Berenberg said artificial intelligence is increasingly disrupting the IT services landscape, prompting the brokerage to revise its stance on sector stocks amid rising concerns over AI-driven pricing deflation, unclear routes to capturing value from AI, and an absence of immediate catalysts that could restore previous valuation levels.
In a note outlining its more cautious view, Berenberg highlighted that IT services equities have lagged broader markets this year despite earnings forecasts remaining comparatively stable. Investors, the bank said, are apprehensive that progress from AI model providers such as OpenAI and Anthropic could reduce demand for conventional consulting and outsourcing engagements.
The broker took action on several large providers. Cognizant Technology Solutions was downgraded from Buy to Hold and its price target was cut to $59 from $81. Berenberg argued that structural AI risks have intensified since January and that Cognizant continues to trail leading peers in the differentiated capabilities needed to counteract AI-driven deflation.
At the same time, Berenberg maintained a Buy rating on Accenture but lowered the price target to $220 from $273, noting that the move reflected sector-wide multiple compression rather than changes to earnings projections. The bank also reiterated a Hold rating and a c112 price target on Capgemini.
Central to Berenberg's thesis is the view that AI is exerting deflationary forces on legacy IT services by cutting into billable hours and giving clients leverage to demand lower fees for work augmented by AI. Yet the brokerage also identified fresh areas of expansion driven by AI, including enterprise modernisation, investments in AI infrastructure, deployments of agentic AI and broader AI-enabled business transformation.
Within that framework, Berenberg judged Accenture to be best positioned to capture value from these emerging AI-driven opportunities because of its mix of higher-value services, strategic partnerships and investments in AI-focused platforms. The bank named Accenture its top pick in the sector and suggested that the company's historical valuation premium relative to peers should eventually reappear.
Berenberg further noted that developers of AI models are increasingly entering the enterprise deployment space, pointing to OpenAI's acquisition of consulting firm Tomoro and Anthropic's initiatives focused on deployment. While such moves raise concerns about a narrowing addressable market for traditional IT services companies, the brokerage said AI providers today lack the scale and vertical expertise required to supplant major outsourcing vendors in large, complex transformation programs that span multiple years.
Despite the softer investor sentiment, Berenberg reported that demand for services has held up reasonably well. Financial services clients continue to outpace other end markets, and large AI-related bookings have been rising across major vendors. Nonetheless, the bank expects average revenue growth among leading IT services firms to remain in the low single digits as client budgets are increasingly redirected toward AI-led transformation work and cost-optimization initiatives.
Analysis takeaway - Berenberg's reassessment underscores a sector at a crossroads: AI is both a source of potential efficiencies that compress legacy revenue pools and a driver of new, but uneven, growth opportunities that premium providers may be better placed to monetize.