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Industry Description
The Zacks Computers – IT Services industry comprises companies that provide consultancy, communications software and services, IT management and operations, cloud-based web development platform, customer relationship management, professional information solutions, real estate information and analysis, and outsourcing services. Industry participants cater to a wide array of end markets, including manufacturing, telecommunications, banking, insurance, healthcare, government agencies and public sector institutions. They focus on the cybersecurity business, the cloud computing market, generative AI, IoT and automation to bolster prospects. Offerings from industry participants help improve engagement with customers, launch products and support new business models, with enterprises going for digital transformation.
What's Shaping the Future of the Computers -IT Services Industry
Digitization Wave is a Tailwind: Most industry participants are modernizing their traditional legacy-oriented business processes to keep pace with evolving IT services. The aim is to integrate the coordination of emerging technologies, including cloud, IoT, AI and analytics. Increasing Internet penetration in emerging markets, particularly across the Asia Pacific, is another tailwind.
Hybrid Work Environment to Boost Prospects: The industry’s growth is expected to accelerate in the days ahead due to an increasing number of hybrid workers. In this era of digital transformation, enterprises are actively seeking a common ground between on-premise and cloud infrastructures, which will enable them to provide flexible and easily adaptable hybrid solutions.
Improving IT Spending to Aid Prospects: Improving IT spending trends bode well for industry participants. Gartner projects IT spending to increase 7.9% over 2024 to $5.43 trillion in 2025. Spending on IT services is expected to see a 4.4% improvement for 2025.
Zacks Industry Rank Indicates Bullish Prospects
The Zacks Computers - IT Services is housed within the broader Zacks Computer and Technology Sector. It currently carries a Zacks Industry Rank #101, which places it in the top 41% of more than 250 Zacks industries.
The group’s Zacks Industry Rank, which is the average of the Zacks Rank of all the member stocks, indicates bullish near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than two to one.
Given the industry’s bullish prospects, there are several stocks worth buying. But before we present the stocks that you may want to consider for your portfolio, let’s take a look at the industry’s recent stock-market performance and valuation picture.
Industry Lags Sector and S&P 500
The Zacks Computers - IT Services Industry has underperformed the S&P 500 and the broader Zacks Computer and Technology sector in the past year.
The industry has dropped 10.2% over this period compared with the S&P 500’s and the broader sector’s return of 19% and 31.1%, respectively.
Industry's Current Valuation
On the basis of the forward 12-month price/earnings, which is a commonly used multiple for valuing IT Services companies, the industry is currently trading at 26.55X, higher than the S&P 500’s 23.59X but lower than the sector’s 29.74X.
Over the past five years, the industry has traded as high as 34.45X and as low as 26.55X, with the median being 29.86X, as the charts below show.
3 IT Services Stocks to Buy Right Now
Vertiv: This Zacks Rank #1 (Strong Buy) company’s shares have jumped 25.5% year to date. You can see the complete list of today’s Zacks #1 Rank stocks here.
Vertiv is benefiting from an extensive product portfolio, which spans thermal systems, liquid cooling, UPS, switchgear, busbar and modular solutions. In the trailing 12 months, organic orders grew approximately 11%. Collaborations with CoreWeave and Oklo strengthened VRT’s technology leadership, positioning Vertiv well for long-term growth in the evolving data center market.
The Zacks Consensus Estimate for VRT’s 2025 earnings is pegged at $3.82 cents per share, unchanged over the past 30 days.
Roper Technologies: This Zacks Rank #2 (Buy) company is benefiting from strength across its segments. Momentum across the Deltek, Vertafore, PowerPlan and Aderant businesses is aiding the Application Software segment. Solid performance of the ConstructConnect and SHP alternate site healthcare businesses is boosting the Network Software segment.
For 2025, Roper now expects adjusted earnings from continuing operations between $19.90 per share and $20.05 per share compared with previous guidance of $19.80-$20.05 range. Total revenues are expected to increase 13% compared with the 12% rise anticipated earlier. Organic revenues are anticipated to increase 6-7% year over year.
The Zacks Consensus Estimate for Roper’s 2025 earnings has remained unchanged at $20.28 per share over the past 30 days. Roper shares have declined 3% year to date.
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This article originally published on Zacks Investment Research (zacks.com).
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