Written by: Rita

Trend Guide

On July 10, Goldman Sachs released a performance preview for the Americas technology IT services sector for Q2 2026, covering five companies: IBM, Cognizant, EPAM, Globant, and TaskUs. The core judgment is that overall Q2 performance meets expectations; however, macroeconomic uncertainty has begun to affect client decisions since April-May, leading enterprises to lower the upper guidance range and anchor expectations around the midpoint. Goldman Sachs believes that IBM is a relative beneficiary in the sector, as the resilience of its software business combined with enterprise AI demand gives it allocation value; whereas targets like EPAM, reliant on discretionary spending, face greater downside risks.

Macroeconomic Uncertainty is Compressing Earnings Guidance Space

Goldman Sachs clearly pointed out in the report that macroeconomic uncertainty has begun to affect the decision-making rhythm of IT service clients since April-May. CIOs in enterprises have become conservative in their expenditure decisions, with consulting and discretionary spending projects being the most affected.

The core evidence for this judgment comes from two aspects: firstly, macro data continues to fluctuate; secondly, enterprise clients' adjustments to AI budgets are squeezing traditional IT service expenditures. Goldman Sachs believes that this impact is not short-term quarterly noise, but could persist throughout 2026. Therefore, it is highly likely that all five companies will narrow their upper guidance range in their Q2 earnings reports, anchoring market expectations near the midpoint of the range.

IBM: Software Resilience + Enterprise AI Demand, Relative Beneficiary

IBM is the only company in the sector rated as a buy by Goldman Sachs, with a target price of $335.

The core resilience of IBM's software business is its key strength. Goldman Sachs expects Q2 software revenue to be $8.16 billion, basically in line with market expectations, with full-year software revenue projected at $33.2 billion. Red Hat is expected to achieve double-digit growth in 2026, and the integration of Confluent is also progressing. In an overall tightening environment for enterprise IT spending, the stability of core software is becoming a scarce attribute.

Enterprise AI demand is another differentiating factor. IBM's consulting + software hybrid model is being repriced by the market; it possesses both the implementation capability of AI consulting and products like WatsonX. Goldman Sachs believes that IBM is increasingly viewed as a net beneficiary of enterprise AI demand.

Goldman Sachs expects IBM's Q2 revenue to be $17.86 billion, slightly exceeding the market expectation of $17.84 billion; with full-year revenue of $71.3 billion, showing a year-on-year growth rate of about 5.2%. IBM's guidance for free cash flow in 2026 may be around $16 billion, higher than the market expectation of $15.9 billion.

EPAM: Largest Exposure to Discretionary Spending, Short-term Surprises Difficult

EPAM is the most cautious target in the sector for Goldman Sachs regarding short-term prospects, rated neutral.

EPAM's business focuses on application implementation and consulting, which is the segment most affected by the current macro fluctuations. Goldman Sachs expects Q2 revenue to be $1.41 billion, basically in line with market expectations; with full-year revenue of $5.7 billion, showing an organic growth rate of about 3.2%, lower than the previous upper guidance range.

More notably, guidance is a point of concern. Goldman Sachs expects EPAM to narrow its full-year organic growth guidance from 2.5%-5.0% to 2.5%-4.0%. Before the macro uncertainty is resolved, EPAM's core business lacks short-term catalysts.

Other Targets: Neutral Ratings Within Goldman Sachs' Coverage

Cognizant (neutral, target price $75) is expected to have full-year revenue of $22.3 billion, with a growth rate of about 5.1%. Goldman Sachs believes Cognizant benefits from clients’ ongoing demand for cost optimization; even if discretionary spending remains sluggish, outsourcing demand still has support.

Globant (neutral, target price $60) is dragged down by geopolitical issues in the Middle East and consumption-related vertical industries (media, entertainment, tourism, hotels). Goldman Sachs expects full-year revenue of $2.48 billion, basically flat.

TaskUs (neutral, target price $7) is the most impacted by AI on business process outsourcing, with Goldman Sachs expected full-year revenue of $1.23 billion, showing a growth rate of 3.7%.

Trends Perspective

The most valuable judgment from Goldman Sachs’ preview is not the specific numbers but the structural differentiation it captures in the industry. Faced with the same macroeconomic uncertainty, IBM and EPAM are heading in completely opposite directions; the former benefits from software stickiness and concentration of enterprise AI budgets, while the latter is burdened by the crowding-out effect of discretionary spending. This differentiation essentially reflects the "AI budget reconstruction" currently happening in the IT services industry: enterprises are cutting back on traditional consulting and systems integration spending, reallocating budgets to AI-related software and implementation projects. This is favorable for IBM and a pressure for EPAM.

In terms of valuation, IBM’s current stock price is about $241, corresponding to a forward P/E ratio of 25, with a target price of $335; EPAM’s stock price is about $130, corresponding to a forward P/E ratio of 8, with a target price of $110. The market’s low valuation of EPAM itself is pricing in "performance will not be good," and Goldman Sachs' judgment is that there are no triggering factors for expected reversal in the short term.

Disclaimer

This article is a compilation and interpretation of the third-party brokerage research report (Goldman Sachs, July 10, 2026) by Trend Research. The ratings, target prices, earnings forecasts, and related judgments cited in the text are the views of that brokerage's analysts, representing only the stance of their respective institutions, and do not represent the views of Trend Research, nor do they constitute any investment advice.

There are risks in the market; decisions should be independent. This article should not be used as the basis for buying or selling any securities.