Deutsche Bank has upgraded Cognizant Technology Solutions to Buy from Hold as markets head into the December-quarter earnings window, saying the IT services provider's trajectory and current valuation deserve a more constructive assessment.
The bank’s note singled out Cognizant as an outlier in an IT services sector where demand for 2026 remains unclear. While Deutsche Bank described overall visibility into client IT budgets and discretionary spending as limited - particularly heading into a seasonally slower fourth quarter - it said Cognizant appears to have "righted the ship" and is positioned to achieve revenue growth above the industry average on a more durable basis. The firm raised its price target on Cognizant to $100.
Deutsche Bank also observed that early 2026 trading has been broadly favorable for IT services names, noting the group is up about 4.5% year to date as sentiment has improved amid signs of fatigue in the artificial intelligence trade. Despite that uptick, the bank maintained a cautious stance on the sector overall given uncertainty around client spending patterns.
Within the sector, Deutsche Bank expects firms focused on digital engineering to face heightened pressure. The bank pointed to companies such as EPAM Systems, Endava and Globant as those with greater exposure to shorter-cycle, discretionary projects - areas that it believes are most vulnerable in the current environment. For that reason, the bank said it is not yet ready to adopt a broadly positive view on the group, even if there are preliminary signs of stabilization.
Deutsche Bank flagged banking and financial services as a potential relative bright spot. The bank noted that spending tied to banking, financial services and insurance projects has shown steady growth in recent quarters, and that some vendors have reported a pickup in discretionary work. Given that banking and financial services account for roughly 30% of industry-wide IT services revenue, sustained momentum in that vertical could serve as an early indicator of a wider recovery in demand, the bank said.
Analytical takeaways
- Deutsche Bank views Cognizant as better positioned than peers to deliver above-average revenue growth on a more durable basis.
- The upgrade to Buy and a higher $100 price target reflect the bank’s view that Cognizant’s recovery and valuation are underappreciated by the market.
- Despite positive year-to-date performance for IT services stocks of about 4.5%, Deutsche Bank remains cautious on the sector due to limited visibility on 2026 client budgets and discretionary spend.
Investors and sector observers should weigh the upgrade against the wider backdrop of uneven demand across verticals and the potential for continued pressure on firms dependent on short-cycle discretionary projects.