What Grid Dynamics (GDYN) Said on Its Q3 Earnings Call

Key Points

• Record Q3 performance: Revenue rose 9.7% year over year to $114.3 million, while non-GAAP EBITDA reached a record $22.9 million, or 20% of revenue, supported by stronger utilization and operating efficiencies.
• AI is driving growth and productivity: AI revenue increased 45% year over year to nearly 32% of total revenue, while 93% of engineers were trained in AI software-development practices. Headcount fell 8.3% year over year as revenue per employee surpassed $100,000.
• Positive outlook and expansion plans: Grid Dynamics forecast fourth-quarter revenue of $113.5 million to $115.5 million and expects to return to double-digit growth in 2027, with larger strategic acquisitions under consideration.

Grid Dynamics NASDAQ: GDYN reported record third-quarter 2026 revenue and non-GAAP EBITDA, as the IT services company cited growing demand for AI-related work, higher revenue per employee and improved operating efficiency.

Revenue rose 9.7% year over year and 5.7% sequentially to $114.3 million, exceeding the company’s guidance range of $112 million to $114 million. Non-GAAP EBITDA reached a record $22.9 million, or 20% of revenue, compared with $14.7 million, or 13.6% of revenue, in the prior quarter.

CEO Leonard Livschitz said the quarter reflected structural changes in how the company delivers projects and manages its operations. He said Grid Dynamics is increasingly pursuing fixed-price, output-based and platform-led engagements while using AI tools internally across functions including recruiting, proposal responses, knowledge management, finance and human resources.

AI Revenue and Delivery Model

AI revenue increased 45% year over year in the third quarter and approached 32% of total revenue, according to Livschitz. He said the company has now recorded AI-revenue growth above 45% for three consecutive quarters, as clients move from exploratory AI initiatives to multi-quarter production programs.

Grid Dynamics said 93% of its engineers have been trained on AI software-development lifecycle practices, exceeding management’s earlier goal of reaching 90% by the end of October. Livschitz said the company’s AI-native delivery model is helping it deliver projects with smaller teams and shorter timelines while supporting improved profitability.

The company’s GAIN platforms combine engineering talent, processes and intellectual property, Livschitz said. He added that the growing use of those platforms is weakening the traditional relationship between revenue growth and headcount growth in IT services.

Grid Dynamics ended the quarter with 4,559 employees, down from 4,838 in the second quarter and 4,971 a year earlier. Revenue per employee exceeded $100,000 for the first time, Livschitz said. Revenue grew 9.7% year over year while total headcount declined 8.3%.

CTO Eugene Steinberg described the company’s approach as a “software factory” built around client-specific frameworks for AI coding agents. He said the model is designed to make changes during projects faster and less costly, allowing the company to take on fixed-price work despite uncertainty in project scope.

Steinberg said engineers remain responsible for specifications, judgment, verification and control, while AI agents provide execution capacity. He also highlighted the use of AI tools in Grid Dynamics’ internal operations and said the company is expanding work in physical AI, robotics simulation, AI-native cybersecurity and sovereign AI.

Margins, Earnings and Cash Position

GAAP gross margin expanded to 40.3% from 36.6% in the prior quarter and 33.3% a year earlier. Non-GAAP gross margin was 40.6%, up from 36.9% sequentially. CFO Anil Doradla attributed the improvement to stronger resource utilization, efficiencies involving non-billable resources and working-time effects.

GAAP net income was $6.2 million, or $0.08 per diluted share, compared with $2.9 million, or $0.03 per share, in the second quarter. Non-GAAP net income was $14.7 million, or $0.18 per diluted share, up from $9 million, or $0.11 per share, in the prior quarter.

Doradla said the EBITDA improvement reflected revenue growth, cost-improvement initiatives and AI-driven productivity gains that reduced cost of sales and operating expenses. He said the company’s headcount reduction was predominantly in non-engineering functions, rather than a broad reduction in engineering capacity.

Cash and cash equivalents totaled $304.3 million as of Sept. 30, up from $298.4 million at the end of June. During the quarter, Grid Dynamics repurchased about 0.9 million shares for $6.7 million. Since the board approved its $50 million repurchase program, the company has repurchased about 5.5 million shares for $37.5 million.

Vertical Performance and Client Work

Technology, media and telecommunications remained Grid Dynamics’ largest vertical, representing 32.3% of revenue and growing 29.3% year over year. Retail accounted for 27.2% of revenue, finance represented 22.5%, and consumer packaged goods and manufacturing contributed 10.9%.

Revenue from the company’s top five customers represented 45.4% of quarterly revenue, while its top 10 customers accounted for 63.3%. Doradla said management sees room to expand its share of spending among large existing clients, while partnerships are also providing access to new customers.

The company cited several project milestones, including expansion of an enterprise AI platform used by more than 180,000 employees at a global bank. It also modernized a payment company’s financial-crime platform, which Grid Dynamics said now screens about 14 million cross-border transactions annually and has reduced transaction-screening time by nearly 70%.

In physical AI, the company said its first intralogistics humanoid deployment for a global pharmaceutical company remains on track. It also described simulation and autonomy work for an advanced humanoid robotics company using NVIDIA Isaac Sim and Google DeepMind MuJoCo.

Outlook and Acquisition Plans

For the fourth quarter, Grid Dynamics forecast revenue of $113.5 million to $115.5 million and non-GAAP EBITDA of $20 million to $22 million.

Livschitz said management expects the company to return to double-digit growth in 2027 and sustain that momentum in subsequent years, though the company did not provide formal 2027 guidance. He pointed to expanding AI work, hyperscaler and NVIDIA partnerships, capital-markets offerings and physical-AI initiatives as drivers of confidence.

Management also said it intends to pursue larger and more strategically significant acquisitions in 2027 after two years of smaller capability-focused deals. Doradla said the company is seeking opportunities that can expand existing skill sets or add capabilities in new areas, while emphasizing that no transaction is assured.

About Grid Dynamics (NASDAQ:GDYN)

Grid Dynamics Holdings, Inc NASDAQ: GDYN is a digital engineering and technology services company that helps enterprises modernize their technology infrastructure and develop data-driven products. Its services include software engineering, cloud computing, data engineering, artificial intelligence and machine learning, user experience design, and application modernization.

The company develops and implements technology solutions for industries including retail and consumer packaged goods, financial services, manufacturing, healthcare, and technology.

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