GDYN — Grid Dynamics Holdings, Inc.

Summary of Grid Dynamics Q1 2026 Earnings Call

1. Key Financial Results and Metrics:

• Revenue: Q1 2026 revenue was $104.1 million, exceeding guidance of $103-$104 million and reflecting a 3.7% year-over-year growth.
• Non-GAAP EBITDA: Reported at $12.5 million (12% of revenue), in line with guidance but down from $14.6 million (14.5% of revenue) in the prior year.
• Net Loss: GAAP net loss of $1.5 million or $0.02 per share, compared to a net income of $2.9 million or $0.03 per share in Q1 2025.
• Gross Margin: GAAP gross profit was $36.2 million (34.8% margin), slightly improved from the previous quarter but down from 36.8% year-over-year.
• Cash Position: Cash and cash equivalents decreased to $327.5 million from $342.1 million at the end of Q4 2025.
• Headcount: Total headcount increased marginally to 4,964 from 4,926 year-over-year.

2. Strategic Updates and Business Highlights:

• AI Revenue Growth: AI revenue constituted 29.3% of total revenue, growing nearly 60% year-over-year, indicating a strong focus on AI-led transformation.
• Customer Diversification: The top five accounts are now outside of retail, with significant contributions from technology and financial services sectors.
• Partnerships: Partner revenue grew to 19.1% of total revenue, with a goal to reach 25%-30% in the future. Key partnerships with Google Cloud, AWS, and Microsoft Azure are driving this growth.
• GAIN Platform: The GAIN platform has evolved into a suite of solutions, enhancing Grid Dynamics' service delivery and client engagement.
• AI Initiatives: Successful projects in various sectors, including manufacturing and financial services, demonstrate the effectiveness of AI-driven solutions.

3. Forward Guidance and Outlook:

• Q2 2026 Guidance: Expected revenue range of $106 million to $108 million and non-GAAP EBITDA of $14 million to $15 million.
• Full Year 2026 Guidance: Maintaining revenue outlook of $435 million to $465 million, with confidence driven by strong demand and a robust pipeline.

4. Challenges and Points of Concern:

• FX Headwinds: Currency fluctuations negatively impacted EBITDA by approximately $1.2 million year-over-year.
• Gross Margin Decline: Year-over-year gross margin decline attributed to FX headwinds and higher operational costs.
• Net Loss: Transitioning to a non-T&M model carries risks related to project scope and execution, which could impact profitability.
• Market Volatility: Potential macroeconomic risks, including geopolitical tensions, could influence client spending and project timelines.

5. Notable Q&A Insights:

• Client Sentiment: There is a shift from POCs to production projects in AI, with an increasing number of fast followers in the market.
• Pricing Environment: No significant pricing pressure observed; clients are not demanding discounts, and vendor consolidation is leading to more stable relationships.
• Non-T&M Model Risks: Transitioning to fixed-price contracts introduces risks related to project scope and execution, but the company is leveraging AI to mitigate these uncertainties.
• M&A Strategy: Focus on tuck-in acquisitions that enhance capabilities, with a recognition that valuations have come down, making it a more favorable environment for potential deals.

Overall, Grid Dynamics reported solid Q1 results driven by AI growth and strategic partnerships, while navigating challenges related to currency fluctuations and the transition to a non-T&M business model. The outlook remains positive, with strong demand and a robust pipeline supporting future growth.