As the craze of earnings season draws to a close, here’s a look back at some of the most exciting (and some less so) results from Q1. Today, we are looking at it services & consulting stocks, starting with IBM (NYSE: IBM).
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 7 it services & consulting stocks we track reported a satisfactory Q1. As a group, revenues beat analysts’ consensus estimates by 1% while next quarter’s revenue guidance was in line.
In light of this news, share prices of the companies have held steady. On average, they are relatively unchanged since the latest earnings results.
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 $14.54 billion, flat year on year. This print exceeded analysts’ expectations by 1%. Overall, it was a strong quarter for the company with a solid beat of analysts’ operating income estimates and an impressive beat of analysts’ EPS estimates.
"We exceeded expectations for revenue, profitability and free cash flow in the quarter, led by strength across our Software portfolio. There continues to be strong demand for generative AI and our book of business stands at more than $6 billion inception-to-date, up more than $1 billion in the quarter," said Arvind Krishna, IBM chairman, president and chief executive officer.
The stock is up 5.6% since reporting and currently trades at $259.
Is now the time to buy IBM? Access our full analysis of the earnings results here, it’s free.
Best Q1: Grid Dynamics (NASDAQ: GDYN)
With engineering centers across the Americas, Europe, and India serving Fortune 1000 companies, Grid Dynamics (NASDAQ: GDYN) provides technology consulting, engineering, and analytics services to help large enterprises modernize their technology systems and business processes.
Grid Dynamics reported revenues of $100.4 million, up 25.8% year on year, outperforming analysts’ expectations by 2%. The business had a very strong quarter with a solid beat of analysts’ EPS estimates and full-year revenue guidance beating analysts’ expectations.
Grid Dynamics achieved the biggest analyst estimates beat, fastest revenue growth, and highest full-year guidance raise among its peers. Although it had a fine quarter compared its peers, the market seems unhappy with the results as the stock is down 11% since reporting. It currently trades at $12.53.
Is now the time to buy Grid Dynamics? Access our full analysis of the earnings results here, it’s free.
Weakest Q1: 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 $968.3 million, down 7.7% year on year, exceeding analysts’ expectations by 0.6%. Still, it was a slower quarter as it posted a significant miss of analysts’ EPS estimates.
ASGN delivered the slowest revenue growth in the group. As expected, the stock is down 9.7% since the results and currently trades at $52.81.
Read our full analysis of ASGN’s results here.
DXC (NYSE: DXC)
Born from the 2017 merger of Computer Sciences Corporation and HP Enterprise's services business, DXC Technology (NYSE: DXC) is a global IT services company that helps businesses transform their technology infrastructure, applications, and operations.
DXC reported revenues of $3.17 billion, down 6.4% year on year. This number beat analysts’ expectations by 0.9%. More broadly, it was a slower quarter as it recorded a significant miss of analysts’ EPS estimates.
DXC had the weakest full-year guidance update among its peers. The stock is down 8.3% since reporting and currently trades at $15.20.
Read our full, actionable report on DXC 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 $1.53 billion, up 4.2% year on year. This result met analysts’ expectations. It was a strong quarter as it also logged an impressive beat of analysts’ EPS estimates.
Gartner had the weakest performance against analyst estimates among its peers. The stock is up 2.1% since reporting and currently trades at $436.42.
Read our full, actionable report on Gartner here, it’s free.
Market Update
In response to the Fed’s rate hikes in 2022 and 2023, inflation has been gradually trending down from its post-pandemic peak, trending closer to the Fed’s 2% target. Despite higher borrowing costs, the economy has avoided flashing recessionary signals. This is the much-desired soft landing that many investors hoped for. The recent rate cuts (0.5% in September and 0.25% in November 2024) have bolstered the stock market, making 2024 a strong year for equities. Donald Trump’s presidential win in November sparked additional market gains, sending indices to record highs in the days following his victory. However, debates continue over possible tariffs and corporate tax adjustments, raising questions about economic stability in 2025.
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