Goldman expects Q2 results for the IT services group to be broadly in line, but macro uncertainty limits upside

Overview

This report is Goldman’s 2Q earnings outlook for U.S. technology IT services companies. The core view is that sector results are likely to be broadly in line with market expectations, but rising macro uncertainty, delayed customer decision-making, and AI disruption to traditional service models are likely to make managements more inclined to narrow full-year guidance and anchor expectations around the midpoint. The coverage includes IBM, CTSH, EPAM, GLOB, and TASK, with separate assessments of software growth, consulting demand, outsourcing backlog, AI business, and margin pressure.

Core views

In relative terms, Goldman is most constructive on IBM, arguing that its software mix, Red Hat growth, WatsonX, and enterprise AI demand make it a structural winner within the sector. CTSH is expected to stay relatively stable supported by cost-focused outsourcing demand, but upside is limited. EPAM and GLOB remain affected by weak discretionary spending, delayed customer decisions, and macro headwinds, with limited short-term catalysts. TASK faces concentration risk in the BPS market, key-client demand, and AI substitution pressure on revenue and margins, making it the most negative name in coverage.

Analysis framework

The report uses a company-by-company decomposition, comparing Goldman forecasts with Street expectations for each company, with emphasis on 2Q performance, FY26/3Q26 revenue guidance, constant-currency growth, FX impact, adjusted operating margins, EPS, free cash flow, and potential conference-call discussion items. It also incorporates recent stock performance, investor expectations, AI demand or AI disruption, and regional and vertical demand to gauge relative risk/reward after earnings release.

Methodology notes

• Valuation and estimate comparisonGS vs. Street estimates

  Comparison between Goldman forecasts and market consensus estimates

  For each company, the report compares Goldman’s predictions for revenue growth, margins, EPS, free cash flow, and guidance versus market expectations, to assess whether earnings are likely to prompt an upside or downside revision.

• Factor frameworkGS Factor Profile

  Growth, financial returns, valuation multiples, and composite factors

  Goldman’s factor framework compares each stock against the market and peers using growth, financial returns, valuation multiples, and a composite score to provide quantitative context for stock-specific positioning.

• M&A scenarioM&A Rank

  Tiered M&A probability assessment

  Goldman rates the likelihood of a company becoming an acquisition target from 1 to 3, where 1 is higher probability, 2 is medium, and 3 is lower; a higher M&A probability can factor into the target price call.

• Database toolQuantum

  Goldman proprietary financial database

  Quantum provides historical financials, forecasts, and ratio data that support both single-company deep dives and cross-company comparisons.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• International Business Machines Corp. (IBM)

  Relatively constructive, primary upside name within the sector

  Strengths

  Software momentum, high-single-digit growth expectations at Red Hat, WatsonX, and enterprise AI demand, and free cash flow resilience.

  Weaknesses

  Consulting demand is pressured by macro slowdown, and mainframe cycle contribution in 2026 may normalize.

  Comparison

  Compared with other IT services companies, IBM’s software mix is more resistant to AI disruption and it may become a net beneficiary of enterprise AI spending.

  Risks

  Headwinds in software cycle, slowing consulting demand, AI order deceleration, and dilutive M&A.

• Cognizant Technology Solutions (CTSH)

  Neutral, expected to be steady but with limited upside

  Strengths

  Cost-oriented clients are likely to continue supporting outsourcing demand, and AI efficiency from Project Leap supports margins.

  Weaknesses

  AI has a negative effect on large outsourcing deals, and macro uncertainty limits organic growth elasticity.

  Comparison

  More stable than EPAM, which has higher exposure to discretionary spending, but it lacks IBM-style software and AI upside catalysts.

  Risks

  Further demand slowdown, dilutive M&A, and margin compression.

• EPAM Systems Inc. (EPAM)

  Neutral to cautious, with limited near-term catalysts

  Strengths

  A relatively strong execution history, long-term upside potential if IT spending recovers, and room for AI revenue run-rate growth.

  Weaknesses

  Core implementation and consulting businesses are more exposed to weak discretionary spend, and client decision delays continue.

  Comparison

  Compared with IBM and CTSH, EPAM is more sensitive to macro conditions and discretionary project budgets, giving it a weaker near-term risk/reward profile.

  Risks

  Further demand slowdown, dilutive M&A, heightened geopolitical tensions, wage pressure, and pricing pressure.

• Globant SA (GLOB)

  Neutral, revised expectations but macro shadow persists

  Strengths

  If AI Pods growth accelerates and shows clear client pull-through, revenue upside is possible; lower valuation after the stock decline reduces the hurdle for positive surprises.

  Weaknesses

  Demand pressure in the Middle East, U.S., and consumer-related verticals, with FY26 growth guidance likely to narrow.

  Comparison

  More AI upside narrative than TASK, but recovery visibility remains unclear due to macro and geographic exposure.

  Risks

  Slowing demand in niche verticals, additional revenue deceleration, and dilutive M&A.

• TaskUs Inc. (TASK)

  Relatively negative, Sell rating

  Strengths

  There is upside if AI customer-service tools develop more slowly than expected, if U.S. domestic labor demand remains stable, or if Meta demand recovers.

  Weaknesses

  High concentration in the BPS market, AI adoption creates a headwind to revenue mix, and hiring plus contract ramp-up pressures constrain margins.

  Comparison

  Among the covered companies, TASK is the most sensitive to AI substitution and single large-customer demand, with the weakest risk/reward.

  Risks

  Large customer demand slowdown, faster AI substitution, pricing pressure, and additional hiring costs putting pressure on EBITDA margins.

Key data

• IBM rating and target priceBuy, 12-month target price $335Target based on 25x forward EPS one year ahead; Goldman expects FY26 constant-currency revenue growth of about 5.2% and free cash flow around $16.0bn.
• CTSH rating and target priceNeutral, 12-month target price $75Target based on 12x forward EPS one year ahead; FY26 constant-currency revenue guidance is expected to narrow to 4.0%-6.0%.
• EPAM rating and target priceNeutral, 12-month target price $110Target based on 8x forward EPS one year ahead; FY26 organic constant-currency revenue growth guidance is expected to narrow to 2.5%-4.0%.
• GLOB rating and target priceNeutral, 12-month target price $60Target based on 9x forward EPS one year ahead; FY26 growth guidance is expected to narrow to 0.3%-1.8%.
• TASK rating and target priceSell, 12-month target price $7Target based on 5x forward EPS one year ahead; Goldman expects the company to reaffirm full-year revenue and EPS guidance, but margins remain under pressure.
• IBM EPS revision2026/2027/2028 EPS at $12.50/$13.50/$15.20FY26 EPS was trimmed from $12.55 to $12.50, mainly reflecting weaker currency tailwinds.
• TASK client concentrationMeta represents about 27% of revenueThe report says investors will focus on Meta demand trends and the impact of AI on customer-service tools.

Impact & implications

From an investment perspective, the sector is not in a strong earnings-upgrade environment, and earnings being in line on their own may not be enough to drive most stocks significantly higher. A more important variable is whether management confirms delayed customer spending, whether the upper end of full-year guidance is lowered, whether AI projects can convert from pilots to actual revenue, and whether margins can absorb wage, pricing, and hiring pressure. On a relative basis, IBM’s AI and software resilience makes it more defensive and upward-biased; TASK and service peers with higher discretionary-spend exposure face higher downside risk.

Risks

• Macro uncertainty continues to hurt client decision-making, leading to potential full-year guidance cuts or narrowing of the top end of guidance ranges.
• AI creates substitution in traditional outsourcing, BPS, and application implementation demand, weighing on revenue growth and valuation multiples.
• Delayed consulting and discretionary IT projects may push out short-term recovery for more discretionary-spend exposed companies such as EPAM and GLOB.
• Wage increases, pricing pressure, M&A activity, and contract-ramp hiring investment could squeeze margins.
• Geopolitical disruptions and changing demand in the Middle East, U.S., and consumer-related verticals may affect revenue recovery for companies such as GLOB.

What to watch

• Whether each company anchors FY26 or 3Q26 guidance around the midpoint of the range or reduces the top end.
• IBM software growth, Red Hat performance, consulting order book, and commentary on AI bookings/ARR.
• CTSH organic growth, stability of outsourcing demand, AI efficiency from Project Leap, and margin trajectory.
• Whether customer decision delays at EPAM ease and whether AI-native revenue begins to contribute incremental growth.
• Demand recovery at GLOB across the Middle East, the U.S., media and entertainment, and travel and hospitality, as well as whether AI Pods accelerates.
• TASK EBITDA margin, Meta demand trend, and the speed of AI customer-service tools substituting BPS work.