Goldman Sachs issued a client note on Friday that identified modest upside potential to first-quarter earnings for two major IT services providers while highlighting a third that faces greater near-term risk. The firm singled out IBM and Cognizant as names with the potential for stronger-than-expected prints, and named Globant as the most vulnerable among the trio because of its sector exposure and geographic footprint.
Analyst James Schneider described the overall sector setup as "increasingly undemanding" following what he characterized as a material de-rating tied to ongoing concerns about AI-driven disruption. That backdrop, Goldman said, creates scope for selective outperformance if companies deliver solid quarterly results.
IBM remains a Buy in Goldmans view. Schneider expects software momentum at IBM to remain intact even as the company is likely to report a slowdown in mainframe revenue growth. He wrote that the company appears "relatively resilient to broader AI-driven concerns in software, supported by continued strength in its core portfolio." That resilience is cited as a reason IBM could post results that exceed tepid expectations.
Cognizant, which Goldman rates Neutral, is expected to show results supported by steady execution, a deep backlog of large deals and constructive commentary around AI adoption and productivity improvements. Schneider noted that, "Given low expectations, we see potential for near-term stock outperformance on a solid print," while also flagging persistent gross margin headwinds as a reason for a more cautious longer-term stance.
Globant, also rated Neutral by Goldman, is viewed as the name under the most pressure. The bank highlighted the company's outsized exposure to Media and Entertainment clients and significant business in the Middle East as specific vulnerabilities. While Goldman expects positive AI demand commentary tied to Globant's "AI Pods" offering, Schneider said that such commentary is unlikely to fully offset near-term growth headwinds stemming from weaker discretionary spending.
Goldman said investor focus during the quarter will center on demand-related commentary amid rising macroeconomic uncertainty, with updates on AI adoption and related productivity gains likely to be closely watched. The note positions quarterly demand signals and management commentary on AI initiatives as the primary lenses through which investors will evaluate near-term performance across IT services names.
Implications by sector
- IT services and enterprise software - company results and AI adoption commentary will be key drivers of near-term stock moves.
- Media and Entertainment - companies with high exposure to this vertical, such as Globant, may face greater demand sensitivity.
- Geopolitical exposure - significant business in regions such as the Middle East can amplify downside risk for affected providers.