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.
5. Dell Technologies Inc. (NYSE:DELL)
Number of Hedge Fund Holders: 82
Dell Technologies Inc. (NYSE:DELL) has emerged as a leading vendor for AI-oriented servers, which are in high demand as companies invest in infrastructure for predictive and generative AI.
Dell Technologies Inc. (NYSE:DELL) reported first-quarter earnings on May 30 that surpassed analysts’ expectations for both earnings and sales. The company projected current-quarter earnings of $1.65 per share and sales between $23.5 billion and $24.5 billion, while analysts anticipated $23.35 billion. For the full fiscal year, Dell Technologies Inc. (NYSE:DELL) forecasted sales between $93.5 billion and $97.5 billion. The company also reported a net income of $955 million for the quarter, or $1.32 per diluted share, compared to $578 million, or $0.79, in the same period last year. Dell’s Infrastructure Solutions Group, which includes data center sales, saw a 22% annual increase in sales, reaching $9.2 billion. In addition, the company’s server unit experienced significant growth, with sales rising 42% to $5.5 billion, driven by strong demand for AI servers.
Bank of America analyst Wamsi Mohan reiterated his Buy rating for Dell Technologies Inc. (NYSE:DELL) following the Q1 earnings report. Mohan believes the AI adoption phase is still in its early stages and expects continued momentum around AI servers. He set a $180 price target for Dell, indicating a 33% upside potential from current levels.
As of the close of Q1 2024, 82 investors disclosed positions in Dell Technologies Inc. (NYSE:DELL), with total stakes amounting to $2.97 billion, an increase from $2.81 billion in the previous quarter.
Carillon Scout Mid Cap Fund stated the following regarding Dell Technologies Inc. (NYSE:DELL) in its first quarter 2024 investor letter:
“Dell Technologies Inc. (NYSE:DELL) reported results that exceeded earnings expectations and announced a better than expected AI-optimized server order pipeline. We expect Dell to participate in the growth of artificial intelligence hardware in its server, storage and personal computing franchises. Long-term, we like the company’s depth and breadth of products and services, as well as its focus on keeping costs low.”
4. Workday, Inc. (NASDAQ:WDAY)
Number of Hedge Fund Holders: 83
Workday, Inc. (NASDAQ:WDAY) is a leading global provider of enterprise cloud applications for finance and human resources. Founded in California in 2005, Workday offers solutions in financial management, human capital management, and analytics to companies, educational institutions, and government agencies.
Workday, Inc. (NASDAQ:WDAY) recently announced strong results for its fiscal 2025 first quarter, which ended on April 30, 2024. The company reported total revenue of $1.99 billion, reflecting an 18.1% year-over-year increase. Additionally, Workday’s earnings per share reached $1.74, surpassing estimates of $1.58. Notably, Workday, Inc. (NASDAQ:WDAY) has consistently exceeded EPS estimates over the past four quarters.
Despite these strong results, some analysts believe that there might be some causes for concern. On May 25, TD Cowen lowered its price target for Workday, Inc. (NASDAQ:WDAY) shares to $290 from the previous $330, while maintaining a Buy rating. This adjustment followed Workday’s announcement of a $5 million subscription revenue beat and customer relationship planning order (cRPO) growth that met expectations at 18%. However, Workday, Inc. (NASDAQ:WDAY)’s management has noted increased scrutiny on larger deals and signs of slower-than-anticipated headcount growth commitments in certain industry sectors during renewals. As a result, the company slightly reduced its revenue guidance for fiscal year 2025. Similarly, KeyBanc adjusted its price target for shares of WDAY to $275 from the previous $330, despite maintaining an Overweight rating on the stock.
Here’s what ClearBridge Investments said about Workday, Inc. (NASDAQ:WDAY) in its Q1 2024 investor letter:
“We also sold our remaining position in data monitoring software maker Splunk (splk) ahead of its acquisition by Cisco Systems. Part of the proceeds were redeployed into enterprise resource planning and finance software maker Workday, Inc. (NASDAQ:WDAY), as we believe its products are well-positioned for consistent, robust subscription growth with potentially further upside as new investment initiatives scale.”
3. ServiceNow Inc. (NYSE:NOW)
Number of Hedge Fund Holders: 90
ServiceNow Inc. (NYSE:NOW) is a leading player in the IT Service Management sector, providing solutions that help companies manage their digital workflows. ServiceNow delivered a strong first quarter in 2024, surpassing expectations in all key growth and profitability metrics. Subscription revenue increased by 25% year-over-year to $2.52 billion, while total revenue grew by 24% year-over-year, reaching $2.60 billion.
In May, Oppenheimer reaffirmed its Outperform rating and $825.00 price target for ServiceNow Inc. (NYSE:NOW) following the company’s annual Knowledge conference. Insights from a survey of 48 customers indicated a positive outlook for ServiceNow Inc. (NYSE:NOW)’s future, emphasizing its leadership in workflow automation and a broad product portfolio that attracts increased spending from its existing customers. Despite the favorable sentiment, Oppenheimer noted some caution regarding the long-term impact of the company’s Pro+ adoption plans on pricing.
Of the 920 hedge funds tracked by Insider Monkey, ServiceNow Inc. (NYSE:NOW) was held by 90 funds at the end of Q1 2024, making it one of the best information technology services stocks to buy now.
Here’s what Lakehouse Capital said about ServiceNow Inc. (NYSE:NOW) in its Q1 2024 investor letter:
“US-based software company,ServiceNow, Inc. (NYSE:NOW), provided another strong result, continuing its long and consistent track record of 20%-plus revenue growth combined with healthy profitability. Subscription revenues grew 25% year-on-year to $2.5 billion and free cash flow grew 47% year-on-year to $1.2 billion. The company’s core operating metrics were also impressive with remaining performance obligations growing 26% year-on-year to $17.7 billion (i.e. roughly 2x 2023 revenue) and renewal rates holding steady at 98%. Performance was evenly spread across segments, products, and geographies, with notable strength in the US federal government. The company now boasts 1,933 customers generating in excess of $1 million in Annual Contract Value (ACV), which is pleasing to see as it implies multiple solutions are involved and that the company’s platform model is increasingly resonating with customers. In our view, ServiceNow is one the highest quality software businesses globally as the combination of consistent growth at scale, robust free cash flow generation and a large addressable market make it a compelling opportunity.”
2. Oracle Corporation (NASDAQ:ORCL)
Number of Hedge Fund Holders: 96
Oracle Corporation (NASDAQ:ORCL) has established itself as a global leader in business IT solutions. The company recently announced its financial results for the fourth quarter and full fiscal year 2024. Oracle Corporation (NASDAQ:ORCL) reported total Q4 revenue of $14.3 billion, marking a 3% year-over-year increase. Revenue from cloud services and license support saw a robust 9% growth, reaching $10.2 billion, underscoring the strength of Oracle’s cloud offerings. Additionally, the company noted a substantial 44% increase in Q4 total remaining performance obligations (RPO), totaling $98 billion.
Following these results, analysts have adjusted their stock price targets for Oracle Corporation (NASDAQ:ORCL). Deutsche Bank analyst Brad Zelnick raised the firm’s price target to $165 from $150, maintaining a Buy rating. This adjustment reflects the incorporation of Oracle’s Q4 results and guidance into Deutsche Bank’s model, along with updated FY2025-26 revenue and non-GAAP EPS estimates. BMO Capital analyst Keith Bachman also increased the ORCL stock price target to $160 from $142, while maintaining a Market Perform rating. Bachman highlighted Oracle’s strong cloud infrastructure bookings over two consecutive quarters and a favorable FY2025 revenue guide, which stands out compared to the generally tepid results in the broader software and IT services sector. He also noted that Oracle Corporation (NASDAQ:ORCL)’s unique combination of cloud infrastructure and enterprise software places it in an enviable market position.
Here’s what Aristotle Atlantic Partners, LLC, said about Oracle Corporation (NYSE:ORCL) in its Q3 2023 investor letter:
“Oracle Corporation (NYSE:ORCL) provides products and services that address enterprise information technology (IT) environments. The company’s products and services include enterprise applications and infrastructure offerings that are delivered worldwide through a variety of flexible and interoperable IT deployment models. The company operates in three segments: cloud and license business, hardware, and services.
We believe Oracle’s cloud infrastructure product, OCI 2.0, continues to demonstrate strong revenue growth over several quarters. Additionally, we see the rapid growth of artificial intelligence (AI) computing needs as being a differentiated growth driver for Oracle. We believe that Oracle will continue to drive positive outcomes for the Cerner business through a better margin structure, as well as topline sales synergies.”
1. Amazon.com, Inc. (NASDAQ:AMZN)
Number of Hedge Fund Holders: 302
Amazon.com, Inc. (NASDAQ:AMZN) is a leading American multinational technology company with a diverse portfolio that includes e-commerce, cloud computing through Amazon Web Services (AWS), online advertising, digital streaming, and artificial intelligence.
On June 14, JPMorgan reaffirmed its Overweight rating on Amazon.com, Inc. (NASDAQ:AMZN), setting a price target of $240. This came after an extensive analysis of the U.S. e-commerce landscape, which assessed category penetration and Amazon’s market share. The findings suggest that Amazon is on course to surpass Walmart as the largest U.S. retailer by 2024, with e-commerce penetration potentially exceeding 40% in the long term.
Moreover, Amazon.com, Inc. (NASDAQ:AMZN) is rapidly becoming a powerhouse in AI, propelled by its AWS division, which reported operating margins of over 37% in the first quarter. AWS has maintained operating margins above 30% for five consecutive quarters. Additionally, Amazon’s first-quarter revenue saw a 12.5% year-over-year increase, while its adjusted EPS more than tripled.
Research by Insider Monkey for the March quarter of 2024 showed that 302 of the 919 hedge funds tracked held stakes in Amazon.com, Inc. (NASDAQ:AMZN). The largest hedge fund investor was Ken Fisher’s Fisher Asset Management, with a stake valued at $7.67 billion.
While Amazon.com, Inc. (NASDAQ:AMZN) ranks as the favorite hedge fund information technology services stock pick, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than AMZN but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None.
