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Industry Description
The Zacks Computer - Services industry primarily comprises companies that offer cloud and software-based solutions. Their offerings include consulting and research solutions, security solutions, business support solutions and systems engineering, as well as software application development solutions. The industry participants cater to varied end markets and customers, including intelligence, defense, U.S. government agencies, communications, banking, financial services, insurance, healthcare, and media and entertainment. Consultancy companies in the industry are helping clients in their ongoing digital transformation. They provide end-to-end services, including application development, integration and maintenance, technology infrastructure management and business process services.
3 Computer-Services Industry Trends to Watch
Remote & Hybrid Work Trends Boost Prospects: The industry’s growth is expected to accelerate in the days ahead based on an increasing number of remote and hybrid workers. In this era of digital transformation, enterprises are actively seeking a common ground between on-premise and cloud infrastructures, enabling them to provide flexible and easily adaptable hybrid solutions. The growing remote-working trend has led to increased demand for cloud and cost-efficient business support solutions, as well as other digital monetization solutions, which bode well for the industry.
Growing Cyber Attacks Are Creating a Tailwind: The increasing number of cyberattacks and related security risks are expected to keep the industry’s momentum alive. Government agencies are ideal targets for cyberattacks, as they are entrusted with sensitive information. Therefore, the growing need for cybersecurity solutions and services in critical areas like defense, intelligence and civilian agencies of the U.S. government bodes well for industry players.
Regulatory Compliance Drives Demand: Companies in this industry are likely to benefit from increasingly complex network systems and sensitive information environments in which governments and businesses operate. Industry participants are keeping pace with global regulatory and business practice requirements, thereby helping customers incorporate the best practices while complying with governmental and industry norms.
Zacks Industry Rank Indicates Bright Prospects
The Zacks Computer – Services industry is housed within the broader Zacks Computer and Technology sector. It currently carries a Zacks Industry Rank #32, which places it in the top 13% 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 bright 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.
The industry’s position in the top 50% of the Zacks-ranked industries is the result of a positive earnings outlook for the constituent companies in aggregate. Looking at the aggregate earnings estimate revisions, it appears that analysts are optimistic about this group’s earnings growth potential. Since March 31, 2025, the Zacks Consensus Estimate for the industry’s 2025 earnings has moved north by 2.6%.
Given the bullish industry outlook, there are a number of stocks worth buying currently. But before we present those 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.
Industry Lags Sector and S&P 500
The Zacks Computer – Services industry has underperformed the broader Zacks Computer and Technology sector and the S&P 500 Index over the past year.
The industry has dropped 7.9% over this period compared with the S&P 500’s appreciation of 16% and the broader sector’s return of 26.1%.
Industry's Current Valuation
On the basis of forward 12-month P/E, which is a commonly used multiple for valuing computer services stocks, we see that the industry is currently trading at 16.6X compared with the S&P 500’s 23.26X and the sector’s forward 12-month P/E of 28.93X.
Over the last five years, the industry has traded as high as 19.44X and as low as 15.91X, with a median of 16.8X, as the charts below show.
3 Computer-Services Stocks to Buy Right Now
Innodata: This Zacks Rank #1 (Strong Buy) company benefits from massive investment promises made by the “Magnificent 7,” including Microsoft’s $80 billion and Meta Platforms’ $64-$72 billion. You can see the complete list of today’s Zacks #1 Rank stocks here. .
The data engineering company plans to invest in AI technology, supporting both current and prospective customers, as well as an expanding salesforce. Innodata raised its 2025 revenue growth guidance to 45% (up from previous guidance of 40%).
The Zacks Consensus Estimate for Innodata’s 2025 earnings is pegged at 83 cents per share, unchanged over the past 30 days. The stock has appreciated 110% year to date.
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CACI International: This Zacks Rank #2 (Buy) company is benefiting from new business wins and organic expansions. CACI International’s disciplined business development actions, consistent operational excellence and high customer satisfaction help it win new deals at regular intervals.
A leader in IT outsourcing for the U.S. federal government, CACI International has ample exposure to the rapidly growing DoD and Department of Homeland Security budgets. CACI International is a pure-play national security company, with 90% of its revenues derived from the U.S. defense, intelligence and homeland security agencies.
The Zacks Consensus Estimate for CACI’s fiscal 2026 earnings has been steady at $27.15 per share over the past 30 days. The stock has appreciated 28% year to date.
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This article originally published on Zacks Investment Research (zacks.com).
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