Value or Mirage? Markets Pricing in Dire End-State Growth for Services

Research evidence excerpt

Value or Mirage? Markets Pricing in Dire End-State Growth for Services

TD SECURITIES (USA) LLC INDUSTRY UPDATE

June 11, 2026

■Computer Services & IT Consulting Value or Mirage? Markets Pricing in Dire End-

■Computer Services & IT Consulting:

Business Services State Growth for Services

Bryan C. Bergin, CFA THE TD COWEN INSIGHT

646 562 1369

Implied terminal growth at current share prices across Services coverage showcases

bryan.bergin@tdsecurities.com

bleak underlying growth views well below current operating levels. NT sentiment remains

Gates Schwarzmann muted as clear catalysts are admittedly lacking, but selective upside potential remains

646 562 1363 underappreciated, particularly as steady FCF gen & valuation increase repo outlays.

gates.schwarzmann@tdsecurities.com

Preference among mid/lrg caps remain EXLS, G, ACN, EPAM.

Services Sector Pressure; Dire Implied Terminal Growth Overdone, Awaiting

Catalysts

Amid sector pressure, Services stocks reflect terminal growth well below what we think is

reasonable for some, with reverse DCF analyses demonstrating an implied -7% average

terminal rate across the group versus what have historically been resilient GDP+ growth

businesses. Clearly, there's ongoing underperformance due to cyclical & structural headwinds,

but this analysis becomes more topical amid growing enterprise AI cost & ROI concerns.

Services stocks currently price a bleak growth outlook over the next decade+ despite

consensus modeling ~4.5% organic CC revenue growth in CY26/27E, with bears arguing

enterprise AI adoption will diminish services revenue potential from increasing productivity,

increased competition and insourcing of IT efforts. Most notably, Digital Product Engineering