Investing.com -- As the IT services sector prepares to report fourth-quarter 2025 results, Jefferies analysts expect performances to be in-line or slightly better than market expectations.
Get premium news and more AI stock picks with InvestingPro - get 55% off today
While quarter-over-quarter demand appears stable to modestly improving, there remains some risk that 2026 guidance could be conservative following three challenging years in the industry.
Here’s a look at the top IT services stocks according to Jefferies’ latest analysis:
Cognizant
Jefferies maintains a Buy rating on Cognizant, expecting another quarter of robust managed services bookings. The company should benefit as previously secured large deals continue to ramp up.
Analysts are particularly interested in potential "green shoots" in the business and anticipate management will provide a solid but achievable guidance for 2026. The firm views Cognizant’s positioning favorably as the IT services market shows signs of stabilization.
Cognizant Technology Solutions announced a multi-year strategic partnership with Microsoft to develop AI-powered solutions and completed its acquisition of 3Cloud, a Microsoft Azure services provider. Following these developments, William Blair upgraded the company’s rating to Outperform, citing its AI-focused strategy.
EPAM Systems
Also rated as a Buy, EPAM is expected to deliver solid fourth-quarter results with positive commentary surrounding AI-native projects and margins. Jefferies projects initial 2026 guidance to reflect year-over-year constant currency growth in the range of 5-8%.
However, there may be some risk to margin guidance as management appears inclined to prioritize investments in artificial intelligence capabilities over near-term margin expansion.
In recent developments, EPAM Systems reported third-quarter results that exceeded analyst expectations and raised its full-year outlook. The company also launched seven new AI agents on Google Cloud Marketplace and saw Truist Securities initiate coverage with a Hold rating.
Grid Dynamics
Jefferies, which rates Grid Dynamics a Buy, expects fourth-quarter results to align with the company’s guidance. Commentary will likely focus on margin expansion initiatives and AI-related revenues.
For 2026, analysts anticipate guidance reflecting growth of approximately 10-15% (or at least double-digits), though first-quarter guidance may be flat to modestly positive due to fewer billable days in the period. Notably, Jefferies maintains the highest estimates on Wall Street for Grid Dynamics’ 2026 revenues and adjusted earnings per share.
Grid Dynamics reported third-quarter 2025 earnings that matched analyst expectations, with revenue reaching $104.2 million. The company also entered into a multi-year strategic collaboration agreement with Amazon Web Services to advance enterprise AI initiatives.
As the sector navigates the transition into 2026, investors should pay close attention to management commentary regarding demand trends, AI integration, and margin outlooks.
The cautious approach to guidance may create opportunities for companies to outperform conservative expectations, particularly for those with strong positioning in high-growth areas like artificial intelligence and managed services.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.
