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Chicago, IL – November 6, 2025 – Today, Zacks EquityResearch Equity areFutu Holdings FUTU, Dave DAVE and Coherent Corp. COHR.
Industry: Tech Services
Link: https://www.zacks.com/commentary/2785490/3-stocks-to-buy-from-the-growing-technology-services-market
The Technology Services space has registered substantial growth since the pandemic, driven by the swift adoption of remote work, accelerating the global digital transition. Technological advancements like 5G, blockchain, artificial intelligence (AI) and machine learning (ML) have propelled industry expansion. Also, raised concerns about data security have provided an impetus for the industry to grow.
Futu Holdings, Dave and Coherent Corp. are poised to gain from the prevailing trends.
The Zacks Technology Services industry encompasses companies involved in producing, developing and designing various software support, data processing, computing hardware and communications equipment. These offerings range from integrated powertrain technologies, advanced analytics, technology solutions, and contract research services to semiconductor packaging and interconnect technologies, collaboration software, specialty printers, and data acquisition and analysis systems.
This industry caters to consumer and business markets and serves diverse end markets and customer segments. Additionally, some industry players offer advanced analytics, clinical research services, data storage technology and solutions, and technology-enabled financial services for consumers and small business owners.
Rising Demand Environment: The industry is mature, with the demand for services remaining healthy over time. Revenues and cash flows are expected to eventually reach the pre-pandemic levels, aiding most industry players to pay out stable dividends.
Economic Recovery: The sector is a major beneficiary of the broader economy and service activities. According to the Bureau of Economic Analysis, GDP grew at an annual rate of 3.8% in the second quarter of 2025 after a slight decline in the first quarter of 2025. Economic activities in the non-manufacturing sector are in good shape. The Services PMI measured by the Institute for Supply Management has stayed above the 50% mark in 11 of the past 13 months.
Technological Advancement Takes Center Stage: The global shift toward digitization creates opportunities in various markets, including 5G, blockchain and AI. The United States, a significant player in the IT sector, is positioned for growth on the widespread adoption of smart technologies and increased investments in security. Companies are increasingly adopting generative AI, ML, blockchain and data science to gain a competitive advantage. Per Statista, the GenAI market is anticipated to reach $59 billion in 2025 and see a CAGR of 37.6% from 2025 to 2031.
The Zacks Technology Services industry, which is housed within the broader Zacks Business Services sector, currently carries a Zacks Industry Rank #94. This rank places it in the top 39% of more than 243 Zacks industries.
The group’s Zacks Industry Rank, which is the average of the Zacks Rank of all the member stocks, indicates continued outperformance in the near term. Our research shows that the top 50% of Zacks-ranked industries outperform the bottom 50% by a factor of more than two to one.
Before we present a few stocks that you may want to consider for your portfolio, let us look at the industry’s recent stock market performance and current valuation.
The Zacks Technology Services industry has outperformed the broader Zacks Business Services sector and the Zacks S&P 500 composite over the past year.
The industry has jumped 53% over this period, surpassing the 7.5% decline of the broader sector and the 17.9% rally of the Zacks S&P 500 composite.
On the basis of EV-to-EBITDA (enterprise value to earnings before interest, tax, depreciation and amortization), which is commonly used for valuing staffing stocks because of their high debt levels, the industry is currently trading at 17.19X compared with the S&P 500’s 18.33X and the sector’s 10.49X.
Over the past five years, the industry has traded as high as 17.19X and as low as 8.85X, with the median being 12.44X.
Futu Holdings: This company is a digitalized securities brokerage and wealth management product distribution service provider operating across Hong Kong and globally.
FUTU’s AI-backed internal operations are key to its financial success. In the second quarter of 2025, FUTU’s top line surged 69.7% year over year, with the operating margin expanding 1,570 basis points (bps), reflecting its ability to scale. On the consumer front, the company’s success was highlighted by its ability to add 262,000 funded accounts during the aforementioned quarter, taking the total to 2.7 million.
Futu Holdings’ ability to expand into regions aside from Hong Kong (its primary market) was fruitful, leading to the 42% year-over-year growth in funded accounts. Hence, its market penetration strategy played a vital role in achieving these lofty metrics. On the product front, the company’s strategy to incorporate AI appears pretty clear. Futubull AI and moomoo AI, as the names suggest, are AI-backed offerings that are helping the company expand global reach.
FUTU currently flaunts a Zacks Rank #1 (Strong Buy). The Zacks Consensus Estimate for its 2025 bottom line has increased 6.2% in the past 60 days. Earnings are expected to grow 74.7% year over year in 2025. FUTU shares have soared 81.3% in the past year.
You can see the complete list of today’s Zacks #1 Rank stocks here.
Dave:This company leverages its platform to provide multiple financial products and services in the United States.
DAVE’s customer-centric approach has resulted in expanding its membership base, leading to a robust financial performance in the third quarter of 2025. With 843,000 members being added, Dave witnessed its monthly transacting members grow 17% year over year. This had a positive impact on the company’s top line, which surged 60% year over year.
The company was able to boost its ExtraCash originations by 49% year over year in the third quarter of 2025. The rally in this metric also indicates a rise in the risk of credit default. However, the company’s proprietary risk management strategy, involving CashAI v5.5, comes into play, lowering the risks of default.
Management appears bullish on Dave’s full-year performance. Investors are likely to be heavily impressed by the fact that management raised the top-line guidance to $544-$547 million from the previous $505-$515 million. Similarly, a move was made on adjusted EBITDA, raising its outlook to $215-$218 million from the $180-$190 million provided in the preceding quarter.
DAVE currently sports a Zacks Rank #1. The Zacks Consensus Estimate for 2025 EPS has moved up marginally in the past 60 days. Earnings are expected to soar 98.5% year over year in 2025. Dave shares have skyrocketed 552.9% over the past year.
Coherent: This global leader in photonics is riding on the AI and data center boom, with COHR at the forefront of optical components and modules supporting the AI-led infrastructure.
In the fourth quarter of fiscal 2025, the company registered 16.4% year-over-year growth in its top line. The main growth driver can be attributed to the surging demand for 800G transceivers. COHR’s research and development (R&D) prowess resulted in innovative products that complement the growing demand for high-speed data center components.
The company introduced the 1.6T transceiver and realized its first revenues in the quarter, highlighting COHR’s aim at capturing the AI boom and utilizing its R&D strength to gain market advantage. The company recorded a significant boost in its margins, with the non-GAAP gross margin improving 290 bps from the year-ago quarter, highlighting improving profitability.
COHR presently carries a Zacks Rank #2 (Buy). The Zacks Consensus Estimate for its fiscal 2026 bottom line has increased marginally in the past 60 days. Earnings are expected to rise 30% year over year in fiscal 2026. Coherent shares have rallied 37.6% in the past year.
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Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.
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This article originally published on Zacks Investment Research (zacks.com).
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