $ | 114.30 | |||||||||||||||||
| Awards vested | (378) | $ | 289.48 | (39) | $ | 273.28 | |||||||||||||||||
| Awards forfeited | (102) | $ | 299.49 | (3) | $ | 295.86 | |||||||||||||||||
| Unvested service-based awards outstanding as of December 31, 2024 | 1,212 | $ | 288.12 | 89 | $ | 298.84 | |||||||||||||||||
| Awards granted | 847 | $ | 181.81 | 53 | $ | 183.27 | |||||||||||||||||
| Awards modified | (2) | $ | 301.10 | 2 | $ | 185.73 | |||||||||||||||||
| Awards vested | (439) | $ | 291.50 | (36) | $ | 303.20 | |||||||||||||||||
| Awards forfeited | (151) | $ | 239.40 | (2) | $ | 258.40 | |||||||||||||||||
| Unvested service-based awards outstanding as of December 31, 2025 | 1,467 | $ | 230.75 | 106 | $ | 238.64 | |||||||||||||||||
The fair value of vested service-based RSU awards (measured at the vesting date) for the years ended December 31, 2025, 2024 and 2023 was as follows:
| For the Years Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Equity-classified equity-settled | 80,407 | 105,100 | 94,418 | ||||||||||||||
| Liability-classified cash-settled | 6,491 | 11,455 | 13,229 | ||||||||||||||
| Total fair value of vested service-based awards | $ | 86,898 | $ | 116,555 | $ | 107,647 | |||||||||||
As of December 31, 2025, $212.0 million of total remaining unrecognized stock-based compensation costs related to service-based equity-classified RSUs, net of estimated forfeitures, is expected to be recognized over the weighted average remaining requisite service period of 2.4 years.
As of December 31, 2025, $14.0 million of total remaining unrecognized stock-based compensation costs related to service-based liability-classified RSUs, net of estimated forfeitures, is expected to be recognized over the weighted average remaining requisite service period of 2.5 years.
The liability associated with the Company’s service-based liability-classified RSUs as of December 31, 2025 and 2024 was $5.7 million and $4.8 million, respectively, and is classified as accrued compensation and benefits expenses in the consolidated balance sheets.
Performance-Based Awards
The table below summarizes activity related to the Company’s performance-based awards for the years ended December 31, 2025, 2024 and 2023:
Equity-Classified Equity-Settled Restricted Stock Units | |||||||||||
| Number of Shares | Weighted Average Grant Date Fair Value Per Share | ||||||||||
| Unvested performance-based awards outstanding as of January 1, 2023 | 15 | $ | 412.60 | ||||||||
| Awards granted | 6 | $ | 258.19 | ||||||||
| Awards vested | (7) | $ | 229.98 | ||||||||
| Awards forfeited | (1) | $ | 363.93 | ||||||||
| Unvested performance-based awards outstanding as of December 31, 2023 | 13 | $ | 441.87 | ||||||||
| Awards granted | 54 | $ | 302.61 | ||||||||
| Awards vested | (3) | $ | 560.97 | ||||||||
| Awards forfeited | (2) | $ | 546.48 | ||||||||
| Unvested performance-based awards outstanding as of December 31, 2024 | 62 | $ | 310.37 | ||||||||
| Awards granted | 100 | $ | 210.21 | ||||||||
| Awards vested | (4) | $ | 490.65 | ||||||||
| Awards forfeited | (20) | $ | 258.23 | ||||||||
| Unvested performance-based awards outstanding as of December 31, 2025 | 138 | $ | 240.97 | ||||||||
In addition, as of December 31, 2025, the Company has issued 82 thousand performance-based equity-classified RSUs which are not considered granted for accounting purposes as the future vesting conditions have not yet been determined and are not reflected in the table above.
As of December 31, 2025, $13.5 million of total remaining unrecognized stock-based compensation cost related to performance-based equity-classified RSUs is expected to be recognized over the weighted average remaining requisite service period of 1.6 years.
During the three months ended March 31, 2025 and 2024, the Company granted to its named executive officers and certain other members of senior management performance-based equity-classified RSU awards that vest after 3 years, contingent on meeting certain financial performance targets, market conditions and continued service. The financial performance targets are set by the Compensation Committee of the Board of Directors at the beginning of each year. For the portion of the awards subject to market conditions, fair value was determined using a Monte Carlo valuation model. The portion of the awards associated with financial performance in future years for which the financial performance targets have not yet been determined are not considered granted for accounting purposes. There were 70 thousand such awards as of December 31, 2025.
Stock Options
Stock option activity under the Company’s long-term incentive plans is set forth below:
| Number of Options | Weighted Average Exercise Price | Aggregate Intrinsic Value | Weighted Average Remaining Contractual Term (in years) | ||||||||||||||||||||
| Options outstanding as of January 1, 2023 | 1,923 | $ | 98.92 | $ | 447,503 | ||||||||||||||||||
| Options granted | 114 | $ | 295.73 | ||||||||||||||||||||
| Options exercised | (397) | $ | 39.01 | ||||||||||||||||||||
| Options forfeited | (6) | $ | 316.91 | ||||||||||||||||||||
| Options expired | (5) | $ | 340.13 | ||||||||||||||||||||
| Options outstanding as of December 31, 2023 | 1,629 | $ | 125.88 | $ | 289,552 | ||||||||||||||||||
| Options granted | 81 | $ | 296.87 | ||||||||||||||||||||
| Options exercised | (483) | $ | 46.71 | ||||||||||||||||||||
| Options forfeited | (16) | $ | 297.52 | ||||||||||||||||||||
| Options expired | (5) | $ | 371.84 | ||||||||||||||||||||
| Options outstanding as of December 31, 2024 | 1,206 | $ | 165.78 | $ | 112,839 | ||||||||||||||||||
| Options exercised | (438) | $ | 67.70 | ||||||||||||||||||||
| Options forfeited | (26) | $ | 296.27 | ||||||||||||||||||||
| Options expired | (41) | $ | 329.44 | ||||||||||||||||||||
| Options outstanding as of December 31, 2025 | 701 | $ | 212.59 | $ | 29,010 | 4.4 | |||||||||||||||||
| Options vested and exercisable as of December 31, 2025 | 586 | $ | 196.81 | $ | 29,010 | 3.8 | |||||||||||||||||
| Options expected to vest as of December 31, 2025 | 112 | $ | 293.02 | $ | — | 7.5 | |||||||||||||||||
The fair value of each option award is estimated on the date of grant using the Black-Scholes option valuation model. The model incorporated the following weighted average assumptions:
| For the Years Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Expected volatility | — | % | 52.1 | % | 50.2 | % | |||||||||||
| Expected term (in years) | — | 6.25 | 6.23 | ||||||||||||||
| Risk-free interest rate | — | % | 4.3 | % | 3.6 | % | |||||||||||
| Expected dividends | — | % | — | % | — | % | |||||||||||
Expected volatility is based on the historical volatility of the Company’s stock price. The expected term represents the period of time that options granted are expected to be outstanding. The risk-free interest rate is based on the U.S. Treasury yield curve for the periods equal to the expected term of the options in effect at the time of grant. The Company has not declared or paid any dividends on its common stock and does not anticipate paying any dividends in the foreseeable future.
There were no stock options granted during the year ended December 31, 2025. The weighted average grant-date fair value of stock options granted during the years ended December 31, 2024 and 2023 was $164.47 and $156.11, respectively. The total intrinsic value of options exercised during the years ended December 31, 2025, 2024 and 2023 was $54.5 million, $113.3 million and $89.8 million, respectively.
The Company recognizes the fair value of each option as compensation expense on a straight-line basis over the requisite service period, which is generally the vesting period. The options are typically scheduled to vest over four years from the time of grant, subject to the terms of the applicable plan and stock option agreement. The Company records share-based compensation expense only for those awards that are expected to vest and as such, the Company applies an estimated forfeiture rate at the time of grant and adjusts the forfeiture rate estimate quarterly to reflect actual forfeiture activity. In general, in the event of a participant’s voluntary termination of service, unvested options are forfeited as of the date of such termination without any payment to the participant and the cumulative amount of previously recognized expense related to the forfeited options is reversed.
As of December 31, 2025, $5.9 million of total remaining unrecognized compensation cost related to unvested stock options, net of estimated forfeitures, is expected to be recognized over a weighted average period of 1.7 years.
Employee Stock Purchase Plan
The 2021 Employee Stock Purchase Plan (“ESPP”) enables eligible employees to purchase shares of EPAM’s common stock at a discount at the end of each designated offering period, which occurs every six months ending April 30th and October 31st. The purchase price is equal to 85% of the fair market value of a share of EPAM’s common stock on the first date of an offering or the date of purchase, whichever is lower. The Company recognizes compensation expense related to shares issued pursuant to the ESPP on a straight-line basis over the six-month offering period. The Company uses the Black-Scholes option pricing model to calculate the fair value of shares issued under the ESPP. The Black-Scholes model relies on a number of key assumptions to calculate estimated fair values. The model incorporated the following weighted average assumptions for the years ended December 31, 2025, 2024 and 2023:
| For the Years Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Expected volatility | 43.4 | % | 43.2 | % | 48.0 | % | |||||||||||
| Expected term (in years) | 0.50 | 0.50 | 0.50 | ||||||||||||||
| Risk-free interest rate | 4.0 | % | 4.9 | % | 5.3 | % | |||||||||||
| Expected dividends | — | % | — | % | — | % | |||||||||||
Expected volatility is based on the historical volatility of the Company’s stock price. The expected term represents the purchase period for the ESPP. The risk-free interest rate is based on the U.S. Treasury yield curve for the period equal to the expected term in effect at the time of grant. The Company has not declared or paid any dividends on its common stock and does not anticipate paying any dividends in the foreseeable future.
During the year ended December 31, 2025, the weighted average price per share was $160.12 and the weighted average grant-date fair value per share was $43.12. During the year ended December 31, 2025, the ESPP participants purchased 213 thousand shares of common stock under the ESPP and the Company recognized $9.9 million of stock-based compensation expense related to the ESPP. As of December 31, 2025, total unrecognized stock-based compensation cost related to the ESPP was $3.0 million, which is expected to be recognized over a period of 0.33 years.
During the year ended December 31, 2024, the weighted average price per share was $212.17 and the weighted average grant-date fair value per share was $56.34. During the year ended December 31, 2024, the ESPP participants purchased 181 thousand shares of common stock under the ESPP and the Company recognized $10.0 million of stock-based compensation expense related to the ESPP.
During the year ended December 31, 2023, the weighted average price per share was $248.23 and the weighted average grant-date fair value per share was $69.74. During the year ended December 31, 2023, the ESPP participants purchased 173 thousand shares of common stock under the ESPP and the Company recognized $12.6 million of stock-based compensation expense related to the ESPP.
Share Repurchases
On October 16, 2025, the Board of Directors authorized a share repurchase program (the “2025 Repurchase Program”) for up to $1,000 million of the Company’s outstanding common stock. The Company may repurchase shares of its common stock on a discretionary basis from time to time through open-market purchases, privately negotiated transactions or other means, including through the use of trading plans intended to qualify under Rule 10b5-1 under the Securities Exchange Act of 1934, as amended. The timing and total amount of stock repurchases will depend upon business, economic and market conditions, corporate and regulatory requirements, prevailing stock prices, and other considerations. The share repurchase program has a term of 24 months, may be suspended or discontinued at any time, and does not obligate the Company to acquire any amount of common stock. Prior to the authorization of the 2025 Repurchase Program, the Company repurchased common stock under the 2024 Repurchase Program and exhausted the $500 million authorized under that program as of September 30, 2025. Prior to the authorization of the 2024 Repurchase Program, the Company repurchased common stock under the 2023 Repurchase Program and exhausted the $500 million authorized under that program as of June 30, 2024.
During the years ended December 31, 2025 and 2024, the Company repurchased 3,538 thousand and 1,854 thousand shares of its common stock for $660.6 million and $398.0 million, respectively, in cash. All of the repurchased shares have been retired. As of December 31, 2025, a remaining balance of $776.5 million was available for purchases of the Company’s common stock under the 2025 Repurchase Program.
About Stock Compensation Disclosures
Stock-based compensation disclosures detail the equity awards granted to employees and executives — including stock options, restricted stock units (RSUs), and performance shares — along with the valuation methods and assumptions used to expense them. This section reveals the true cost of talent retention and the alignment between management incentives and shareholder interests.
Key signals: total unrecognized compensation expense and its expected recognition period signal future earnings headwinds from already-granted awards. For stock options, examine Black-Scholes assumptions — expected volatility, risk-free rate, and expected term — as understating any of these reduces reported compensation expense. Compare stock compensation expense as a percentage of revenue against peers to assess dilution cost. Watch vesting schedules for acceleration clauses tied to change-of-control events. Performance-based awards with undemanding targets may indicate weak governance. Add back stock compensation to operating cash flow to calculate a more conservative free cash flow figure.