Grid Dynamics Holdings Inc.
03/05/2026 | Press release | Distributed by Public on 03/05/2026 15:43
Annual Report for Fiscal Year Ending December 31, 2025 (Form 10-K)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and the accompanying notes thereto included elsewhere in this Annual Report on Form 10-K. This discussion contains forward-looking statements based upon current plans, expectations, and beliefs, involving risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements. You should review the section titled "Special Note Regarding Forward-Looking Statements" for a discussion of forward-looking statements and in Item 1A, "Risk Factors" for a discussion of factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis and elsewhere in this Annual Report on Form 10-K. Our historical results are not necessarily indicative of the results that may be expected for any period in the future.
Overview
Grid Dynamics Holdings, Inc. ("Grid Dynamics," the "Company," "we," "us," or "our") is an enterprise artificial intelligence ("AI") transformation partner for the Fortune 1000. We combine deep AI expertise with proven enterprise-scale delivery to help clients identify where to invest in AI, build systems that work at scale, and capture real business value from AI deployments. The building blocks of AI have always been our foundation - distributed systems, real-time data, machine learning algorithms, and natural language processing. What has changed is that these capabilities have now converged into Enterprise AI.
This technical heritage is matched with business acumen. We solve the most pressing technical challenges and enable positive business outcomes for enterprise companies. A key differentiator is our nearly two decades of technology leadership and pioneering enterprise AI expertise. This is supported by deep capabilities and ongoing investment in data and machine learning platform engineering, cloud platform and product engineering, Internet of Things and edge computing, and digital engagement services.
Fiscal Year Highlights
The following table sets forth a summary of Grid Dynamics' financial results for the periods indicated:
| Year ended December 31, | |||||||||||||||||||||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||||||||||||||||||||
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% of revenues
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% of revenues
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% of revenues
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| (in thousands, except percentages and per share data) | |||||||||||||||||||||||||||||||||||
| Revenues | $ | 411,827 | 100.0 | % | $ | 350,571 | 100.0 | % | $ | 312,910 | 100.0 | % | |||||||||||||||||||||||
| Gross profit | 142,348 | 34.6 | % | 127,005 | 36.2 | % | 113,146 | 36.2 | % | ||||||||||||||||||||||||||
| Loss from operations | (1,895) | (0.5) | % | (2,105) | (0.6) | % | (5,580) | (1.8) | % | ||||||||||||||||||||||||||
| Net income/(loss) | 9,668 | 2.3 | % | 4,041 | 1.2 | % | (1,765) | (0.6) | % | ||||||||||||||||||||||||||
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Diluted income/(loss) per share
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$ | 0.11 | n/a | $ | 0.05 | n/a | (0.02) | n/a | |||||||||||||||||||||||||||
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Non-GAAP Financial information
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Non-GAAP EBITDA(1)
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53,792 | 13.1 | % | 52,474 | 15.0 | % | 44,246 | 14.1 | % | ||||||||||||||||||||||||||
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Non-GAAP net income(1)
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35,129 | 8.5 | % | 37,222 | 10.6 | % | 31,684 | 10.1 | % | ||||||||||||||||||||||||||
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Non-GAAP diluted EPS(1)
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0.40 | n/a | 0.47 | n/a | 0.41 | n/a | |||||||||||||||||||||||||||||
__________________________
(1)Non-GAAP EBITDA, Non-GAAP net income and Non-GAAP diluted EPS are non-GAAP financial measures. See "Non-GAAP Measures" below for additional information and reconciliations to the most directly comparable GAAP financial measures.
Our key metrics for the year ended December 31, 2025 are:
•Revenues:Total revenues increased 17.5% year-over-year to a record $411.8 million, driven by demand across our core verticals and contributions from our acquisitions.
•Operating loss: Loss from operations narrowed to $1.9 million, compared to a loss of $2.1 million in the prior year. This improvement reflects revenue growth outpacing the increase in operating expenses.
•Net income and EPS: Net income increased to $9.7 million from $4.0 million in the prior year. The increase was largely attributable to a combination of revenue growth and other income. Diluted GAAP EPS was $0.11 per share, compared to $0.05 per share for the year ended December 31, 2024.
•Non-GAAP measures: Non-GAAP EBITDA increased 2.5%, reaching $53.8 million for the year ended December 31, 2025. Diluted Non-GAAP EPS was $0.40 per share, compared to $0.47 per share in the prior year.
•Cash flows: Operating cash flow was $40.6 million up from $30.2 million in 2024.
The operating results in any period are not necessarily indicative of the results that may be expected for any future period.
Business Update Regarding Military Action in Ukraine
In February 2022, Russian forces launched a significant military action against Ukraine, which continues and even worsens. The impact on Ukraine, coupled with the actions taken by other countries, including sanctions imposed by the U.S., Canada, the U.K., the European Union, and other countries, companies and organizations against officials, individuals, regions, and industries in Russia and certain regions of Ukraine, and each country's potential response to such sanctions, tensions, and military actions could have a material adverse effect on our operations. For example, Russia could attempt to take control of assets in Ukraine belonging to companies registered in the U.S., such as Grid Dynamics. Any such material adverse effect from the conflict and enhanced sanctions activity may disrupt our delivery of services, impair our ability to complete financial or banking transactions, cause us to continue to shift all or portions of our work occurring in the region to other countries, and may restrict our ability to engage in certain projects in the region or involving certain customers in the region.
We continue to actively monitor the security of our personnel and the stability of our infrastructure, including communications and internet availability. We executed our business continuity plan and have adapted to developments as they occur to protect the safety of our people and handle potential impacts to our delivery infrastructure. We continue to actively work with our personnel and with our customers to meet their needs and to ensure smooth delivery of services.
We have no way to predict the progress or outcome of the military action in Ukraine, as the conflict and government responses continue to develop and even worsen and are beyond our control. The prolonged unrest, military activities, expansion of hostilities, or broad-based sanctions could have a material adverse effect on our operations and business outlook. For example, if Russia were to invade other countries, such as Moldova, it could adversely affect our business. In addition, the current geopolitical situations in Armenia and separately in Serbia create additional uncertainty in the region, and could adversely affect our business.
For additional information on the various risks posed by the ongoing fighting in Ukraine and related sanctions and other impacts in the region, as well as other macroeconomic factors affecting our business, please read "Part I. Item 1A. Risk Factors" included in this Annual Report on Form 10-K.
Key Performance Indicators and Other Factors Affecting Performance
Grid Dynamics uses the following key performance indicators and assesses the following other factors to analyze its business performance, to make budgets and financial forecasts and to develop strategic plans:
Employees by Region
Attracting and retaining the right employees in the right regions is critical to the success of Grid Dynamics' business and is a key factor in Grid Dynamics' ability to meet customers' needs and grow its revenue base. Grid Dynamics' revenue prospects and long-term success depend significantly on its ability to recruit and retain qualified IT professionals. We seek to employ the appropriate professionals globally to support our "Follow-the-Sun" strategy of client service and in locations to optimize our employee costs and expenses. A substantial majority of Grid Dynamics' personnel is comprised of such IT professionals.
The following table shows the number of Grid Dynamics personnel (including full-time and part-time employees and contractors serving in similar capacities) by region, as of the dates indicated:
| As of December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
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Americas (1)
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793 | 830 | 567 | ||||||||||||||
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Europe (2)
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3,258 | 3,134 | 2,806 | ||||||||||||||
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Rest of the world (3)
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910 | 766 | 547 | ||||||||||||||
| Total | 4,961 | 4,730 | 3,920 | ||||||||||||||
__________________________
(1)Americas includes personnel located in North, Central and South America.
(2)Europe includes personnel located in Western, Central and Eastern Europe.
(3)Rest of the world includes personnel located in India and other countries not included in regions described above.
Attrition
There is competition for IT professionals in the regions in which Grid Dynamics operates, and such competition may adversely impact Grid Dynamics' business and gross profit margins. Employee retention is one of Grid Dynamics' main priorities and is a key driver of our operational efficiency. Grid Dynamics seeks to retain top talent by providing the opportunity to work on exciting, cutting-edge projects for high profile clients, a flexible work environment and training and development programs.
Hours and Utilization
As most of Grid Dynamics' customer projects are performed and invoiced on a time and materials basis, Grid Dynamics' management tracks and projects billable hours as an indicator of business volume and corresponding resource needs for IT professionals. To maintain its gross profit margins, Grid Dynamics must effectively utilize its IT professionals, which depends on its ability to integrate and train new personnel, to efficiently transition personnel from completed projects to new assignments, to forecast customer demand for services and to attract and deploy personnel in the right regions with appropriate skills and seniority to projects. Grid Dynamics' management generally tracks utilization with respect to subsets of employees, by location or by project, and calculates the utilization rate for each subset by dividing (x) the aggregate number of billable hours for a period by (y) the aggregate number of total available hours for the same period. Grid Dynamics' management analyzes and projects utilization to measure the efficiency of its workforce and to inform management's budget and personnel recruiting decisions.
Customer Concentration
Grid Dynamics' ability to retain and expand its relationships with existing customers and add new customers are key indicators of its revenue potential. New customers have a direct impact on the Company's ability to diversify sources of revenue and replace customers that may no longer require its services. At the same time, the Company continuously works towards rationalization of its portfolio of non-strategic customers. This work resulted in a decrease in thetotal number of customers from 264 in 2024 to 237 in 2025.
Grid Dynamics has a high level of revenue concentration with certain customers, as indicated in the below table, and constantly works toward decreasing those levels. During the years ended December 31, 2025, 2024 and 2023, one customer accounted for 10% or more of our revenues in each of the periods indicated. We expect to continue our focus on maintaining our long-term relationships with customers while seeking to diversify our customer base.
The following table presents revenues concentration by amount and as a percentage of our revenues for the periods indicated:
| For the years ended December 31, | ||||||||||||||||||||||||||
| 2025 | 2024 | 2023 | ||||||||||||||||||||||||
| (in thousands, except percentages) | ||||||||||||||||||||||||||
| Top one customer | $ | 63,615 | 15.4 | % | $ | 56,261 | 16.0 | % | $ | 44,961 | 14.4 | % | ||||||||||||||
| Top five customers | $ | 157,095 | 38.1 | % | $ | 133,486 | 38.1 | % | $ | 115,862 | 37.0 | % | ||||||||||||||
| Top ten customers | $ | 237,546 | 57.7 | % | $ | 195,180 | 55.7 | % | $ | 175,588 | 56.1 | % | ||||||||||||||
| Top twenty customers | $ | 302,209 | 73.4 | % | $ | 243,716 | 69.5 | % | $ | 213,790 | 68.3 | % | ||||||||||||||
| Customers below top twenty | $ | 109,618 | 26.6 | % | $ | 106,855 | 30.5 | % | $ | 99,120 | 31.7 | % | ||||||||||||||
The following table shows the evolution of Grid Dynamics' customer base where customers are grouped by revenues recognized for each annual period presented:
| For the years ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| >$5.0 million | 18 | 14 | 10 | ||||||||||||||
| >$2.5 - 5.0 million | 11 | 14 | 11 | ||||||||||||||
| >$1.0 - 2.5 million | 24 | 22 | 27 | ||||||||||||||
| >$0.5 - 1 million | 26 | 31 | 32 | ||||||||||||||
Seasonality
Grid Dynamics' business is subject to seasonal trends that impact its revenues and profitability between quarters. Some of the factors that influence the seasonal trends include the timing of holidays in the countries in which Grid Dynamics operates and the U.S. retail cycle, which drives the behavior of Grid Dynamics' retail customers.
Critical Accounting Estimates
Management's discussion and analysis of our financial condition and results of operations is based on the consolidated financial statements, which have been prepared in accordance with the U.S. generally accepted accounting principles ("GAAP"). Preparation of the financial statements requires us to make judgments, estimates and assumptions that impact the reported amount of revenue and expenses, assets and liabilities and the disclosure of contingent assets and liabilities. We consider an accounting judgment, estimate or assumption to be critical when (1) an estimate or assumption is complex in nature or requires a high degree of judgment, and (2) the use of different judgments, estimates and assumptions could have a material impact on our consolidated financial statements. Our significant accounting policies are described in Note 1 in the notes to our consolidated financial statements in this Annual Report on Form 10-K.
Revenues
Determining the amount of revenue to be recognized requires from us significant estimates and judgments, including whether services specified in the agreements are single or distinct performance obligations, whether obligations are satisfied over time or at a point in time and what is the best method to measure our progress to completion.
We derive our revenues through time and materials and fixed fee contracts. Grid Dynamics recognizes revenues for services over time as hours are incurred by Grid Dynamics' engineering personnel. For all contracts, the customer derives value from the Company providing daily consulting services, and the value derived corresponds to the labor hours expended. Therefore, the Company measures the progress and recognizes revenue using an effort-based input method.
Revenues related to fixed fee contracts are recorded as work is performed based upon actual labor hours incurred and level of effort expended throughout the duration of the contract. The accuracy of revenues recognized for these contracts during the reporting period largely depends on our ability to correctly estimate the total expected efforts required to fulfill the performance obligation. We constantly evaluate our estimates of total efforts required based on available information and experience.
Some of our contracts give rise to variable considerations, including volume discounts. Volume discounts apply once the customer reaches certain contractual spend thresholds. If the consideration promised in a contract includes a variable amount,
we include estimated amounts of consideration in the transaction price to the extent it is probable that a significant reversal of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is resolved.
Income Taxes
The determination of the provision for income taxes requires significant judgment, the use of estimates and the interpretation and application of complex tax laws. The provision for income taxes reflects a combination of income earned and taxed in the various U.S. federal and state and non-U.S. jurisdictions. Changes in tax law, increases or decreases in permanent differences between book and tax items, accruals or adjustments of accruals for tax contingencies or valuation allowances, and the change in the mix of earnings across taxing jurisdictions all affect the overall effective tax rate.
In assessing the realizability of deferred tax assets, we consider whether it is more-likely-than-not that some portion, or all, of the deferred tax assets will not be realized. Management considers all available evidence, both positive and negative, in determining whether a valuation allowance is required, including prior earnings history, the scheduled reversal of deferred tax liabilities, projected future taxable income, carryback and carryforward periods of tax attributes, and tax planning strategies that could potentially enhance the likelihood of realization of a deferred tax asset in making this assessment. The weight given to the positive and negative evidence is commensurate with the extent to which the evidence may be objectively verified.
We are subject to tax payments and filing of tax returns in various tax jurisdictions. Our tax returns are routinely examined by tax authorities in various countries. Such inspections may result in future tax expenses, interest and penalties. We evaluate for such uncertain tax positions at each balance sheet date. When it is more likely than not that a position will be sustained upon examination by a tax authority that has full knowledge of all relevant information, we measure the amount of tax benefit from the position and record the largest amount of tax benefit that is greater than 50% likely to be realized after settlement with a tax authority. We believe our estimates for uncertain tax positions are appropriate and sufficient. We recognize both accrued interest and penalties related to unrecognized tax benefits in income tax expense.
Business Combinations
We account for business combinations under the acquisition method of accounting, which requires recognition of any assets acquired and liabilities assumed based on their respective fair values. Any excess of the fair value of purchase consideration over the fair value of the assets acquired less liabilities assumed is recorded as goodwill. We use significant management estimates and assumptions as well as available industry data to arrive at the acquisition date fair values of assets acquired and liabilities assumed, especially with respect to intangible assets and contingent consideration granted, if any.
Significant estimates used in the valuation of intangible assets may include, but are not limited to, revenue projections, expected economic life of customer relations and trade names, royalty rates, useful lives and discount rates. The fair value of any contingent consideration is determined using the Monte Carlo model which involves a simulation of future revenues and earnings during the earn-out period using projected financial results adjusted to market risk assumptions, discount rates and probability assumptions with respect to the likelihood of achieving the various earn-out criteria.
We consider our assumptions and estimates used to determine fair values to be reasonable, but any changes due to inherent uncertainty and unpredictability may result in significant differences between actual and estimated results.
Recently Adopted and Issued Accounting Pronouncements
Recently issued and adopted accounting pronouncements are described in Note 1 in the notes to our consolidated financial statements in this Annual Report on Form 10-K.
Results of Operations
Year Ended December 31, 2025 compared to Year Ended December 31, 2024
The following table sets forth a summary of Grid Dynamics' consolidated results of operations for the periods indicated, and the changes between periods:
| Year ended December 31, | Change | ||||||||||||||||||||||
| 2025 | 2024 | Dollars | Percentage | ||||||||||||||||||||
| (in thousands, except percentages) | |||||||||||||||||||||||
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Revenues
|
$ | 411,827 | $ | 350,571 | $ | 61,256 | 17.5 | % | |||||||||||||||
| Cost of revenue | 269,479 | 223,566 | 45,913 | 20.5 | % | ||||||||||||||||||
| Gross profit | 142,348 | 127,005 | 15,343 | 12.1 | % | ||||||||||||||||||
| Engineering, research, and development | 23,665 | 18,347 | 5,318 | 29.0 | % | ||||||||||||||||||
| Sales and marketing | 30,032 | 28,622 | 1,410 | 4.9 | % | ||||||||||||||||||
| General and administrative | 90,546 | 82,141 | 8,405 | 10.2 | % | ||||||||||||||||||
| Total operating expense | 144,243 | 129,110 | 15,133 | 11.7 | % | ||||||||||||||||||
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Loss from operations
|
(1,895) | (2,105) | 210 | (10.0) | % | ||||||||||||||||||
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Interest and other income, net
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17,596 | 13,160 | 4,436 | 33.7 | % | ||||||||||||||||||
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Income before income taxes
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15,701 | 11,055 | 4,646 | 42.0 | % | ||||||||||||||||||
| Provision for income taxes | 6,033 | 7,014 | (981) | (14.0) | % | ||||||||||||||||||
|
Net income
|
$ | 9,668 | $ | 4,041 | $ | 5,627 | 139.2 | % | |||||||||||||||
Revenues
During the year ended December 31, 2025, we generated record revenues of $411.8 million, an increase of 17.5% from the previous year. The growth reflected the continued growth across most of our verticals, including the benefit of strategic acquisitions completed during 2024.
Revenues by Vertical.We assign our customers into one of the main vertical markets or a group of various industries, labeled as "verticals." In the first quarter of 2024, we disaggregated Healthcare and Pharma as a separate vertical due to their growing importance to the Company. The following table presents our revenues by vertical and revenues as a percentage of total revenues by vertical for the periods indicated:
| Year ended December 31, | |||||||||||||||||||||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||||||||||||||||||||
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(in thousands, except percentages of revenues)
|
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| Retail | $ | 120,507 | 29.3 | % | $ | 113,957 | 32.5 | % | $ | 102,551 | 32.8 | % | |||||||||||||||||||||||
|
Technology, Media and Telecom
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107,451 | 26.1 | % | 95,048 | 27.1 | % | 98,830 | 31.6 | % | ||||||||||||||||||||||||||
| Finance | 100,384 | 24.4 | % | 60,157 | 17.2 | % | 28,842 | 9.2 | % | ||||||||||||||||||||||||||
| CPG/Manufacturing | 43,058 | 10.5 | % | 40,468 | 11.5 | % | 42,861 | 13.7 | % | ||||||||||||||||||||||||||
| Healthcare and Pharma | 10,183 | 2.5 | % | 11,109 | 3.2 | % | 13,653 | 4.4 | % | ||||||||||||||||||||||||||
| Other | 30,244 | 7.2 | % | 29,832 | 8.5 | % | 26,173 | 8.3 | % | ||||||||||||||||||||||||||
| Total | $ | 411,827 | 100.0 | % | $ | 350,571 | 100.0 | % | $ | 312,910 | 100.0 | % | |||||||||||||||||||||||
Retail remained our largest vertical, representing 29.3% of total revenues for the year ended December 31, 2025. Revenues in this vertical increased $6.6 million, or 5.7%, compared to the prior year, primarily driven by expanded demand across our specialty retail, grocery and apparel customer base.
Technology, Media and Telecom ("TMT") revenues increased $12.4 million, or 13.0%, compared to the prior year, contributing 20.2% to the total year-over-year consolidated revenues growth. The growth was largely driven by our top technology customers. Our TMT vertical represented 26.1% of total revenues for the year ended December 31, 2025.
Finance revenues increased $40.2 million, or 66.9%, to $100.4 million for the year ended December 31, 2025, compared to $60.2 million for the year ended December 31, 2024. This vertical was the largest contributor to the overall consolidated
revenues growth for the period. The increase was attributable to robust demand from fintech and banking customers, including contributions from our 2024 acquisitions.
CPG and Manufacturing revenues increased $2.6 million, or 6.4%, to $43.1 million for the year ended December 31, 2025, from $40.5 million in the prior year.
Healthcare and Pharma vertical decreased to $10.2 million for the year ended December 31, 2025, compared to $11.1 million in the prior year, representing 2.5% and 3.2% of total revenues, respectively.
Lastly, our Other vertical increased 1.4% year-over-year driven by demand from both new and existing customers. The Other vertical represented 7.2% of total revenues during the year ended December 31, 2025, compared to 8.5% in the prior year.
Cost of Revenues and Gross Margin
Our cost of revenues consists primarily of salaries and employee benefits, including performance bonuses and stock-based compensation, and project-related travel expenses of client-serving professionals. Cost of revenues also includes depreciation and amortization expense related to client-serving activities.
Our cost of revenues increased by $45.9 million, or 20.5%, to $269.5 million, for the year ended December 31, 2025, from $223.6 million for the year ended December 31, 2024. The increase in cost of revenues was primarily driven by the operational and delivery expenses to support revenue growth.
Our gross profit increased by $15.3 million to $142.3 million in the year ended December 31, 2025, compared to $127.0 million in the prior year. Expressed as a percentage of revenues, our gross margin decreased by 160 basis points to 34.6% in 2025, from 36.2% in 2024. Although gross profit grew in absolute terms due to increased revenues, the decline in gross margin was driven by a higher cost basis in key delivery geographies and foreign exchange fluctuations.
Engineering, Research and Development
The principal components of engineering, research and development expenses are salaries and employee benefits including performance bonuses and stock-based compensation for personnel engaged in the design and development of solutions, as well as depreciation and amortization expenses related to engineering, research and development activities.
Our engineering, research, and development expenses increased by $5.3 million, or 29.0%, to $23.7 million for the year ended December 31, 2025, from $18.3 million in the previous year. The increase primarily reflected our continued investments in customer delivery capabilities and internally developed solutions. This includes the integration of AI technologies designed to enhance our scalability, operational efficiency and long-term competitiveness.
Sales and Marketing
Sales and marketing expenses represent spending associated with promoting and selling of our services. These expenses are comprised of personnel costs, including performance bonuses and stock-based compensation, marketing events, travel expenses, as well as depreciation and amortization related to such activities.
Our sales and marketing expenses were $30.0 million for the year ended December 31, 2025, compared to $28.6 million in 2024. While expenses increased $1.4 million in absolute terms, they decreased as a percentage of revenues to 7.3% compared to 8.2% in the prior year. This decrease reflects improved operating leverage, as revenue growth outpaced increases in sales-related costs, supported by optimization initiatives across sales and business-development functions.
General and Administrative
General and administrative expenses include costs to support the business and consist primarily of administrative personnel and officers' salaries, employee benefits including performance bonuses, stock-based compensation, legal and audit expenses, insurance, operating lease expenses of office premises and other facility costs, workforce global mobility initiatives, restructuring and employee relocations cost not directly related to customer projects, and depreciation and amortization expenses related to such activities. General and administrative expenses include a substantial majority of Grid Dynamics' stock-based compensation costs for the financial periods discussed herein.
General and administrative expenses increased by $8.4 million, or 10.2%, to $90.5 million for the year ended December 31, 2025, from $82.1 million for the year ended December 31, 2024. The increase was primarily attributable to the full-year impact of acquisitions completed in 2024, which resulted in higher personnel-related costs and depreciation and amortization expenses.
Expressed as a percentage of revenues, our general and administrative expenses decreased by 1.3 percentage points to 22.1% in 2025, compared to 23.4% in the prior year, reflecting effective cost optimization across various corporate functions.
Interest and Other Income, Net
Interest and other income, net represents interest earned on our cash and cash equivalents, including money market funds, interest expense related to our borrowings, foreign exchange gains and losses as well as changes in the fair value of contingent considerations and marketable equity securities.
Interest and other income, net was $17.6 million for the year ended December 31, 2025, compared to $13.2 million for the year ended December 31, 2024. The $4.4 million increase was primarily driven by fair value adjustments related to acquisition-related contingent consideration. These gains were partially offset by unfavorable foreign currency exchange rate fluctuations.
Provision for Income Taxes
Grid Dynamics follows the asset and liability method of accounting for income taxes. The provision for income taxes reflects income earned and taxed in the various U.S. federal and state and non-U.S. jurisdictions. Jurisdictional tax law changes, increases or decreases in permanent differences between book and tax items, accruals or adjustments of accruals for tax contingencies or valuation allowances, and the change in the mix of earnings from these taxing jurisdictions all affect the overall effective tax rate.
Provision for income taxes was $6.0 million in the year ended December 31, 2025 compared to $7.0 million in the year ended December 31, 2024. The effective tax rate decreased between the periods from 63.4% in 2024 to 38.4% in 2025. The difference in the tax provision was mainly attributable to an increase in pre-tax book income due to the change in fair value of contingent consideration payable that is not taxable.
Year Ended December 31, 2024 Compared to Year Ended December 31, 2023
Our Annual Report on Form 10-K for the fiscal year ended December 31, 2024 includes a discussion and analysis of our financial condition and results of operations between the years ended December 31, 2024 and 2023 in Item 7 of Part II, "Management's Discussion and Analysis of Financial Condition and Results of Operations," which is hereby incorporated herein by reference.
Non-GAAP Measures
To supplement our consolidated financial data presented on a basis consistent with U.S. GAAP, this Annual Report contains certain non-GAAP financial measures, including Non-GAAP EBITDA, Non-GAAP net income and Non-GAAP diluted earnings per share, or Non-GAAP diluted EPS. We have included these non-GAAP financial measures because they are financial measures used by our management to evaluate the Company's core operating performance and trends, to make strategic decisions regarding the allocation of capital and new investments and are among the factors analyzed in making performance-based compensation decisions for key personnel. These measures exclude certain expenses that are required under U.S. GAAP. We exclude these items because they are not part of core operations or, in the case of stock-based compensation, non-cash expenses that are determined based in part on our underlying performance.
We believe these supplemental performance measurements are useful in evaluating operating performance, as they are similar to measures reported by our public industry peers and those regularly used by security analysts, investors and other interested parties in analyzing operating performance and prospects. These non-GAAP financial measures are not intended to be a substitute for any GAAP financial measures and, as calculated, may not be comparable to other similarly titled measures of performance of other companies in other industries or within the same industry.
There are significant limitations associated with the use of non-GAAP financial measures. Further, these measures may differ from the non-GAAP information, even where similarly titled, used by other companies and therefore should not be used to compare our performance to that of other companies. We compensate for these limitations by providing investors and other users of our financial information a reconciliation of non-GAAP measures to the related GAAP financial measures. We encourage investors and others to review the financial information in its entirety, not to rely on any single financial measure and to view our non-GAAP measures in conjunction with GAAP financial measures.
We define and calculate non-GAAP financial measures as follows:
•Non-GAAP EBITDA: Net income/(loss) before interest income/(expense), provision for income taxes and depreciation and amortization, and further adjusted for the impact of stock-based compensation expense, transaction-
related costs (which include, when applicable, professional fees, retention bonuses, and consulting, legal and advisory costs related to Grid Dynamics' merger and acquisition and capital-raising activities), impairment of long-lived assets, restructuring costs, one-time charges, and non-operating income/(expenses), net (which includes mainly foreign currency transaction gains and losses, fair value adjustments and other miscellaneous expenses).
•Non-GAAP net income: Net income/(loss) adjusted for the impact of stock-based compensation expense, transaction-related costs (which include, when applicable, professional fees, retention bonuses, and consulting, legal and advisory costs related to Grid Dynamics' merger and acquisition and capital-raising activities), impairment of long-lived assets, restructuring costs, one-time charges, and non-operating income/(expenses), net (which includes mainly foreign currency transaction gains and losses, fair value adjustments and other miscellaneous expenses), and the tax impacts of these adjustments.
•Non-GAAP diluted EPS: Non-GAAP net income, divided by the diluted weighted-average number of diluted shares outstanding for the period.
The following table presents the reconciliation of Non-GAAP EBITDA to consolidated net income/(loss), the most directly comparable GAAP measure, for the periods indicated:
| Year ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| (in thousands) | |||||||||||||||||
|
GAAP net income/(loss)
|
$ | 9,668 | $ | 4,041 | $ | (1,765) | |||||||||||
| Adjusted for: | |||||||||||||||||
| Depreciation and amortization | 19,705 | 14,228 | 8,926 | ||||||||||||||
|
Provision for income taxes
|
6,033 | 7,014 | 6,603 | ||||||||||||||
| Stock-based compensation | 30,343 | 34,167 | 35,516 | ||||||||||||||
|
Geographic reorganization(1)
|
1,396 | 1,627 | 1,858 | ||||||||||||||
|
Transaction and transformation-related costs(2)
|
1,431 | 3,144 | 2,038 | ||||||||||||||
|
Restructuring(3)
|
2,812 | 1,413 | 1,488 | ||||||||||||||
|
Interest and other income, net(4)
|
(17,596) | (13,160) | (10,418) | ||||||||||||||
| Non-GAAP EBITDA | $ | 53,792 | $ | 52,474 | $ | 44,246 | |||||||||||
__________________________
(1)Geographic reorganization includes expenses connected with military actions of Russia against Ukraine and the exit plan announced by the Company and includes travel and relocation-related expenses of employees from the aforementioned countries, severance payments, allowances as well as legal and professional fees related to geographic repositioning in various locations. These expenses are incremental to those expenses incurred prior to the crisis, clearly separable from normal operations, and not expected to recur once the crisis has subsided and operations return to normal.
(2)Transaction and transformation-related costs include, when applicable, external deal costs, transaction-related professional fees, transaction-related retention bonuses, which are allocated proportionally across cost of revenues, engineering, research and development, sales and marketing and general and administrative expenses as well as other transaction-related costs including integration expenses consisting of outside professional and consulting services.
(3)Our restructuring costs comprised of severance charges and respective taxes and are included in General and administrative expenses in the Company's consolidated statements of income/(loss).
(4)Interest and other income, net consist primarily of gains and losses on foreign currency transactions, fair value adjustments, interest on cash held at banks and returns on investments in money-market funds, and other miscellaneous non-operating expenses.
The following table presents a reconciliation of Non-GAAP diluted EPS and Non-GAAP net income to consolidated net income/(loss) for the periods indicated:
| Year ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| (in thousands, except per share data) | |||||||||||||||||
|
GAAP net income/(loss)
|
$ | 9,668 | $ | 4,041 | $ | (1,765) | |||||||||||
| Adjusted for: | |||||||||||||||||
| Stock-based compensation | 30,343 | 34,167 | 35,516 | ||||||||||||||
|
Geographic reorganization(1)
|
1,396 | 1,627 | 1,858 | ||||||||||||||
|
Transaction and transformation-related costs(2)
|
1,431 | 3,144 | 2,038 | ||||||||||||||
|
Restructuring(3)
|
2,812 | 1,413 | 1,488 | ||||||||||||||
|
Other (income)/expense, net(4)
|
(5,460) | (2,597) | (1,113) | ||||||||||||||
|
Tax impact of non-GAAP adjustments(5)
|
(5,061) | (4,573) | (6,338) | ||||||||||||||
|
Non-GAAP net income
|
$ | 35,129 | $ | 37,222 | $ | 31,684 | |||||||||||
|
Number of shares used in GAAP diluted EPS
|
86,892 | 79,974 | 75,193 | ||||||||||||||
|
GAAP diluted EPS
|
$ | 0.11 | $ | 0.05 | $ | (0.02) | |||||||||||
|
Number of shares used in non-GAAP diluted EPS
|
86,892 | 79,974 | 77,651 | ||||||||||||||
|
Non-GAAP diluted EPS
|
$ | 0.40 | $ | 0.47 | $ | 0.41 | |||||||||||
__________________________
(1)Geographic reorganization includes expenses connected with military actions of Russia against Ukraine and the exit plan announced by the Company and includes travel and relocation-related expenses of employees from the aforementioned countries, severance payments, allowances as well as legal and professional fees related to geographic repositioning in various locations. These expenses are incremental to those expenses incurred prior to the crisis, clearly separable from normal operations, and not expected to recur once the crisis has subsided and operations return to normal.
(2)Transaction and transformation-related costs include, when applicable, external deal costs, transaction-related professional fees, transaction-related retention bonuses, which are allocated proportionally across cost of revenues, engineering, research and development, sales and marketing and general and administrative expenses as well as other transaction-related costs including integration expenses consisting of outside professional and consulting services.
(3)Our restructuring costs comprised of severance charges and respective taxes and are included in general and administrative expenses in the Company's consolidated statements of income/(loss).
(4)Other (income)/expense, net consist primarily of gains and losses on foreign currency transactions, fair value adjustments, and other miscellaneous non-operating income and expense. During the year ended December 31, 2024, the Company started to include interest (income)/expense, net in its calculation of non-GAAP net income. As a result, the Company has adjusted previously reported Other (income)/expense, net adjustment to include interest income, net of $9.3 million for the year ended December 31, 2023.
(5)Reflects the estimated tax impact of the non-GAAP adjustments presented in the table.
Liquidity and Capital Resources
We measure liquidity in terms of our ability to fund the cash requirements for business operations, including working capital needs, capital expenditures, contractual obligations and other commitments with cash flows from operations and other sources of funding. Our current liquidity needs relate mainly to compensation and benefits of our employees and contractors and capital investments to support our growth and geographical expansion. Our ability to expand and grow our business will depend on many factors including capital expenditure needs and financing sources and our operating cash flows. We may need more cash resources due to changing business conditions or other developments, including investments or acquisitions.
Our principal source of liquidity continues to be cash generated from our operations. From time to time, we seek additional financing by means of follow-on public offerings of our common stock. The latest offering closed on November 14, 2024 and resulted in $107.6 million of net proceeds, after deducting underwriting discounts and commissions. Additionally, we entered into an agreement establishing a revolving credit facility with JPMorgan Chase Bank, N.A., as an administrative agent for the lenders. The revolving credit facility provides us with $30.0 million of available borrowing capacity. On May 20, 2025, the maturity of this facility was extended to March 15, 2028.
See consolidated statement of changes in stockholders' equity and Note 7 "Debt" in the notes to our consolidated financial statements in this Annual Report on Form 10-K regarding our follow-on offering and debt details.
As of December 31, 2025, Grid Dynamics had cash and cash equivalents of $342.1 million compared to $334.7 million as of December 31, 2024. Of these amounts, $48.4 million and $38.6 million, respectively, were held in countries outside the U.S, and included, among others, Switzerland, the U.K., India, Mexico, Ukraine, Argentina, the Netherlands, Poland and other countries. We did not have any debt outstanding under the revolving credit facility at any balance sheet date presented. We believe that our cash and cash equivalents balance, cash generated from operating activities and proceeds from our recent public offering will be sufficient to fund currently expected levels of operating, investing and financing expenditures for a period of twelve months from the date of this filing. However, if our resources are insufficient to satisfy our cash requirements, we may need to seek additional equity or debt financing, which may be subject to conditions outside of our control and may not be available on terms acceptable to our management or at all.
See Note 7 "Debt", Note 8 "Leases" and Note 14 "Commitments and contingencies" in the notes to our consolidated financial statements in this Annual Report on Form 10-K for detailed information on our contractual obligations and commitments.
Cash Flows
The following table summarizes Grid Dynamics' cash flows for the annual periods indicated:
| Year ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| (in thousands) | |||||||||||||||||
| Net cash provided by operating activities | $ | 40,600 | $ | 30,198 | $ | 41,093 | |||||||||||
| Net cash used in investing activities | (15,136) | (51,301) | (25,950) | ||||||||||||||
|
Net cash (used in)/provided by financing activities
|
(19,937) | 101,162 | (16,321) | ||||||||||||||
| Effect of exchange rate changes on cash and cash equivalents | 1,376 | (2,131) | 1,676 | ||||||||||||||
|
Net increase in cash, cash equivalents and restricted cash
|
6,903 | 77,928 | 498 | ||||||||||||||
|
Cash, cash equivalents and restricted cash (beginning)
|
335,155 | 257,227 | 256,729 | ||||||||||||||
|
Cash, cash equivalents and restricted cash (ending)
|
$ | 342,058 | $ | 335,155 | $ | 257,227 | |||||||||||
Operating Activities.Net cash provided by operating activities was $40.6 million for the year ended December 31, 2025, compared to $30.2 million in the prior year. The $10.4 million increase was primarily driven by favorable changes in working capital, specifically regarding the timing of payments to vendors and settlement of employee-related liabilities.
Investing Activities.Net cash used in investing activities decreased by $36.2 million to $15.1 million for the year ended December 31, 2025, from $51.3 million in the prior year. This decrease was driven by significant cash outflows in 2024 related to the acquisitions of JUXT and Mobile Computing, net of cash acquired.
Financing Activities. Net cash used in financing activities was $19.9 million for the year ended December 31, 2025 driven by the settlement of employee tax withholding obligations associated with the vesting of equity awards. In the prior year, financing activities generated $101.2 million, primarily reflecting net proceeds from an equity offering, partially offset by similar employee tax withholding obligations.
Our Annual Report on Form 10-K for the fiscal year ended December 31, 2024 includes a discussion and analysis of our cash flows between the years ended December 31, 2024 and 2023 in Item 7 of Part II, "Management's Discussion and Analysis of Financial Condition and Results of Operations."
Off-Balance Sheet Arrangements and Commitments
We do not have any material off-balance sheet commitments or contractual arrangements other than those disclosed in Note 8 "Leases" and Note 14 "Commitments and contingencies" in the notes to our consolidated financial statements in this Annual Report on Form 10-K.
As a result of analysis related to Grid Dynamics' functional control of its subcontractors one was determined to be a variable interest entity ("VIE") and is therefore consolidated in Grid Dynamics' financial statements. The assets and liabilities of this VIE consist primarily of intercompany balances and transactions, all of which have been eliminated in consolidation.
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