The end of an earnings season can be a great time to discover new stocks and assess how companies are handling the current business environment. Let’s take a look at how Kyndryl (NYSE:KD) and the rest of the it services & consulting stocks fared in Q1.
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.
Thankfully, share prices of the companies have been resilient as they are up 6.6% on average 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 $3.8 billion, down 1.3% year on year. This print exceeded analysts’ expectations by 0.8%. Despite the top-line beat, it was still a mixed quarter for the company with a decent beat of analysts’ EPS estimates but revenue guidance for next quarter slightly missing analysts’ expectations.
"Fiscal 2025 was another year of strong execution on our strategy. In addition to returning to constant-currency revenue growth in the fourth quarter, we strengthened our leadership in innovative mission-critical technology services. We expanded our capabilities in cloud, modernization, applications, AI and security, and we further differentiated our services with Kyndryl Bridge," said Kyndryl Chairman and Chief Executive Officer Martin Schroeter.
Kyndryl Total Revenue
Interestingly, the stock is up 23.8% since reporting and currently trades at $41.
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 Total Revenue
Grid Dynamics pulled off the biggest analyst estimates beat, fastest revenue growth, and highest full-year guidance raise among its peers. The market seems content with the results as the stock is up 1.4% since reporting. It currently trades at $14.28.
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 guidance for next quarter estimates and a miss of analysts’ EPS estimates.
ASGN delivered the slowest revenue growth in the group. As expected, the stock is down 4.3% since the results and currently trades at $56.
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 was in line with analysts’ expectations. It was a strong quarter as it also recorded an impressive beat of analysts’ EPS estimates.
Gartner had the weakest performance against analyst estimates among its peers. The stock is up 4.4% since reporting and currently trades at $446.10.
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 print surpassed analysts’ expectations by 0.9%. Taking a step back, it was a slower quarter as it produced a significant miss of analysts’ EPS guidance for next quarter estimates.
DXC had the weakest full-year guidance update among its peers. The stock is down 3.3% since reporting and currently trades at $16.02.
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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