Wrapping up Q2 earnings, we look at the numbers and key takeaways for the it services & consulting stocks, including Kyndryl (NYSE:KD) and its peers.
IT Services & Consulting companies stand to benefit from increasing enterprise demand for digital transformation, AI-driven automation, and cybersecurity resilience. Many enterprises can't attack these topics alone and need IT services and consulting on everything from technical advice to implementation. Challenges in meeting these needs will include finding talent in specialized and evolving IT fields. While AI and automation can enhance productivity, they also threaten to commoditize certain consulting functions. Another ongoing challenge will be pricing pressures from offshore IT service providers, which have lower labor costs and increasingly equal access to advanced technology like AI.
The 8 it services & consulting stocks we track reported a mixed Q2. As a group, revenues beat analysts’ consensus estimates by 1.3% while next quarter’s revenue guidance was 0.5% below.
Amidst this news, share prices of the companies have had a rough stretch. On average, they are down 10.3% since the latest earnings results.
Kyndryl (NYSE:KD)
Born from IBM's managed infrastructure services business in a 2021 spinoff, Kyndryl (NYSE:KD) is the world's largest IT infrastructure services provider that designs, builds, and manages technology environments for enterprise customers.
Kyndryl reported revenues of $3.74 billion, flat year on year. This print fell short of analysts’ expectations by 1.5%. Overall, it was a slower quarter for the company with revenue guidance for next quarter missing analysts’ expectations.
"Our first quarter reflected steady progress across key growth areas of our business, with contributions from Kyndryl Consult, hyperscaler-related activity, scope expansions and productivity gains. Our expertise in mission-critical technology and our unique operational capabilities, including Kyndryl Bridge, are helping customers innovate and creating new growth opportunities for Kyndryl," said Chairman and Chief Executive Officer Martin Schroeter.
Kyndryl delivered the weakest performance against analyst estimates of the whole group. Unsurprisingly, the stock is down 17.6% since reporting and currently trades at $30.25.
Read our full report on Kyndryl here, it’s free.
Best Q2: EPAM (NYSE:EPAM)
Founded in 1993 during the early days of offshore software development, EPAM Systems (NYSE:EPAM) provides digital engineering, cloud, and AI transformation services to help global enterprises and startups modernize their technology systems and create digital products.
EPAM reported revenues of $1.35 billion, up 18% year on year, outperforming analysts’ expectations by 1.5%. The business had a strong quarter with a solid beat of analysts’ EPS guidance for next quarter estimates and an impressive beat of analysts’ constant currency revenue estimates.
The market seems happy with the results as the stock is up 8.9% since reporting. It currently trades at $165.
Is now the time to buy EPAM? Access our full analysis of the earnings results here, it’s free.
Slowest Q2: ASGN (NYSE:ASGN)
Evolving from its roots in IT staffing to become a high-end technology consulting powerhouse, ASGN (NYSE:ASGN) provides specialized IT consulting services and staffing solutions to Fortune 1000 companies and U.S. federal government agencies.
ASGN reported revenues of $1.02 billion, down 1.4% year on year, exceeding analysts’ expectations by 2.4%. Still, it was a softer quarter as it posted a significant miss of analysts’ full-year EPS guidance estimates and a significant miss of analysts’ EPS estimates.
Interestingly, the stock is up 5.5% since the results and currently trades at $52.77.
Read our full analysis of ASGN’s results here.
IBM (NYSE:IBM)
With a corporate history spanning over a century and once known for its iconic mainframe computers, IBM (NYSE:IBM) provides hybrid cloud computing platforms, AI solutions, consulting services, and enterprise infrastructure to help businesses modernize their operations.
IBM reported revenues of $16.98 billion, up 7.7% year on year. This number topped analysts’ expectations by 2.4%. More broadly, it was a mixed quarter as it also recorded a solid beat of analysts’ operating income estimates but revenue guidance for next quarter missing analysts’ expectations.
The stock is down 15.1% since reporting and currently trades at $239.62.
Read our full, actionable report on IBM here, it’s free.
Gartner (NYSE:IT)
With over 2,500 research experts guiding organizations through complex technology landscapes, Gartner (NYSE:IT) provides research, advisory services, and conferences that help executives make better decisions about technology and other business priorities.
Gartner reported revenues of $1.69 billion, up 5.7% year on year. This print met analysts’ expectations. It was a strong quarter as it also produced a beat of analysts’ EPS estimates and a narrow beat of analysts’ constant currency revenue estimates.
The stock is down 28.8% since reporting and currently trades at $240.00.
Read our full, actionable report on Gartner here, it’s free.
Market Update
Thanks to the Fed’s series of rate hikes in 2022 and 2023, inflation has cooled significantly from its post-pandemic highs, drawing closer to the 2% goal. This disinflation has occurred without severely impacting economic growth, suggesting the success of a soft landing. The stock market thrived in 2024, spurred by recent rate cuts (0.5% in September and 0.25% in November), and a notable surge followed Donald Trump’s presidential election win in November, propelling indices to historic highs. Nonetheless, the outlook for 2025 remains clouded by potential trade policy changes and corporate tax discussions, which could impact business confidence and growth. The path forward holds both optimism and caution as new policies take shape.
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