Investing.com-- Jefferies outlined five IT services stocks to watch ahead of their third-quarter earnings in the coming days, highlighting a sector grappling with weak discretionary spending and macro uncertainty while navigating the transition to AI-driven solutions.

The firm maintained a cautious stance across most names, with selective Buy ratings on companies demonstrating resilience through strong bookings, analytics capabilities, or AI-led growth. Visibility remains limited for many providers, particularly those heavily reliant on time-and-materials models or concentrated client bases. Below are Jefferies’ ranked picks in the sector.

Cognizant (NASDAQ:CTSH, Buy)

Jefferies sees discretionary spend as still weak with no sign of improvement, which caps upside despite continued strength in bookings. It expects management to narrow its 2026 revenue guide, with margins edging up through efficient delivery and headcount management. The bigger theme is 2027: Jefferies thinks growth stays rangebound at roughly 2026 levels unless discretionary spend rebounds, and it has trimmed its 2027 estimates accordingly.

Everforth (NASDAQ:EFOR, Hold)

This is the more constructive Hold. Management flagged improving new-business wins and pipeline activity in July, so Jefferies expects results above the midpoint of guidance, with upside if that momentum persisted. Commercial Consulting is the near-term growth driver, Staffing remains the drag, and Federal is expected to accelerate in 2027 on project wins and renewals. Jefferies also expects margins to keep improving and buybacks to pick up.

EPAM (NYSE:EPAM, Hold)

Jefferies expects an in-line quarter and a reiteration of full-year guidance, which was cut in each of the last two quarters. It sees little upside barring a large project win, as clients keep delaying decisions amid macro uncertainty and the pace of technological change. Jefferies sees no near-term path back to high-single-digit growth, and its 2027 growth estimate is below consensus. The bright spot is AI-native revenue, which is on track for its full-year target.

EXL Service (NASDAQ:EXLS, Buy)

Jefferies expects steady, in-line mid-teens growth driven by strong demand for data and AI-led analytics, and a reiteration of full-year guidance. Some margin compression is expected in the second half as management invests in new capabilities and solutions. Healthcare and life sciences should be the fastest-growing vertical, payment integrity and data management remain strong, and the recently closed iMerit acquisition adds inorganic contribution.

Genpact (NYSE:G, Buy)

Jefferies expects results within management’s guidance range and sees medium-term targets as still achievable despite a roughly 4-point headwind from shutting down certain legacy operations. Large deal wins and backlog are at record levels, and Jefferies expects earlier wins to ramp and lift organic growth into 2026 and 2027.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

Original Article