Key Moments
- Barclays turned more cautious on digital IT services, cutting EPAM Systems and Grid Dynamics to Hold and signaling greater downside than upside in current demand trends.
- The bank highlighted sharply lower valuations, with the group trading at an average price-to-earnings multiple of 9 times and 8 times on 2026 and 2027 estimates after a 30% to 35% year-to-date decline.
- Everforth was upgraded to Hold as Barclays argued that the market is pricing in negative long-term growth that it views as too pessimistic.
Barclays Turns More Defensive on Sector Outlook
Investing.com — Barclays has reinforced a cautious view on the digital IT services space, arguing that the balance of risks in the demand backdrop tilts to the downside as artificial intelligence continues to alter how clients allocate technology budgets.
In a fresh sector report, the bank downgraded EPAM Systems and Grid Dynamics to Hold and said it is “incrementally more negative in the near term” on its digital IT services coverage list, which consists of EPAM, Grid Dynamics and Globant.
Client Spending Under Pressure Despite In-Line Q1
Analyst Surinder Thind told investors that first-quarter earnings generally matched expectations, but companies maintained full-year outlooks that are concentrated in the latter part of the year. According to the note, this pattern points to customers scaling back near-term project spending.
Barclays wrote: “Clients are waiting for the next generation of technology and its deflationary impacts, which is hindering willingness to spend on new projects,” and said this behavior is intensifying investor concerns about terminal value across the group.
Company-Specific Challenges: EPAM and Grid Dynamics
For EPAM, Barclays sees a difficult road ahead in returning to sustained double-digit organic revenue expansion. The note indicates that the company faces meaningful obstacles before it can re-establish that level of growth.
Grid Dynamics, meanwhile, is flagged for its exposure to the retail sector. Barclays cautioned that this end-market mix increases the possibility that the company’s growth rate will fail to re-accelerate in line with prior expectations.
Valuations Compress Sharply
The report highlighted a marked derating in valuations across the group. After falling by 30% to 35% year-to-date, the stocks under Barclays’ digital IT services coverage are now trading at an average price-to-earnings multiple of 9 times and 8 times based on 2026 and 2027 estimates, respectively.
| Coverage Group Metric | Value |
|---|---|
| Year-to-date share price move | 30% to 35% decline |
| Average P/E on 2026 estimates | 9 times |
| Average P/E on 2027 estimates | 8 times |
However, Barclays argued that lower valuations by themselves are not enough to draw investors back into the space. The bank stated: “Multiples are unlikely to expand without a material acceleration in organic growth, the timing of which is uncertain.”
Everforth Upgraded as Market Expectations Seen Too Harsh
In contrast to the more defensive stance on EPAM and Grid Dynamics, Barclays raised its rating on Everforth to Hold. The firm said that current pricing implies negative long-term growth for Everforth, a scenario the bank believes is excessively negative relative to its own outlook.
TradingPedia.com is a financial media specialized in providing daily news and education covering Forex, equities and commodities. Our academies for traders cover 
