GDYN 10-K & 10-Q changes, risk factors and insider trading

•Our revenues have historically been highly dependent on a limited number of clients and industriesindustries, and accordingly any decrease in demand for outsourced services by these clients or in these industries may reduce our revenues and adversely affect our business, financial condition and results of operations.

•We face intense competitioncompetition, and any damage to our reputation maycould adversely impact our ability to generate and retain business.

•Failure to adapt to changing technologies,Technologies, methodologies, and evolving industry standardsstandards, including that relate to artificial intelligence (“AI”), are rapidly changing, on an accelerated basis; these changes, and our failure to adopt to them, may have a material adverse effect on our business, financial condition, and results of operations.

•Social and ethical issues relating to the extensive use of artificial intelligence (“AI”) technologies in our offerings may result in reputational harm or liability.

•We face risks associated with the long selling and implementation cyclecycles for our services that require significant resource commitments prior to realizing revenues for those services.

•We are exposed to various risks related to the global regulatory environment as well as legal proceedings, claimsproceedings and the like.claims.

•Regulatory issues relating to the development and use of AI may adversely affect our business, financial condition, and results of operations.

•Our effective tax rate could be adversely affected by severala variety of factors.

•Our bylaws limit the forum in which stockholders may bring a suit for substantially all disputes between us and our stockholder.stockholders.

•The price of our common stock may continue to be volatile.

The technology services industry is competitive and continuously evolving, subject to rapidly changing demands and constant technological developments.developments, particularly in recent years with the development and proliferation of AI. As a result, success and performance metrics are difficult to predict and measure. Since services and technologies are rapidly evolving and each company within the industry can vary greatly in terms of the services it provides, its business model and its results of operations, it can be difficult to predict how any company’s services, including ours, will be received in the market.

While many Fortune 1000 enterprises, including our clients, have been willing to devote significant resources to incorporate AI and other emerging technologies and related market trends into their business models, they may not continue to spend any significant portion of their budgets on services like those provided by us. Neither our past financial performance nor the past financial performance of any other company in the technology services industry is indicative of how we will fare financially in the future. Our future profits may vary substantially from our past profits and those of other companies, making an investment in us risky and speculative. If clients’ demand for our services declines as a result of economic conditions, market factors, shifts in the technology industry, competition or otherwise, our business, financial condition and results of operations would be adversely affected.

We may be unable to effectively manage our growth or achieve anticipated growth, particularly as we expand into new geographies,geographies and industries, which could place significant strain on our management personnel, systems and resources.

These risks are heightened as we continue to expand geographically, including through acquisitions, such as our recent acquisitions of JUXT in the U.K. and Mobile Computing in Argentina.Argentina in 2024. As we grow, we continue to explore other geographies for expansion. This may result in higher costs, such as increased overhead related to compliance with new regulatory frameworks, affecting our profitability levels. Furthermore, as we expand to new geographies, we may not be able to sustain the level of competitiveness, including the high quality and low cost, of our workforce that has contributed to our success. Additionally, we do not have a long history of operating our business, including recruiting, training and retaining employees, in these new geographies, and our competitiveness may decline if we are not able to effectively manage these risks.

Our revenues have historically been highly dependent on a limited number of clients and industries, and accordingly any decrease in demand for outsourced services by these clients or in these industries may reduce our revenues and adversely affect our business, financial condition and results of operations.

Although we had net income of $9.7 million and $4.0 million for the years ended December 31, 2025 and 2024, respectively, we incurred net losses of $1.8 million for the year ended December 31, 2024, we incurred net losses of $1.8 million and $29.2 million for the years ended December 31, 2023 and 2022, respectively.2023. We may incur losses, even significant, in the future for a number of reasons, including, unforeseen and high levels of operating expenses, expansion into higher-cost geographies, and increased personnel costs due to wage inflation, or otherwise.

We anticipate that our operating expenses will increase in the foreseeable future as we invest in our business for growth. This includes, but is not limited to acquisition relatedacquisition-related integration costs, costs associated with maintaining compliance as a public company, and increased spending related to sales, marketing and R&D. These increased expenditures may make it more difficult to achieve and maintain profitability. In addition, our efforts to grow our business may be more expensive than we expect, and we may not be able to generate sufficient revenue to offset increased operating expenses. If we are required to reduce our expenses, our growth strategy could be materially affected. We will need to generate and sustain significant revenue levels in future periods in order to become profitable, and, even if we do, we may not be able to maintain or increase our level of profitability.

We operate globally and as a result our business, revenues and profitability are impacted by global macroeconomic conditions. Our operations have been, and could be, affected by general economic and market conditions, including, among others, inflation rate fluctuations, currency exchange rates, interest rates, tax rates, economic downturns and uncertainty, market volatility, fluctuations in consumer spending, political instability, changes in laws and global trade policies, tariffs and sanctions. Further, a federal government shutdown resulting from failing to pass budget appropriations, adopt continuing funding resolutions, or raise the debt ceiling, and other budgetary decisions limiting or delaying deferral government spending, may negatively impact U.S. or global economic conditions, including corporate and consumer spending, and liquidity of capital markets. Such economic volatility could adversely affect our clients’ business, as well as our business, financial condition, results of operations and cash flows, and future market disruptions could negatively impact us. Because of our concentration on our clients’ capital-intensive digital transformation programs, our clients, and therefore our business, may be particularly sensitive to rising interest rates. Geopolitical destabilization could continue to impact global currency exchange rates, commodity prices, trade and movement of resources, which may adversely affect the technology spending of our clients and potential clients.

Changes by the new U.S. administration to fiscal, political, regulatory and other policies may adversely affect our business, financial condition and results of operations.

Changes by the new U.S. administration to fiscal, political, regulatory and other policies, including new policies and other changes, may adversely affect our business, financial condition and results of operations. In particular, there is substantial regulatory uncertainty regarding international trade and trade policy.policy, Inincluding the past,imposition unilateralof tariffstariffs, on imported products by the U.S.which have triggeredand retaliatorylikely actionswill fromcontinue certain foreign governments, including China and, similar policy changes, if adopted in the future, mayto, trigger retaliatory actions byfrom other foreign governments, potentially resulting in a “trade war.”

We face risks related to geopolitical events, international hostilities, epidemics, outbreaks, and other macroeconomic events that are outside of our control. Any material adverse effect from conflicts, political instability or unrest, administration or regime changes, coups or other geopolitical events may disrupt our delivery of services, impair our ability to complete financial or banking transactions, cause us 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 in projects involving certain customers in the region. For example, the significantcontinued military action against Ukraine launchedinitiated by Russia and the conflicts involving Israel and others in the Middle East have affected and will further affect our business and have resulted in disruptions in the broader global economic and geopolitical environment, which may further affect our business. Further, actions implemented by governments in response to any geopolitical instability, such as sanctions, tariffs, trade embargos or otherwise, could impact our ability to deliver services, execute our operational strategy and have an adverse impact on our results of operations.

The impact of the military action in UkraineUkraine, which has worsened in recent periods, has affected and may continue to affect our business.

The ongoing Russian military conflict with UkraineUkraine, which has even worsened, has impacted our business and may continue to pose risks to our business. The impact to Ukraine as well as actions taken by other countries, including new and stricter sanctions imposed by the United States, European Union, the United Kingdom, Canada and other countries against officials, individuals, regions, and industries in Russia and Ukraine,Russia, and actions taken by Russia in response to such sanctions, and each country’s potential response to such sanctions, tensions, and military actions could have a material adverse effect on our operations. 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 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 have no way to predict the progress or outcome of the military action in Ukraine, as the conflict and government reactions continue to develop and are beyond our control. Prolonged unrest, military activities, expansion of hostilities, or broad-based sanctions, could have a material adverse effect on our operations and business outlook. In addition, the current geopolitical situations in ArmeniaSerbia and separatelyelsewhere in SerbiaEastern Europe create additional uncertainty in the region, and could adversely affect our business.

Our primary competitors include global consulting and traditional IT service providers such as Accenture plc, EPAM Systems, Inc., Capgemini SE, Cognizant Technology Solutions Corporation, Infosys Technologies, Tata Consultancy Services Limited, Wipro, and digital transformation providers such as EPAM Systems, Inc., Globant S.A., and Endava plc,plc., and Thoughtworksspecialized Holding,AI Inc.and data science consultancies. Many of our present and potential competitors have substantially greater financial, marketing and technical resources, and name recognition than we do. Therefore, they may be able to compete more aggressively on pricing or devote greater resources to the development and promotion of technology and IT services. Thus, we may be unable to successfully compete and retain our clients against such competitors. Increased competition as well as our inability to compete successfully may have a material adverse effect on our business, prospects, financial condition and results of operations.

Acquisitions could be difficult to identifyidentify, and integrate,could divert the attention of management, disrupt our business, dilute stockholder value and adversely affect our financial condition and results of operations, we may not achieve the financial and strategic goals that were contemplated at the time of a transaction, and we may be exposed to claims, liabilities and disputes as a result of the transaction that may adversely impact our business, operating results and financial condition.

We continuously review and consider strategic acquisitions of businesses, products or technologies. For example, in December 2022 we acquired Mutual Mobile, in April 2023 we acquired NextSphere, in September 2024 we acquired JUXT and in October 2024 we acquired Mobile Computing. We seek to acquire or invest in other businesses, products or technologies that we believe could complement or expand our services, enhance our technical capabilities or otherwise offer growth opportunities. The pursuit of potential acquisitions may divert the attention of management and cause us to incur various expenses in identifying, investigating and pursuing suitable acquisitions, whether or not the acquisition purchases are completed. Additionally, we may not be able to find and identify desirable acquisition targets or be successful in entering into an agreement with any particular target or obtain adequate financing to complete such acquisitions. If we acquire businesses, we may not be able to successfully integrate the acquired personnel, operations and technologies, or effectively manage the combined business following the acquisition.

Additionally, we may not be able to find and identify desirable acquisition targets or be successful in entering into an agreement with any particular target or obtain adequate financing to complete such acquisitions. Acquisitions could also result in dilutive issuances of equity securities or the incurrence of debt, which could adversely affect our financial condition, cash flows and results of operations. In addition, if an acquired business fails to meet our expectations, we may not achieve the financial and strategic goals that were contemplated at the time of a transaction, and our business, financial condition and results of operations may be adversely affected. Furthermore, we may acquire businesses that have inferior margins and profitability levels in comparison to our existing business and this may dilute our overall profitability of the company. This, in turn, may result in adverse financial results and dilution to existing stockholders.

There are a number of factors relating to our clients that are outside of our control which might lead them to terminate a contract or project with us, choose not to renew contracts or decline engaging us for future projects, including:

The following table sets forth a summary of Grid Dynamics’ financial results for the annual periods indicated:

•We reduced ourOperating loss: Loss from operations narrowed to $2.1$1.9 million, compared to $5.6a loss of $2.1 million in the previous fiscalprior year. This wasimprovement areflects resultrevenue ofgrowth higheroutpacing revenuesthe partiallyincrease offset by increasedin operating expenses.

•OurNet dilutedincome 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 $0.05$0.11 per share, compared to $(0.02)$0.05 per share infor the year ended December 31, 2023.2024.

In February 2022, Russian forces launched a significant military action against Ukraine.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 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. ProlongedThe 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 militaryongoing actionfighting in Ukraine and therelated impactsanctions 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.

Grid Dynamics has a relatively high level of revenue concentration with certain customerscustomers, 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, compared to two customers during the year ended December 31, 2022.indicated. We expect to continue our focus on maintaining our long-term relationships with customers while diversifyingseeking to diversify our customer base.

We are subject to tax payments and fillingfiling 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.

During the year ended December 31, 2024,2025, we generated record revenues of $350.6$411.8 million, an increase of 12.0%17.5% from the previous year. The growth wasreflected driventhe bycontinued agrowth combinationacross most of customerour expansionverticals, acrossincluding industrythe verticalsbenefit andof revenuesstrategic fromacquisitions newcompleted acquisitions.during 2024.

Revenues by Vertical. We assign our customers into one of the main vertical markets or a group of various industries where we have or are increasing our presence,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:

Retail remained our largest vertical, contributingrepresenting 32.5%29.3% of total revenues duringfor the year ended December 31, 2024.2025. Revenues in this vertical grewincreased $6.6 million, or 5.7%, compared to the prior year, primarily driven by 11.1%expanded overdemand 2023.across Growth in the year came from a range of customers operating in the home improvement space,our specialty retail, grocery and departmentapparel stores.customer base.

Lastly,Technology, ourMedia Otherand verticalTelecom continued(“TMT”) revenues increased $12.4 million, or 13.0%, compared to growthe withprior year, contributing 20.2% to the total year-over-year consolidated revenues upgrowth. 14.0% year-over-year. ThisThe growth was largely driven by increasedour demandtop from both existing and newtechnology customers. TheOur OtherTMT vertical contributedrepresented approximately 8.0%26.1% of total revenues for each of the yearsyear ended December 31, 2024 and 2023.2025.

Our gross profit increased $13.9by $15.3 million to $127.0$142.3 million in the year ended December 31, 20242025, fromcompared $113.1to $127.0 million duringin the yearprior ended December 31, 2023.year. Expressed as a percentage of revenues, our gross margin remaineddecreased flatby during160 thebasis yearspoints endedto December34.6% 31,in 20242025, and 2023, reachingfrom 36.2% in both2024. periods.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.

Our engineering, research, and development expenses increased significantly by 24.5%$5.3 duringmillion, or 29.0%, to $23.7 million for the year ended December 31, 20242025, and reachedfrom $18.3 million, compared to $14.7 million lastin the previous year. GrowthThe of our engineering, research, and development expensesincrease primarily reflectsreflected our continued investments in customer delivery operationscapabilities and internally developed softwaresolutions. This includes the integration of AI technologies designed to supportenhance our growth.scalability, operational efficiency and long-term competitiveness.

Sales and marketing expenses represent spending associated with promoting and selling of our services. These expenses compriseare 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.

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 compared to $6.6 million in the year ended December 31, 2023.2024. The effective tax rate decreased between the periods from 136.5% in 2023 to 63.4% in 2024.2024 to 38.4% in 2025. The difference in the tax provision was mainly attributable to an increase in pre-tax book income.income due to the change in fair value of contingent consideration payable that is not taxable.

The following table presents the reconciliation of Non-GAAP EBITDA to consolidated net income/(loss), the most directly comparable GAAP measure, for the annual periods indicated:

(3)We implemented a restructuring plan during the first quarter of 2023. Our restructuring costs comprised of severance charges and respective taxes and are included in General and administrative expenses in the Company’s consolidated statementstatements of net income/(loss) and comprehensive income/(loss). We did not incur any restructuring expenses during the year ended December 31, 2022.

The following table presents a reconciliation of Non-GAAP diluted EPS and Non-GAAP net income to consolidated net income/(loss) for the annual periods indicated:

(3)We implemented a restructuring plan during the first quarter of 2023. Our restructuring costs comprised of severance charges and respective taxes and are included in general and administrative expenses in the Company’s consolidated statementstatements of loss and comprehensive income/(loss). We did not incur any restructuring expenses during the year ended December 31, 2022.

(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 and $2.1 million for the yearsyear ended December 31, 2023 and 2022, respectively.2023.

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, on March 15, 2022, 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,capacity. ofOn whichMay zero20, was outstanding as of December 31, 2024. We are seeking to extend2025, the termmaturity of this facility,facility whichwas currentlyextended expires onto March 15, 2025.2028.

As of December 31, 2024,2025, Grid Dynamics had cash and cash equivalents amountingof $342.1 million compared to $334.7 million comparedas to $257.2 million atof December 31, 2023.2024. Of these amounts, $38.6$48.4 million and $21.2$38.6 million, respectively, were held in countries outside the U.S, and includedincluded, among othersothers, Switzerland, the U.K., Switzerland,India, Mexico, Ukraine, Argentina, the Netherlands, India, Poland, Argentina, Mexico, Armenia, Moldova, SerbiaPoland 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.

Operating Activities. Net cash provided by operating activities duringwas $40.6 million for the year ended December 31, 20242025, decreased by $10.9 millioncompared to $30.2 million from $41.1 million in the prior year,year. The $10.4 million increase was primarily driven by favorable changes in working capital, includingspecifically regarding the timing of compensation payments to our employeesvendors and collectionssettlement fromof customers.employee-related liabilities.

Investing Activities. Net cash used in investing activities duringdecreased 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 almost doubled comparedrelated to 2023the acquisitions of JUXT and reachedMobile $51.3 million. The main driver for the increase in cash spending were closing payments,Computing, net of cash acquired, for the JUXT and Mobile Computing acquisitions.acquired.

Our key metrics for the three months ended MarchJune 31,30, 2026 are presented below:

•Non-GAAP measures: Non-GAAP EBITDA was $12.5$14.7 million for the three months ended MarchJune 31,30, 2026, compared to $14.6$12.7 million in the prior-year quarter. Diluted Non-GAAP earnings per share was $0.09$0.11 per share, compared to $0.11$0.10 per share in the prior-year quarter.

Attracting and retaining top talent in key regions is vital to Grid Dynamics’ success and our ability to drive revenue growth. Our long-term prospects depend on recruiting qualified IT professionals who support a global delivery model across the Americas, Europe, and Asia. This geographic footprint allows us to provide clients with continuous development, US-based leadership, and specialized talent pools optimized for both quality and cost-efficiency. We seek to employ the appropriate professionals in locations to optimize our employee costs and expenses. Currently, the vast majority of our workforce consists of these highly skilled IT professionals. We increasingly prioritize experienced senior talent over volume staffing to handle the complexity of production-grade infrastructure required for AI implementations.

AsCurrently, mosta majority of Grid Dynamics’ customer projects are performed and invoiced on a time and materials basis, although as part of our strategy, an increasing number of projects are performed on a fixed-price 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. With respect to fixed-price projects, Grid Dynamics must accurately project the time and other costs associated with project performance. 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 decisions.

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. The total number of customers for the threesix months ended MarchJune 31,30, 2026 was 183213 customers, a decreaseslight increase from 204211 a year ago.

Grid Dynamics has a relatively high level of revenue concentration with certain customers and constantly works toward achieving a more diversified revenue mix. During each of the three and six months ended MarchJune 31,30, 2026 and 2025, one customer accounted for 10% or more of Grid Dynamics’ revenues. The Company expects to continue its focus on maintaining long-term relationships with customers while diversifyingseeking to diversify its customer base.

The following tabletables presentspresent revenue concentration by amount and as a percentage of Grid Dynamics’ revenues for the periods indicated:

The three and six months ended MarchJune 31,30, 2026 compared to the three and six months ended MarchJune 31,30, 2025

The Technology, Media and Telecom (“TMT”) vertical becameremained our largest vertical inand theprincipal firstgrowth quarter of 2026,driver, contributing 29.5%31.8% and 30.7% of total revenues.revenues TMTfor revenuesthe three and six months ended June 30, 2026, respectively. Revenues in this vertical increased 30.3%by year-over-year,36.4% and 33.5% during the three and six months ended June 30, 2026, reaching $34.4 million and $65.1 million, respectively, compared to $25.2 million and $48.8 million, for the corresponding periods of 2025. Growth was primarily driven by expandedstrong engagementsdemand withfrom our largest technology customers.

The •Healthcare and Pharma vertical generated $2.2$2.1 million and $4.3 million of revenues for the three and six months ended MarchJune 31,30, 2026, representing 2.1%1.9% and 2.0% of total revenues.revenues, respectively. This compares to $2.4$2.6 million and $5.0 million, or 2.4%2.5% of total revenues,revenues in theboth corresponding periodperiods of 2025.

Cost of revenues was $67.9 million forDuring the three months ended MarchJune 31,30, 2026, our cost of revenues was $68.5 million, an increase of $4.5$2.0 million, or 7.0%,2.9%, compared to $63.4$66.6 million in the samecorresponding period of 2025. For the six months ended June 30, 2026, cost of revenues increased by $6.4 million, or 4.9%, reaching $136.4 million, compared to $130.0 million in the prior-year period. The increase in cost of revenues in both periods reflected our continued investment in delivery to support growing customer demand.

Gross profit decreasedwas to$39.6 $36.2million and $75.9 million for the firstthree quarterand six months ended June 30, 2026, representing an increase of 2026,$5.1 downmillion, 2.1%or from14.8%, and $4.4 million, or 6.1%, compared to $34.5 million and $71.5 million in the samecorresponding periodprior-year inperiods, 2025.respectively. Expressed as a percentage of revenues, gross margin declinedwas to36.6% 34.8%and 35.7% for the three and six months ended MarchJune 31,30, 2026, compared to 36.8%34.1% and 35.5% in the correspondingprior-year periodperiods, ofrespectively. 2025.The Ourincrease in gross profit declineand wasexpansion largelyof attributablegross tomargin higherwere costprimarily structuresdriven acrossby ourrevenue keygrowth outpacing delivery locationscost, improved delivery resource utilization and adversepositive foreign exchange impacts.

During the three and six months ended MarchJune 31,30, 2026, engineering, research, and development expenses were $6.1$6.4 million,million and $12.5 million respectively, representing a decrease of $0.4$0.3 million, or 4.8%, and $0.7 million, or 5.5%, compared to $6.7 million fromand $6.5$13.2 million in the corresponding periodprior-year ofperiods, 2025.respectively. The decrease in both the quarterly and year-to-date periods primarily reflected our cost optimization of customer delivery capabilities and internally developed software.optimization. Expressed as a percentage of revenues, engineering, research, and development expenses were 5.8%5.9% for both the three and six months ended June 30, 2026, compared withto 6.5%6.7% and 6.6% in the priorcorresponding yearperiods period.of 2025, respectively.

During the three months ended MarchJune 31,30, 2026, our sales and marketing expenses were $7.1 million, flat compared to the prior-year quarter. For the six months ended June 30, 2026, sales and marketing expenses were $7.7$14.8 million, a decrease of $0.6 million, or 6.8%,3.6%, fromcompared $8.3to $15.4 million in the correspondingprior-year period of 2025.period. Expressed as a percentage of revenues, sales and marketing expenses weredecreased 7.4%to 6.6% and 7.0% for the three and six months ended June 30, 2026, respectively, compared to 8.2%7.0% and 7.6% in the priorcorresponding yearperiods period.of 2025. The declinedecrease was primarily reflecteddriven operatingby leveragelower stock-based compensation expense and cost optimization initiatives of sales and business-development functions.optimization.

General and administrative expenses increased 7.6%19.4% to $26.1$24.8 million for the three months ended MarchJune 31,30, 2026, compared to $24.3$20.8 million in the prior-year period. For the six months ended June 30, 2026, general and administrative expenses totaled $50.9 million, an increase of 13.1% from $45.1 million in the same period of 2025. The increase was primarily driven by higher restructuring costs, professional fees associated with potential acquisitionsacquisitions, and increased facility and IT-related expenses, partially offset by costlower optimizationcompensation initiativescosts, ofincluding operationalstock-based functions.compensation expenses.

Expressed as a percentage of revenues, general and administrative expenses increased,were reaching22.9% 25.1%and 24.0% for the three and six months ended MarchJune 31,30, 2026, compared to 24.2%20.5% and 22.4% for the corresponding periodperiods in 2025.2025, respectively.

During the three and six months ended MarchJune 31,30, 2026, otherOther income, net, decreased towas $3.2 million fromand $4.5$6.4 million, respectively, compared to $7.4 million and $11.9 million in the corresponding prior-year period.periods. The decrease in otherboth income, net on a year-to-date basisperiods was primarily driven by a gainreduction in gains from the remeasurement of acquisition-related contingent consideration liabilitiesliabilities, which decreased to $1.2 million in the priorfirst yearhalf of 2026 from $6.3 million in the prior-year period, partiallyas well as lower money market income due to lower average cash balances, slightly offset by favorable net foreign currencyexchange tailwinds.movements during the first half of 2026.

During the three months ended MarchJune 31,30, 2026, we recognized income tax expense of $1.0$1.6 million, compared to $2.0 million expense in the same period of 2025. During the six months ended June 30, 2026, we recognized income tax benefitexpense of $0.4$2.6 million, compared to $1.6 million in the same period of 2025. The change in the tax provision was primarily attributable to a shift from pre-tax income in the prior year period to a pre-tax loss in the current period, higher tax expense for stock-based compensation, and additional tax expense related to prior year state tax returns.

The following table presents the reconciliation of Grid Dynamics’ Non-GAAP EBITDA to its GAAP net income/(loss),income, the most directly comparable GAAP measure, for the periods indicated:

(3)Our restructuring costs are comprised ofinclude severance chargesbenefits and respectiverelated employer taxes, andas well as facility-related exit costs. These charges are includedpresented inwithin general and administrative expenses in the Company’s unaudited condensed consolidated statements of income/(loss).income.

The following table presents a reconciliation of Grid Dynamics’ Non-GAAP diluted EPS and its Non-GAAP net income to its GAAP net income/(loss) for the periods indicated:

(3)Our restructuring costs are comprised ofinclude severance chargesbenefits and respectiverelated employer taxes, andas well as facility-related exit costs. These charges are includedpresented inwithin general and administrative expenses in the Company’s unaudited condensed consolidated statements of income/(loss).income.

As of MarchJune 31,30, 2026, Grid Dynamics had cash and cash equivalents amounting to $327.5$298.4 million compared to $342.1 million at December 31, 2025. Of these amounts, $49.0$50.4 million and $48.4 million, respectively, were held outside the United States, and included Switzerland, the U.K., India, Netherlands, Mexico, Moldova, Poland, Armenia, Argentina, Poland, and other countries. We did not have any debt outstanding under the revolving credit facility as of MarchJune 31,30, 2026. We believe that our cash and cash equivalents balance, cash generated from operating activities and proceeds from our November 2024 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.

Operating Activities. Net cash provided by operating activities was $8.4$14.5 million for the threesix months ended MarchJune 31,30, 2026, compared to $9.4$23.7 million in the prior-year quarter.period. The $1.0$9.2 million decrease was primarily driven by changes in working capital,capital specificallyfluctuations, regardingincluding the timing of paymentscustomer tocollections, vendorsvendor payments, and settlement of employee-related liabilities.

Investing Activities. Net cash used in investing activities was $4.0$21.6 million for the threesix months ended MarchJune 31,30, 2026, compared to $3.3$7.3 million for the six months ended June 30, 2025. The increase in the prior-yearfirst period,half andof 2026 was relatedprimarily todriven ourby the acquisition of Ekumen, which resulted in cash outflows of $14.1 million, net of cash acquired. Cash spent on capital expenditures and thecapitalized capitalizationinternal-use ofsoftware internallycosts developedremained projectsrelatively instable across both periods.

Financing Activities. Net cash used in financing activities was $17.6$35.2 million for the threesix months ended MarchJune 31,30, 2026, compared to $16.9 million for the six months ended June 30, 2025. The $18.3 million increase in cash used was largely driven by repurchasesan outflow of our$28.8 million for common stock repurchases under the buyback program initiated in the fourth quarter of 2025,2025. paymentThis ofwas contingentpartially considerationoffset by a $12.8 million decrease in cash outflows for our 2024 acquisitions and tax withholding obligationswithholdings related to the issuancenet-share settlement of shares in connection with vested equity awards.awards Netcompared cash used in financing activities forto the threeprior-year months ended March 31, 2025 was $15.8 million and was primarily related to tax withholding obligations in connection with vested equity awards.period.