Grid Dynamics — Third Quarter 2026 Earnings Summary

Financial Performance:

• Total revenues reached $114.3 million, representing a 5.7% sequential increase and a 9.7% year-over-year increase.
• GAAP gross profit was $46.1 million (40.3% of revenue), compared to $34.7 million (33.3%) in the third quarter of 2025.
• Non-GAAP gross profit was $46.5 million (40.6% of revenue), compared to $35.2 million (33.8%) in the third quarter of 2025.
• GAAP net income was $6.2 million ($0.08 per diluted share), compared to $1.2 million ($0.01 per diluted share) in the third quarter of 2025.
• Non-GAAP net income was $14.7 million ($0.18 per diluted share), compared to $8.2 million ($0.09 per diluted share) in the third quarter of 2025.
• Non-GAAP EBITDA was $22.9 million (20.0% of revenue), compared to $12.7 million (12.2%) in the third quarter of 2025.
• Cash provided by operating activities was $30.5 million for the nine months ended September 30, 2026, compared to $30.7 million for the same period in 2025.
• Cash and cash equivalents totaled $304.3 million as of September 30, 2026, down from $342.1 million as of December 31, 2025.
• Total headcount was 4,559 as of September 30, 2026, down from 4,971 as of September 30, 2025.

Guidance and Future Outlook:

• Fourth quarter 2026 revenue is expected to be between $113.5 million and $115.5 million.
• Fourth quarter 2026 Non-GAAP EBITDA is expected to be between $20.0 million and $22.0 million.
• Basic share count for Q4 2026 is projected to be 81–82 million; diluted share count is projected to be 82–83 million.
• Management expressed confidence entering the fourth quarter with a positive backdrop for 2027, citing momentum and a structural foundation to sustain growth.
• AI revenue has grown over 45% year-over-year for three consecutive quarters and now constitutes 31% of total revenue.

Business Segments and Product Lines:

• Technology, Media and Telecom (TMT) was the principal growth driver, contributing 32.3% of Q3 2026 revenues, up 29.3% year-over-year and 7.6% sequentially.
• Retail contributed 27.2% of Q3 2026 revenues, up 13.3% year-over-year and 8.5% sequentially.
• Finance contributed 22.5% of Q3 2026 revenues, up 3.9% sequentially.
• Consumer Packaged Goods (CPG) and Manufacturing contributed 10.9% of Q3 2026 revenues, up 5.8% sequentially.
• Healthcare and Pharma contributed 1.8% of Q3 2026 revenues.
• Other verticals contributed 5.3% of Q3 2026 revenues.

Market and Competitive Landscape:

• The company operates as a leader in enterprise-level AI and digital transformation, serving Fortune 1000 clients.
• Revenue growth is driven by higher demand from largest technology customers and new customers in the TMT sector.
• Specialty retailers drove increased demand in the Retail sector.
• Global capital market customers provided ongoing demand in the Finance sector.
• The company faces intense and increasing competition.

Risks and Challenges:

• Revenues are highly dependent on a limited number of clients and industries; decreases in demand for outsourced services could materially adversely affect results.
• Macroeconomic conditions, inflation, recession risks, tariffs, and geopolitical climate, including the Russian invasion of Ukraine and conflict with Iran, may materially adversely affect the business.
• Revenues are highly dependent on clients primarily located in the United States; economic downturns in the U.S. or Europe could have a material adverse effect.
• Risks include the inability to effectively manage growth, failure to attract or retain highly skilled personnel, and failure to adapt to rapidly changing technologies.
• Issues relating to the use of AI technologies may result in reputational harm or liability.
• Security breaches and other incidents could expose the company to liability.
• Risks related to acquiring and integrating other companies, global regulatory environment, and legal proceedings exist.

Management Commentary and Tone:

• Leonard Livschitz, Chief Executive Officer, described Q3 2026 as a pivotal quarter delivering record revenue, record EBITDA, and AI-native programs in production at some of the world's largest enterprises.
• Management highlighted that the 40% gross margin and 20% EBITDA margin exceeded their 300 basis point margin commitment a quarter sooner than planned, attributing this to substantial enhancements to the business model rather than one-time events.
• The tone was confident, stating the company is growing faster and more profitably where enterprise AI spend is accelerating.

Other Key Points:

• The Company spent $35.5 million to repurchase 5.3 million shares during the nine months ended September 30, 2026, under its $50 million share repurchase program, including $6.7 million for 0.9 million shares in the third quarter.
• GAAP net income for the nine months ended September 30, 2026, was $7.5 million ($0.09 per share), compared to $9.4 million ($0.11 per share) in the prior year period.
• Non-GAAP net income for the nine months ended September 30, 2026, was $31.1 million ($0.37 per share), compared to $26.4 million ($0.30 per share) in the prior year period.
• Restructuring costs for the quarter were $1.985 million, and geographic reorganization expenses were $279,000.
• The company does not provide GAAP targets for net income for Q4 2026 due to the difficulty in estimating excluded items such as interest income, taxes, and stock-based compensation.