Grid Dynamics Q4 Earnings Call Highlights

Key Points

• Grid Dynamics reported record Q4 revenue of $106.2 million and full‑year 2025 revenue of $411.8 million (up 17.5% YoY) with non‑GAAP EBITDA of $13.7 million in Q4 and $53.8 million for the year, and guided Q1 2026 revenue of $103–104 million and full‑year 2026 revenue of $435–465 million while targeting ~300 bps of margin expansion.
• AI-related revenue is accelerating—up 9% QoQ in Q4 and comprising 25% of the quarter (>$90M for FY, +30% YoY)—as the company shifts to platform‑driven, output/outcome‑based engagements and scales assets like Rosetta, GAIN, MXP/XDB and Incarno to capture higher‑margin, licensed work.
• Customer concentration increased (top five = 39.7%, top ten = 58.5%), but management points to deeper hyperscaler partnerships with AWS, NVIDIA and Temporal, a cash balance of $341.1 million at year‑end, and continued M&A focus on strategic AI and vertical acquisitions.

Grid Dynamics NASDAQ: GDYN executives outlined record fourth-quarter and full-year 2025 results, highlighting growing artificial intelligence-related revenue, increased partner influence, and an ongoing shift toward platform-driven and outcome-based engagements. Management also issued first-quarter and full-year 2026 guidance, citing seasonality and fewer working days as near-term factors while maintaining a bullish view tied to AI adoption and a strong pipeline.

Record revenue and profitability in Q4 and full-year 2025

CEO Leonard Livschitz said the company closed 2025 with “another landmark performance,” reporting fourth-quarter record revenue of $106.2 million and $13.7 million in non-GAAP EBITDA. For the full year, Grid Dynamics posted record revenue of $411.8 million, representing 17.5% year-over-year growth, and $53.8 million in non-GAAP EBITDA.

CFO Anil Doradla said fourth-quarter revenue was slightly above the midpoint of the company’s guidance range of $105 million to $107 million, with sequential growth of 1.9% and year-over-year growth of 5.9%. Non-GAAP EBITDA margin was 12.9% in the quarter, at the higher end of the company’s guidance range.

AI revenue, platforms, and the push toward value-based pricing

Livschitz said AI revenue grew 9% quarter-over-quarter in Q4 and represented 25% of overall revenue for the quarter. For full-year 2025, he said AI revenue exceeded $90 million, representing 30% year-over-year growth. Management said it anticipates continued AI revenue growth in 2026.

Executives repeatedly emphasized a strategic shift from time-and-materials work toward output- and outcome-based engagements, which they said can help decouple pricing from effort and support margin expansion. Livschitz attributed confidence in the outlook to three factors: the rise of AI coding agents and automation changing “build versus buy” decisions, the company’s GAIN initiative supporting a richer mix of outcome and output-based work, and uneven AI adoption across verticals—driving investment focus toward technology, financial services, and manufacturing.

CTO Eugene Steinberg detailed the company’s AI strategy across three “horizons”:

• AI-first engineering: The company launched Rosetta, described as an AI-native software development framework providing governance for AI coding agents, and said it plans to scale GAIN as the standard delivery backbone across engagements in 2026.
• Agentic enterprise: Steinberg said the “agentic era” favors bespoke engineering over system integration-heavy programs, and described the company’s two-track go-to-market: custom vertical AI platforms for large enterprises and hyperscaler-based solutions with Grid Dynamics components for mid-market clients.
• Physical AI: Steinberg highlighted Incarno, described as a software platform supporting robotics use cases, including work with SmartRay on robotic weld inspection and a manufacturing automation project converting CAD files to CNC instructions, which he said reduced cycle time by more than 90% in production.

Steinberg and other executives also discussed platform assets including the Merchandising Experience Platform (MXP) and a bitemporal data platform referred to as XDB (also referenced as XTDPO/XDB in remarks) for auditability in regulated financial environments. Steinberg said MXP crossed into license revenue in 2025 and cited a deployment for a European luxury retailer that delivered a 7% total revenue uplift and a 50% reduction in merchandising team workload, while handling a 25% year-over-year surge in peak holiday traffic.

Vertical performance, customer concentration, and FX impacts

Doradla broke out fourth-quarter revenue by vertical and discussed foreign exchange effects. He said FX created headwinds of 30 basis points sequentially and 22 basis points year-over-year for revenue. He also said FX was a year-over-year EBITDA headwind of approximately $1.5 million, while providing a sequential EBITDA tailwind of about $160,000.

Key vertical results in Q4 included:

• Retail: 28.7% of revenue; up 5.3% sequentially but down 6.9% year-over-year.
• TMT: 28.3% of revenue; up 5.3% sequentially and up 27.5% year-over-year, driven primarily by the top two technology customers.
• Finance: 22.9% of revenue; up 5% year-over-year, driven by demand from a large fintech customer and large banks.
• CPG and manufacturing: 10.2% of revenue; stable sequentially but down 4.3% year-over-year, reflecting declines at some automotive customers partially offset by CPG.
• Other: 7.3% of revenue; flat sequentially and up 8.4% year-over-year, primarily from a meal kit client.
• Healthcare and pharma: 2.6% of revenue.

Customer concentration increased year-over-year. Doradla said revenue from the top five customers was 39.7% and top 10 customers was 58.5%, compared with 35.6% and 55.8%, respectively, in the year-ago quarter.

Headcount ended the quarter at 4,961, slightly down from 4,971 in Q3 but up from 4,730 in Q4 2024. Doradla said total headcount declined sequentially, but billable headcount increased “meaningfully,” as the company rationalizes its workforce to align skills and geographic mix.

Guidance, margin expansion framework, partnerships, and M&A

For the first quarter of 2026, Doradla guided revenue to $103 million to $104 million and non-GAAP EBITDA to $12 million to $13 million. He characterized Q1 as a “very simple story” driven by seasonality and fewer working days in the time-and-materials business.

For full-year 2026, the company guided revenue to a range of $435 million to $465 million. Executives described the guidance range as wider than the prior year to reflect potential variability during the year, while pointing to pipeline growth and continued AI traction, particularly in technology and fintech, as well as growth in manufacturing.

On profitability, Doradla said the company expects margin expansion in 2026, referencing prior commentary about 300 basis points of improvement from Q4 to Q4. Leadership cited internal productivity, geographic optimization, and a higher mix of fixed-price and outcome-based engagements as levers, while also noting continued investments in AI platforms. Doradla also pointed to FX as a material factor affecting year-over-year comparisons.

Livschitz said partner influence revenue exceeded 19% of total revenue in 2025. He highlighted strengthened relationships with hyperscalers and noted that Grid Dynamics signed a strategic collaboration agreement with AWS for data foundations and AI that provides access to AWS funding for AI enterprise initiatives. He also cited collaboration with NVIDIA on Omniverse-based solutions for industrial-grade digital twins, and Steinberg highlighted a partnership with Temporal through its Jumpstart program, which management said has generated multiple new engagements.

Doradla said M&A remains a priority for capital allocation. In Q&A, he said multiples have improved relative to six to 10 months earlier, and that the company has a strong pipeline and a high number of exclusivities, while emphasizing it would pursue acquisitions only with a high strategic fit—particularly around AI capabilities and targeted vertical expertise. The company ended 2025 with $341.1 million in cash and cash equivalents, up from $338.6 million at the end of Q3.

In closing remarks, Livschitz said the company is embedding AI-driven efficiencies through platforms, upskilling its workforce, and entering the next phase with a roadmap focused on long-term shareholder value.

About Grid Dynamics NASDAQ: GDYN

Grid Dynamics NASDAQ: GDYN is a digital engineering and technology services company that helps enterprises accelerate their digital transformation initiatives. The company specializes in designing and implementing scalable, cloud-native solutions that leverage advanced analytics, machine learning and artificial intelligence to optimize operations, enhance customer experiences and drive revenue growth. Its technology expertise spans e-commerce platforms, modern data architectures, DevOps and automation, as well as custom application development across a range of industries including retail, financial services, high tech and automotive.

Key service offerings include cloud migration and modernization, data engineering and analytics, AI/ML-driven insights, digital commerce and omnichannel solutions.

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