In this piece, we will take a look at the 10 best information technology services stocks to buy.
Information technology (IT) services are a key component of the broader IT market, which also includes services, devices, enterprise software, and data center systems. By 2023, global IT spending had surged to over $1.3 trillion. Regionally, North America and Asia were projected to account for 66% of global IT expenditure in 2022. Meanwhile, IT services spending in Latin America has consistently held a 6% share since 2019. Cloud computing is one segment of the broader IT market that is experiencing robust growth, with end-user spending anticipated to exceed $590 billion by 2023. Projections from Mordor Intelligence indicate an increase from $0.68 trillion in 2024 to an estimated $1.44 trillion by 2029, reflecting a compound annual growth rate (CAGR) of 16.4%. This upward trend is expected to persist, with the market value approaching $2.5 trillion by 2032. These figures highlight the increasing adoption and utilization of cloud solutions across various industries.
On another front, the advent of 5G technology has led companies to establish networks on their premises. According to Ericsson, global 5G subscriptions are projected to exceed 5.6 billion by the end of 2029, accounting for 60% of all mobile subscriptions. Set to replace 4G by delivering ultra-fast speeds and significantly reduced latency, 5G is expected to become the leading mobile access technology by 2028. In Q1 2024 alone, 5G subscriptions surged by 160 million, bringing the total to 1.7 billion.
According to Gartner’s latest forecast, worldwide IT spending will reach $5.06 trillion in 2024, marking an 8% increase from 2023. This revised growth rate is up from the previous quarter’s estimate of 6.8%, setting the stage for IT spending to exceed $8 trillion well before the decade’s end. Additionally, spending on data center systems is anticipated to experience a significant growth surge, rising from 4% in 2023 to 10% in 2024, largely driven by preparations for generative AI. Speaking on this, John-David Lovelock, Distinguished VP Analyst at Gartner, said the following:
“Spending on IT services is projected to grow by 9.7%, surpassing $1.52 trillion and becoming the largest market tracked by Gartner. Enterprises are increasingly unable to compete with IT service firms in attracting talent with critical IT skill sets. As a result, there is a rising need for investment in consulting services over internal staffing. This year marks an inflection point, with more spending on consulting than on internal staff for the first time.”
Moreover, the AI industry has seen significant growth, with global funding doubling to $66.8 billion by 2021. According to a report by Precedence Research, the market will grow to approximately $2,575.2 billion by 2032, reflecting a CAGR of 19% from 2023 to 2032. Additionally, PwC suggests that AI could contribute around $15.7 trillion to the global economy by 2030, surpassing the current combined output of China and India. This contribution is expected to consist of $6.6 trillion from increased productivity and $9.1 trillion from effects related to heightened consumption.
A team of Information Technology professionals creating complicated algorithms at their desks.
Our Methodology
To identify the best information technology services stocks to buy now, we utilized Insider Monkey’s extensive database, which tracks 920 hedge funds as of Q1 2024. We selected the information technology services stocks that had the highest number of hedge fund investors. Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
10 Best Information Technology Services Stocks to Buy
10. Cognizant Technology Solutions Corp. (NASDAQ:CTSH)
Number of Hedge Fund Holders: 35
Cognizant Technology Solutions Corp. (NASDAQ:CTSH) offers a comprehensive range of IT services, including Cloud, Business Process Automation (BPO), Internet of Things (IoT), AI, applications, and more.
On Monday, Goldman Sachs initiated coverage on shares of Cognizant Technology Solutions Corp. (NASDAQ:CTSH), assigning a Neutral rating and setting a price target of $72. The firm highlighted Cognizant as a leading global provider of application development, maintenance, and outsourcing services, while emphasizing the company’s focus on improving sales engagement with clients and securing large deals as crucial for future success, which could position Cognizant for long-term growth.
However, not all analysts share this positive outlook. BofA Securities, for instance, maintained an Underperform rating on Cognizant Technology Solutions Corp. (NASDAQ:CTSH) with a consistent price target of $70.00. This came after Cognizant announced a definitive agreement to acquire Belcan, an engineering services provider, for approximately $1.29 billion, including $1.19 billion in cash and $97 million in CTSH stock. Despite this diversification effort, BofA Securities noted that the company’s visibility into its multi-year organic growth profile remains unclear.
As of the end of the first quarter of 2024, 35 hedge funds tracked by Insider Monkey were bullish on Cognizant Technology Solutions Corp. (NASDAQ:CTSH), holding stakes valued at $2.05 billion.
9. International Business Machines Corporation (NYSE:IBM)
Number of Hedge Fund Holders: 49
International Business Machines Corporation (NYSE:IBM), a leader in the IT services industry with its ITSM solutions and consulting, is currently in the spotlight following strategic decisions by its management. Recently, IBM decided to sell its QRadar product to Palo Alto Networks and announced the release of its Granite models as open-source software. These moves are seen as efforts to focus on more profitable areas. Additionally, IBM’s acquisition of HashiCorp, while initially expected to dilute earnings, is projected to become earnings per share (EPS) accretive by 2026.
On June 25, Goldman Sachs initiated coverage on IBM shares with a Buy rating and a price target of $200. The firm praised IBM’s strategic shift towards long-term growth, highlighting the company’s focus on infrastructure software assets, especially those related to open-source and artificial intelligence.
In addition, International Business Machines Corporation (NYSE:IBM)’s financial performance and strategic changes are garnering investor interest. Revenue is expected to grow from $60.5 billion in 2024 to $65.5 billion in 2025, with EPS increasing from $9.13 in 2024 to $10.34 in 2025. The company’s strategic focus on AI and hybrid cloud services is anticipated to attract further investor interest, driven by a significant AI-centric backlog and the potential for Red Hat to accelerate its performance.
According to Insider Monkey’s database of 920 hedge funds, 49 had stakes in International Business Machines Corporation (NYSE:IBM). The largest hedge fund stakeholder was AQR Capital Management, which owns a $232.9 million stake in the company.
8. Hewlett Packard Enterprise Company (NYSE:HPE)
Number of Hedge Fund Holders: 49
Hewlett Packard Enterprise Company (NYSE:HPE) delivers data solutions worldwide through its various segments, including Compute, HPC & AI, Storage, Intelligent Edge, Financial Services, and Corporate Investments. The company offers an array of products such as servers, storage solutions, edge systems, networking solutions, and related services.
Hewlett Packard Enterprise has recently made several significant announcements. In collaboration with NVIDIA Corporation, Hewlett Packard Enterprise Company (NYSE:HPE) has launched a comprehensive AI enablement program and a new private cloud solution designed for AI applications. This program aims to bolster the AI capabilities of HPE’s enterprise partners through specialized training and certifications. The private cloud solution integrates NVIDIA’s AI computing with HPE’s AI storage and the HPE GreenLake cloud platform. Additionally, Hewlett Packard Enterprise Company (NYSE:HPE) recently came into partnership with global technology services firm Wipro to introduce a new AI solution, GenAI, which is expected to enhance operational efficiency and customer experience.
Financially, HPE reported significant growth in AI shipments, reaching approximately $900 million in the April quarter. Following this performance, Evercore ISI maintained a $22 share price target and an In Line rating for the stock.
Insider Monkey’s first-quarter data indicates hedge fund optimism towards Hewlett Packard Enterprise Company (NYSE:HPE), with 49 hedge funds holding positions in the company, down slightly from 50 in the previous quarter.
7. Accenture Plc (NYSE:ACN)
Number of Hedge Fund Holders: 57
Accenture Plc (NYSE:ACN) stands as one of the largest IT services companies globally, offering a wide range of services and solutions across various IT domains, including data, infrastructure, automation, Cloud, security, supply chain, and more.
During its third quarter fiscal 2024 earnings call, Accenture Plc (NYSE:ACN) reported steady growth and strategic investments. The company posted $16.5 billion in revenue, a 1.4% increase in local currency despite a 1% decline in US dollars. Operating margins saw a slight improvement to 16.4%, and free cash flow remained strong at $3 billion. The company’s new bookings were particularly impressive, showing 22% growth in U.S. dollars and 26% growth in local currency, totaling $21.1 billion. A key growth driver was the company’s focus on large-scale transformations, especially in artificial intelligence, with its GenAI business achieving $2 billion in sales year-to-date.
Following the earnings report, TD Cowen slightly adjusted its outlook on Accenture Plc (NYSE:ACN), lowering the price target to $293 from $294 while maintaining a Hold rating on the shares. Despite performance that exceeded concerns, with bookings particularly strong in Management Services (MS), the firm noted that contract durations are lengthening and organic growth trends remain subdued.
Hedge fund sentiment towards Accenture Plc (NYSE:ACN) was positive in the first quarter, according to Insider Monkey’s database of 920 hedge funds. By the end of the period, 57 hedge funds reported owning stakes in Accenture Plc (NYSE:ACN), down slightly from 58 in the previous quarter.
6. Cisco Systems, Inc. (NASDAQ:CSCO)
Number of Hedge Fund Holders: 58
Cisco Systems, Inc. (NASDAQ:CSCO) develops and sells networking and related products. The company recently launched a $1 billion fund for artificial intelligence (AI) startups, with investments already made in Cohere, Mistral AI, and Scale AI. Additionally, Cisco has partnered with NVIDIA Corporation to introduce the Cisco Nexus HyperFabric AI cluster, combining Cisco’s networking expertise with NVIDIA’s computing power and AI software.
Morgan Stanley analyst Meta Marshall recently praised Cisco Systems, Inc. (NASDAQ:CSCO)’s Q3 results, noting that the company slightly exceeded estimates with better-than-expected orders. Marshall holds an Overweight rating and a $58 price target on CSCO, believing that the company’s 2025 earnings estimates are “achievable.”
BofA Securities also maintained a positive outlook on Cisco Systems, Inc. (NASDAQ:CSCO), reiterating a Buy rating and a $60 price target after attending Cisco’s Investor Day. Cisco’s management projects a 5% year-over-year revenue growth for both FY26 and FY27, aligning with the company’s core revenue growth expectations for FY25, excluding contributions from Splunk. BofA Securities suggests that these targets may be conservative, not fully reflecting the potential impacts of new growth initiatives. The analysts highlight several areas where Cisco could exceed its guidance, including advancements in AI networking, accelerated growth in security products, and potential revenue synergies from the integration of Splunk.
As of the end of Q1 2024, 58 hedge funds in Insider Monkey’s database held stakes worth $1.6 billion in Cisco Systems, Inc., compared to 60 hedge funds in the previous quarter with stakes worth $2.7 billion.