EPAM Systems (EPAM) is likely to face weaker discretionary spending by clients, especially in Q2, amid ongoing macro uncertainty, Morgan Stanley said in a Friday note.

The company's guided for Q2 non-GAAP earnings of $3.10 to $3.18 per diluted share on revenue of $1.40 billion to $1.415 billion. Analysts surveyed by FactSet are looking for non-GAAP earnings of $3.10 on revenue of $1.42 billion.

"Discretionary continues to be more pressured than mission-critical managed services work provided by other IT Services peers," Morgan Stanley said, noting similar findings from its 1Q26 CIO Survey. This is expected to drag clients' decision-making, delaying deals for the company, the investment firm added.

Deal delays have already started for EPAM Systems in April/May, leading the company to cut its 2026 revenue growth guidance to between 4% and 6.5%, from 4.5% to 7.5% previously, according to Morgan Stanley. The company also has low visibility into win rates, deal close timing, and ramp pace, the firm said.

Morgan Stanley cut its price target on EPAM Systems to $112 from $148, with an equal-weight rating.

Price: 99.95, Change: -4.29, Percent Change: -4.12