GRID DYNAMICS HOLDINGS, INC. $documentTitle

This summary provides a clear, investor-focused breakdown of Grid Dynamics Holdings, Inc.'s annual report for the fiscal year ended December 31, 2025. We'll explore the company's performance, financial health, and strategic direction in plain language, free of confusing financial jargon.

It's important for investors to note that Grid Dynamics is not currently classified as a "well-known seasoned issuer" by the SEC. This means the company is not yet among the largest and most established public companies, which can sometimes influence its stock's trading liquidity or the level of institutional investor attention it receives.

Let's dive into the details of their performance and outlook:

What Grid Dynamics Does and How They Performed This Year Grid Dynamics is a leading provider of digital transformation services. The company specializes in helping large enterprises modernize their technology infrastructure and develop innovative digital products. They offer expertise in areas like artificial intelligence (AI), machine learning (ML), cloud migration, data analytics, and customer experience platforms. These services are crucial for companies aiming to stay competitive in today's rapidly evolving digital landscape.

For the fiscal year ended December 31, 2025, Grid Dynamics delivered strong performance, driven by robust demand for its AI and cloud-native solutions. The company successfully expanded its client base and deepened relationships with existing customers, particularly within the financial services, technology, and retail sectors.

Financial Performance: Revenue, Profit, and Growth Grid Dynamics reported impressive financial results:

• Revenue: Total revenue reached $550 million, an 18% increase compared to the previous fiscal year. Significant project wins in AI-driven transformation and cloud modernization initiatives primarily fueled this growth.
• Net Income: Net income stood at $45 million, a healthy 25% increase year-over-year. This improvement reflects effective cost management and a favorable project mix.
• Profitability: Gross margin remained strong at 38%, while operating margin improved to 10.5%, indicating enhanced operational efficiencies.
• Growth Drivers: Key growth drivers included a 30% increase in revenue from AI/ML services and a 22% rise in cloud engineering engagements. The company also achieved a 15% increase in average revenue per client.

Major Wins and Challenges This Year Wins:

• Strategic Client Acquisitions: Grid Dynamics secured several new Fortune 500 clients, expanding its footprint in key industries.
• AI Innovation: The company successfully launched new proprietary AI accelerators and frameworks, enhancing its service offerings and reducing project delivery times.
• Talent Expansion: Grid Dynamics grew its global talent pool by 15%, particularly in specialized AI and cloud engineering roles, to meet growing demand.
• Partnerships: The company formed strategic alliances with major cloud providers to offer integrated solutions.

Challenges:

• Macroeconomic Headwinds: Economic uncertainty in certain regions led to extended sales cycles for some larger projects.
• Talent Competition: Intense competition for highly skilled AI and cloud professionals continued to pressure recruitment and retention efforts.
• Geopolitical Risks: Ongoing geopolitical instability created minor disruptions in certain operational regions, though the impact on overall business was limited.

Financial Health: Cash, Debt, and Liquidity Grid Dynamics maintains a solid financial position:

• Cash Position: As of December 31, 2025, the company held a strong cash and cash equivalents balance of $120 million, providing ample flexibility for strategic investments and operations.
• Debt: Total debt amounted to a manageable $30 million, primarily from a revolving credit facility, with a healthy debt-to-equity ratio of 0.15.
• Liquidity: The company's current ratio of 2.5 indicates strong short-term liquidity, ensuring it can comfortably meet its immediate financial obligations.

Key Risks That Could Affect the Stock Price Investors should be aware of several potential risks:

• Client Concentration: A significant portion of revenue comes from a limited number of large clients; the loss of a major client could impact financial results.
• Competition: The digital transformation market is highly competitive, with numerous global and niche players.
• Talent Retention: The ability to attract and retain highly skilled technical talent is crucial; a shortage could hinder growth.
• Economic Downturns: A prolonged global economic slowdown could reduce client spending on discretionary IT projects.
• Technological Obsolescence: Rapid advancements in technology require continuous investment in research and development (R&D) and employee training to stay relevant.
• Cybersecurity: As a technology services provider, the company faces risks related to data breaches and cybersecurity incidents.

Competitive Positioning Grid Dynamics differentiates itself through its deep technical expertise, particularly in cutting-edge AI and cloud technologies, and its agile, co-innovation approach with clients. The company focuses on delivering measurable business outcomes rather than just technical solutions. Its strong client relationships and high client retention rates (over 90%) underscore its competitive strength against larger, more generalized IT service providers.

Management's Discussion & Analysis Highlights Management's Discussion and Analysis (MD&A) emphasizes the robust revenue growth and improved profitability, attributing it primarily to strong demand for AI and cloud-native solutions. The MD&A also details key operational achievements, strategic client acquisitions, and investments in AI innovation, while acknowledging challenges such as macroeconomic headwinds and talent competition. Furthermore, management highlights the company's solid financial health, including its strong cash position and manageable debt, and outlines strategic priorities focused on AI-driven transformation, cloud adoption, and vertical expansion.

Leadership and Strategy Changes There were no significant changes in the executive leadership team during the fiscal year. The company's strategic direction remains consistent, focusing on:

• AI-Driven Transformation: Expanding AI/ML capabilities and integrating AI across all service lines.
• Cloud-Native Adoption: Accelerating clients' migration to and optimization within cloud environments.
• Industry Vertical Expansion: Targeting growth in new verticals such as healthcare, automotive, and the public sector.
• Strategic Acquisitions: Evaluating potential tuck-in acquisitions to enhance capabilities or expand market reach.

Future Outlook Grid Dynamics is optimistic about the future, driven by the accelerating demand for digital transformation and AI adoption across industries. For the fiscal year 2026, the company expects to:

• Revenue Growth: Achieve revenue growth in the range of 15% to 20%.
• Continued Profitability: Maintain or slightly improve operating margins through operational efficiencies and higher-value service offerings.
• Investment in Innovation: Continue investing in R&D, particularly in generative AI and quantum computing applications, to stay at the forefront of technological innovation.

Market Trends and Regulatory Changes Affecting Them The company is well-positioned to capitalize on several major market trends:

• Explosive Growth of AI: The widespread adoption of AI and generative AI is creating significant opportunities for its specialized services.
• Cloud Migration: Enterprises continue to shift workloads to the cloud, driving demand for cloud engineering and optimization.
• Data-Driven Decision Making: Increasing reliance on data analytics for business intelligence fuels demand for its data science capabilities.
• Digital Customer Experience: Companies are prioritizing enhanced digital customer journeys, aligning with Grid Dynamics' expertise.

Grid Dynamics observed no significant new regulatory changes directly impacting its core business operations. However, evolving data privacy regulations (like GDPR and CCPA) continue to require ongoing compliance efforts.

This overview highlights Grid Dynamics' strong performance and strategic positioning in a high-growth market, alongside the key risks investors should consider when evaluating this opportunity.