Key Moments
- Jefferies expects IT services companies to post fourth-quarter 2025 results that are in-line with or slightly above market forecasts.
- Cognizant, EPAM Systems, and Grid Dynamics all hold Buy ratings at Jefferies, supported by AI initiatives and managed services momentum.
- Analysts see potential for conservative 2026 guidance after three difficult years, which could set the stage for upside against expectations.
Jefferies’ Outlook on the IT Services Sector
Investing.com — Jefferies analysts anticipate that fourth-quarter 2025 results across the IT services sector will generally meet or marginally exceed consensus expectations. Demand trends are described as steady to slightly improving on a quarter-over-quarter basis.
Despite this gradual improvement, Jefferies notes that management teams may issue cautious 2026 outlooks, reflecting lingering uncertainty after three challenging years for the industry. This conservative stance on guidance could influence how investors interpret near-term forecasts.
Cognizant: Benefiting From Large Deal Ramps and AI Strategy
Jefferies reiterates a Buy rating on Cognizant, projecting another period of strong managed services bookings. The firm expects previously signed large contracts to continue ramping, supporting near-term performance.
Analysts will be watching closely for early signs of recovery in Cognizant’s operations and expect management to outline a 2026 outlook that is described as solid yet attainable. Jefferies views the company as well positioned as the IT services market shows emerging signs of stabilization.
Cognizant Technology Solutions has announced a multi-year strategic partnership with Microsoft to develop AI-powered offerings and has completed the acquisition of 3Cloud, a provider of Microsoft Azure services. In response to these moves, William Blair upgraded the stock to Outperform, pointing to the company’s AI-focused strategy as a key driver.
EPAM Systems: Growth Targeted with AI Investments
EPAM Systems also carries a Buy rating from Jefferies. The brokerage expects the company to report a solid fourth quarter, underpinned by favorable commentary on AI-native projects and margins.
Jefferies projects that EPAM’s initial 2026 guidance will indicate year-over-year constant currency growth in the range of 5-8%. However, the firm cautions that margin guidance could face some pressure, as management appears inclined to emphasize investment in artificial intelligence capabilities rather than near-term margin expansion.
EPAM Systems recently reported third-quarter results that surpassed analyst expectations and increased its full-year outlook. The company introduced seven new AI agents on Google Cloud Marketplace and received a Hold rating as Truist Securities initiated coverage.
Grid Dynamics: Double-Digit Growth Ambitions and AI Collaboration
Jefferies maintains a Buy rating on Grid Dynamics and expects the company’s fourth-quarter results to be broadly consistent with management’s prior guidance. The firm expects management commentary to emphasize efforts to expand margins and capture AI-related revenue opportunities.
For 2026, Jefferies anticipates that Grid Dynamics will guide to growth of approximately 10-15%, or at a minimum, a double-digit rate. However, first-quarter guidance could be flat to slightly positive, reflecting fewer billable days in that period. Jefferies notes that it holds the highest 2026 revenue and adjusted earnings per share estimates for Grid Dynamics on Wall Street.
Grid Dynamics reported third-quarter 2025 earnings that were in line with analyst expectations, with revenue of $104.2 million. The company also entered into a multi-year strategic collaboration agreement with Amazon Web Services aimed at advancing enterprise AI initiatives.
| Company | Rating (Jefferies) | Key 2026 Commentary | Recent Strategic AI Actions |
|---|---|---|---|
| Cognizant | Buy | Expected solid but achievable 2026 guidance; benefits from large deal ramps and managed services bookings | Multi-year AI partnership with Microsoft; acquisition of 3Cloud |
| EPAM Systems | Buy | Initial 2026 constant currency growth projected at 5-8%; possible margin pressure due to AI investment priorities | Launch of seven AI agents on Google Cloud Marketplace |
| Grid Dynamics | Buy | 2026 growth expected around 10-15% (at least double-digit); Q1 guidance may be flat to modestly positive | Multi-year strategic collaboration with Amazon Web Services for enterprise AI |
Implications for Investors
As IT services providers move into 2026, Jefferies suggests that investors closely monitor management commentary on demand patterns, AI integration across service offerings, and margin trajectories. These elements are expected to be central to the sector’s narrative in upcoming earnings discussions.
The possibility of cautious or conservative guidance could create conditions for companies to outperform expectations later, particularly for those with strong exposure to high-growth themes such as artificial intelligence and managed services.
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