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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 9.8% over 2024 to $5.62 trillion in 2025. Spending on IT services is expected to see a 9% improvement, much better than the 5.6% growth for 2024.
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 #53, which places it in the top 22% 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 sector and the broader Zacks Computer and Technology sector in the past year.
The industry has appreciated 7.7% over this period compared with the S&P 500’s and the broader sector’s return of 11.6% and 9.2%, 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 29.68X, higher than the S&P 500’s 22.33X and the sector’s 26.7X.
Over the past five years, the industry has traded as high as 40.16X and as low as 24.87X, with the median being 31.4X, as the charts below show.
3 IT Services Stocks to Buy Right Now
Taboola.com: This Zacks Rank #1 (Strong Buy) company’s shares have declined 13.9% year to date. Taboola is a global leader in performance advertising with its platform, Realize, connecting thousands of advertisers to approximately 600 million daily users. You can see the complete list of today’s Zacks #1 Rank stocks here.
Taboola’s expanding partner base that now includes the likes of Microsoft and Gannett, which added display inventory for Realize advertisers. The company inked a partnership deal with LINE, one of the largest messaging apps in Asia.
The Zacks Consensus Estimate for TBLA’s 2025 earnings is pegged at 38 cents per share, unchanged over the past 30 days.
Infosys: This Zacks Rank #2 (Buy) company is gaining from large deal wins and fast-growing digital services.
Infosys’ sustained focus on Agile Digital and AI-driven Core services is a tailwind. The strong demand for the company’s services in the cloud, the Internet of Things (IoT), cyber security and data and analytics is a key driver. Higher investments by clients in digital transformation, AI and automation are an upside. The solid traction of its Cobalt cloud portfolio is a positive. The latest forecast for worldwide IT spending by Gartner is also positive for Infosys.
The Zacks Consensus Estimate for INFY’s fiscal 2026 earnings has remained unchanged at 78 cents per share over the past 30 days. Infosys’ shares have declined 13.9% year to date.
Cognizant: This Zacks Rank #2 company is benefiting from a strong product pipeline, including a favorable mix of new opportunities. Robust organic growth, particularly in Health Sciences and Financial Services, has been a major growth driver. The acquisition of Belcan is bolstering CTSH’s portfolio, adding 450 basis points of growth. An expanding clientele, driven by partnerships with companies like Docusign, OMRON and ServiceNow, is also contributing to growth.
AI initiatives, including Flowsource and Neuro Edge, are enhancing productivity in software development and IT operations.
The consensus mark for CTSH’s 2025 earnings has been steady at $5.07 per share over the past 30 days. Cognizant shares have increased 4.3% year to date.
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This article originally published on Zacks Investment Research (zacks.com).
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