Overview of European IT Services#

BofA Securities has become optimistic about the European IT services sector, predicting a gradual recovery in revenue through 2026. This follows two years of negative growth. The firm’s proprietary sector indicator has shown improvement for eight consecutive months, indicating a positive trend in the industry.

Key Company Picks#

BofA has identified several companies as strong performers in this recovery:

Capgemini#

Capgemini is highlighted as a top choice, receiving a "buy" rating with a target price of €145. BofA believes that the company will benefit from European clients increasing their offshoring activities due to tighter budgets. Additionally, the effective monetization of Generative AI (GenAI) offerings could further enhance its growth. Currently, shares are priced at €107.80, suggesting a potential upside of around 35% to the target price.

Netcompany#

Netcompany also earns a "buy" rating, with a price target of DKK 336. BofA hosted the company’s CEO in a discussion earlier this year and came away optimistic about its product-focused delivery model and specialization in certain sectors. These factors position Netcompany well as the industry shifts towards more AI-driven solutions and performance-based pricing. Its shares are currently trading at DKK 327.

Sopra Steria#

Sopra Steria has a "buy" rating and a price target of €173, compared to its current price of €126.90, indicating a potential upside of over 36%. BofA notes that the company is experiencing improved organic growth and expects faster profit margins following the sale of its Banking Software division in 2024, allowing IT services to become the core focus of the business.

Kainos#

Lastly, Kainos is included in BofA’s preferred list with a "buy" rating and a price target of 1,290p. The firm appreciates Kainos’s strong presence in the public sector, which provides stable revenue streams through long-term government contracts. BofA views its digital services capabilities as a lasting competitive edge, especially as clients seek more value for their budgets.