The Technology Services space has registered strong growth post-pandemic, led by the swift adoption of remote work, augmenting the global digital transition. Technological advancements like 5G, blockchain, artificial intelligence (AI), and machine learning (ML) have expanded the industry. Furthermore, the industry’s growth has raised concerns about data security.
AppLovin Corporation APP, Qifu Technology QFIN and Priority Technology Holdings PRTH are on the path to take advantage of the prevailing trends.
About the Industry
The Zacks Technology Services industry encompasses companies producing, developing and designing various software support, data processing, computing hardware, and communications equipment. These offerings range from integrated powertrain technologies, advanced analytics, technology solutions and contract research services to semiconductor packaging and interconnect technologies, collaboration software, specialty printers, and data acquisition and analysis systems. This industry caters to consumer and business markets, and serves diverse end markets and customer segments. Furthermore, some industry players offer advanced analytics, clinical research services, data storage technology and solutions, and technology-enabled financial services for consumers and small business owners.
Factors Structuring the Future of Technology Services
Rising Demand Environment: The industry is mature, with the demand for services remaining healthy over time. Revenues, income and cash flows are slowly recovering to the pre-pandemic levels, aiding most industry players to pay out stable dividends.
Economic Recovery: The sector is a major beneficiary of the broader economy and service activities. According to the Bureau of Economic Analysis, GDP grew at an annual rate of 2.8% in 2024 compared with 2.5% growth in 2023. Economic activities in the non-manufacturing sector are on a good trajectory. The Services PMI measured by the Institute for Supply Managementhas stayed above the 50% mark in 56 out of 59 months.
Technological Advancement Takes the Lead: The global shift toward digitization provides opportunities in various markets, including 5G, blockchain and AI. The United States, a vital player in the IT sector, is positioned for growth in the widespread adoption of smart technologies and a surge in investments in security. Companies incorporate generative AI, ML, blockchain and data science faster to gain a competitive edge. According to Bloomberg, the worldwide generative AI is expected to grow, witnessing a 42% CAGR over the next 10 years, and become a $1.3-trillion market by 2032.
Zacks Industry Rank Indicates Promising Outlook
The Zacks Technology Services industry, which is housed within the broader Zacks Business Services sector, carries a Zacks Industry Rank #49 at present. This rank places it in the top 20% of more than 246 Zacks industries.
The group’s Zacks Industry Rank, which is the average of the Zacks Rank of all the member stocks, indicates continued outperformance in the near term. Our research shows that the top 50% of Zacks-ranked industries outperform the bottom 50% by a factor of more than two to one.
Before we present a few stocks that you may want to consider for your portfolio, let us look at the industry’s recent stock market performance and current valuation.
Industry Outperforms Sector & S&P 500
The Zacks Technology Services industry has outperformed the broader Zacks Business Services sector and the Zacks S&P 500 composite over the past year.
The industry has returned 42.1% over this period compared with the 12% rise of the broader sector and the 12.4% rally of the Zacks S&P 500 Composite.
One-Year Price Performance
Industry's Current Valuation
On the basis of EV-to-EBITDA (enterprise value to earnings before interest, tax, depreciation and amortization), which is used for valuing staffing stocks because of their high debt levels, the industry is trading at 31.02X at present compared with the S&P 500’s 16.6X and the sector’s 12.03.
Over the past five years, the industry has traded as high as 40.7X and as low as 22.13X, with the median being 29.86X, as the charts below show.
EV-to-EBITDA
3 Technology Services Stocks Ahead of the Pack
Here, we have recommended three high-potential technology services stocks anticipated to gain from a flourishing market.
AppLovin: This company engages in building a software-based platform for advertisers to improve the marketing and monetization of their content in the United States and across the globe.
The company is rigorously enhancing its machine-learning models and leveraging AI to deliver greater value to its partners, ensuring that its platform demonstrates exceptional performance. APP is advancing its e-commerce and web advertising solutions by improving integrations with third-party platforms and vendors to provide advertisers with a smooth experience.
APP is prioritizing improving the creative experience by allowing advertisers to optimize campaigns with ease. We expect these initiatives to bear fruit for the company in the long run, positioning it for sustained success.
AppLovin’s technological innovators have significantly augmented the gaming ecosystem, breathing life into an industry that would otherwise be facing difficulties without the company’s advancements over the past two years. Carrying this confidence, the company is expanding its reach into new sectors, trying to replicate the improvement it achieved within the gaming industry in these new domains.
APP flaunts a Zacks Rank #1 (Strong Buy) at present. The Zacks Consensus Estimate for its 2025 bottom line has increased 22% in the past 60 days. Earnings are expected to rise 85.2% year over year in 2025. APP shares have skyrocketed 340.5% in the past year.
You can see the complete list of today’s Zacks #1 Rank stocks here.
Price and Consensus: APP
Priority Technology: This company operates a platform that combines payables, merchant services and banking solutions to streamline financial operations.
In the first quarter of 2025, PRTH registered strong growth in its top and bottom lines despite the economic turbulence over the impacts of tariffs and government cuts. An optimistic performance in unfavorable macroeconomic conditions positions the company to benefit in the long run when the economic conditions improve.
Priority Technology is witnessing robust enrollment trends and a surge in the number of billed clients in CFTPay, coupled with an increase in the number of integrated partners and organic sales growth across same-store with those partners.
PRTH sports a Zacks Rank #1 at present. The Zacks Consensus Estimate for its 2025 bottom line has increased 1.9% in the past 60 days. Earnings are expected to rise more than 100% year over year in 2025. PRTH shares have upsurged 116.8% in the past year.
Price and Consensus: PRTH
Qifu Technology: This leading China-based credit tech is riding on higher total loan facilitation and origination volume on its platform. QFIN is improving user acquisition efficiency by diversifying acquisition channels and lowering its average acquisition cost per credit line user.
Qifu Technology’s initiative to integrate AI in improving credit data analysis and strategy to optimize its loan portfolio is enhancing its asset quality. Apart from this, the company is leveraging AI copilot models in loan collection and telemarketing to automate the development of marketing materials. QFIN’s AI-Plus strategy is gaining strong traction among its financial institution partners, which will become vital to its technology solutions business.
Moving to the macroeconomic environment, China’s special action plan aimed at boosting consumption is expected to facilitate higher demand for loan products. Banking on AI and favorable macros, QFIN’s vision to grow will become clearer in the long run.
QFIN flaunts a Zacks Rank #1 at present. The Zacks Consensus Estimate for 2025 earnings per share has increased 8.3% in the past 60 days. Earnings are expected to rise 22.4% year over year in 2025. QFIN shares have skyrocketed 113.7% in the past year.
Price and Consensus: QFIN
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
