Activist hedge fund Engine Capital is urging technology consulting group EPAM Systems to significantly increase its share buybacks or consider selling the business. The investor believes the company’s significant decline in market capitalization is not due to the threat of artificial intelligence to the outsourcing model, but rather to the passivity of its management.
Activist hedge fund Engine Capital is urging technology consulting group EPAM Systems to significantly increase its share buybacks or consider selling the business. The investor believes the company’s significant decline in market capitalization is not due to the threat of artificial intelligence to the outsourcing model, but rather to the passivity of its management.
The fund’s demands are reported by the Financial Times, citing an open letter to the EPAM board of directors. The details of the ultimatum and the company’s financial condition were also analyzed by Sigma Software Group CEO and Defence Builder board member Valeriy Krasovsky.
Engine Capital owns about 1,5% of EPAM. Analysts estimate that the company is currently trading at ~5.4x EV/EBITDA, compared to a median of 6,8x for peers and 17,9x for M&A deals in the sector. At the same time, shareholder returns have fallen 36% year-over-year and 82% over the past five years. Meanwhile, EPAM has nearly $794 million in free cash lying idle on its balance sheet with virtually no debt.
The fund put forward five key requirements for the company’s management:
Buy back $750 million worth of shares using cash, free cash flow, and borrowings, which will reduce the number of shares outstanding by 60–80% over three years.
Consider selling the company with the participation of independent advisors if the board of directors does not believe in its own business.
Reform the management bonus system, as in 2025 management received 200% payouts for slightly exceeding EPS targets amid a 12% drop in shares.
Force top managers to buy shares with their own money: since the IPO in 2012, no director has purchased securities on the open market, but since 2020 they have sold shares worth over $250 million.
Renew the board of directors by replacing 6 members who have been in office for over 10 years.
The letter emphasizes that the market’s concerns about AI killing the service business are unfounded, and EPAM’s offering remains robust. In the second quarter of 2026, the company’s AI-native revenue reached $160 million (11% of its total business), and the target for 2026 is $600 million. EPAM CEO Balazs Fejes notes that the company uses a very strict methodology for calculating this revenue, counting only its own AI products and large-scale AI transformations of enterprises.
In parallel, EPAM is actively retraining its staff: the partnership with Anthropic involves training 10,000 Claude-certified architects, and the agreement with OpenAI will add 5,000 consultants. In total, the company plans to certify about 15,000 of its 56,650 production specialists.
«This is a rare case when an investor publicly diagnoses our entire industry — and the diagnosis is not „the model is dead,“ but „the market does not know how to distinguish those who adapt from those who do not.“ The market is selling the entire IT service sector in one basket under the thesis „AI will eat up hours.“ But the EPAM discount is not about AI, but about the fact that the company is not taking action to close it,» notes Sigma Software Group CEO Valeriy Krasovsky.
EPAM Systems is one of the largest software development services providers in the world, employing over 50,000 IT professionals, and the Ukrainian team traditionally makes up one of the largest parts of its global business. EPAM’s board of directors has not yet responded to Engine Capital’s allegations.
