Grid Dynamics Secures Preferred Vendor Status with Hyperscaler, Highlighting Growth Amid Margin Skepticism

What happened

Grid Dynamics announced it has achieved Preferred Vendor status with a major hyperscale cloud provider, a milestone following a two-year vendor consolidation initiative. This aligns with the company's strategy, noted in the DeepValue report, to deepen hyperscaler partnerships like those with AWS and Google Cloud, which are central to its AI-focused growth. The designation could enhance revenue visibility by embedding GDYN in more strategic projects, potentially supporting its goal of mid-teens annual growth. However, the report underscores persistent challenges, including non-GAAP gross margin compression to 33.8% in Q3 2025 and high customer concentration, which this news does not directly address. Ultimately, while the Preferred Vendor status bolsters GDYN's competitive positioning, it remains a piece of a broader puzzle requiring margin improvement and diversification for sustained investor confidence.

Implication

This development strengthens GDYN's relationships with key hyperscalers, likely increasing its share of AI and cloud projects and supporting revenue growth towards the high end of guidance. However, margin expansion remains a critical hurdle, as the DeepValue report highlights non-GAAP gross margin decline and wage inflation, which could offset revenue gains. Investors should monitor whether this status translates into better pricing power or utilization, key drivers for EBITDA improvement and the 300 bps margin expansion target. The news adds positive momentum but does not alter the high customer concentration risk, with top-five clients accounting for 38% of revenue. Therefore, while a step forward, the implication is that GDYN must still demonstrate tangible progress on margins in upcoming earnings to justify a re-rating.

Thesis delta

The Preferred Vendor status provides a tangible boost to GDYN's growth narrative by potentially accelerating revenue from hyperscaler-led AI projects. However, the core investment thesis—which hinges on margin expansion and diversification to support a move toward $11–13—remains unchanged, as this news does not address cost pressures or margin targets directly. Thus, while it adds a positive catalyst, the thesis delta is limited, reinforcing the need for upcoming guidance and earnings to validate execution on both growth and profitability.