Barclays reiterated a conservative view on companies that provide digital IT services, downgrading EPAM Systems and Grid Dynamics to Hold and upgrading Everforth to Hold. The bank said the sector faces greater downside risk than upside as artificial intelligence continues to reshape client priorities and spending behavior.
Analyst Surinder Thind told investors that first-quarter results were largely in line with expectations, but that full-year guidance remains back-half weighted. Barclays interprets this guidance profile as an indicator that clients are scaling back near-term projects and delaying spending.
"Clients are waiting for the next generation of technology and its deflationary impacts, which is hindering willingness to spend on new projects," Barclays wrote, adding that the dynamic is fueling growing market concerns around terminal value. The bank said it is "incrementally more negative in the near term" on its digital IT services coverage, which spans EPAM, Grid Dynamics and Globant.
On a company-by-company basis, Barclays said EPAM faces a difficult route back to sustainable double-digit organic revenue growth. For Grid Dynamics, the bank highlighted the companys exposure to the retail sector, which raises the risk that growth may not accelerate as investors had anticipated.
Valuation metrics for the group have repriced noticeably. Barclays noted the coverage group now trades at an average price-to-earnings multiple of 9 times on 2026 estimates and 8 times on 2027 estimates, after a 30% to 35% decline year-to-date. However, the bank cautioned that cheap multiples alone may not be sufficient to draw investor interest. "Multiples are unlikely to expand without a material acceleration in organic growth, the timing of which is uncertain," Barclays wrote.
Separately, Barclays upgraded Everforth to Hold, arguing that the market is pricing in negative long-term growth for the company that the bank views as overly pessimistic.
Barclayss recent note underscores a near-term demand risk for digital IT services as clients await new technology cycles and reassess spending. The combination of back-half weighted guidance, sector-wide valuation compression, and uncertainty about the timing of growth recovery frames the banks more cautious positioning.