Overview
BofA Securities is increasing its bullishness on the European IT services industry, citing a seven-month run of improvement in a proprietary sector indicator. The broker expects the industry to return to 2.7% organic revenue growth in 2026.
Context and backdrop
After an extended downturn that pushed valuations toward near decade-low levels, BofA says the industry is entering a recovery phase. The broker argues that both valuation and fundamental considerations support repositioning into select names now that its indicator has shown persistent improvement.
Top stock selections
BofA has highlighted four companies it views as best positioned to benefit from a sector turnaround. The broker outlines the rationale for each pick, emphasizing size, specialization, recent results, portfolio simplification, and public-sector exposure as differentiating features.
Capgemini
BofA identifies Capgemini as its preferred large-cap exposure to the European IT recovery. The French consulting and technology group recently reported fourth-quarter results that came in 2.5% ahead of expectations, a performance the broker views as supportive of the case for the stock. BofA points to Capgemini’s scale and diversification as competitive advantages as enterprise IT budgets show signs of stabilization. The broker also notes that the shares trade near ten-year lows on a price-to-earnings basis, arguing that the valuation argument complements the fundamental picture.
Netcompany
Netcompany is singled out as BofA’s highest-conviction niche pick. The Danish IT services firm beat on both revenue and EBITDA in the fourth quarter and provided what BofA describes as a "robust 2026 outlook." The broker highlights Netcompany’s deep specialization in public sector digital transformation - an area that the broker says held up even during the 2008 financial crisis - as a structural source of earnings resilience. According to BofA, Netcompany’s current valuation leaves room for meaningful upside relative to its growth profile.
Sopra Steria
Sopra Steria is recommended as a niche provider with strong industry-specific capabilities. Following the disposal of its banking software division in 2024, the Franco-British group has a more focused IT services business, which BofA views as better positioned to benefit from an industry upturn. The broker sees Sopra Steria as attractively valued versus peers and as well-placed to capture opportunities as clients move toward deeper systems integration and outcome-based technology contracts.
Kainos
Kainos is the smallest of the four buy-rated names and is flagged by BofA as a primary contributor to the broker’s 2026 sector growth forecast. Headquartered in Belfast, Kainos has developed a reputation for delivery in Workday implementations and UK government digital services. Those areas provide recurring revenue characteristics and exposure to structural IT spending, rather than purely cyclical demand, according to the broker. BofA’s buy case emphasizes Kainos’s niche positioning and the visibility afforded by a largely public-sector client base.
Implication
BofA’s selections reflect a mix of scale, niche specialization, and portfolio simplification as routes to capture the expected industry rebound. The broker’s outlook centers on a recovery that becomes clearer in its proprietary indicator and culminates in positive organic revenue growth in 2026.
Limitations
The broker’s views are contingent on the persistence of the indicator’s improvement and the realization of the projected 2026 growth rate. The companies highlighted are selected on the basis of recent results, strategic positioning, and relative valuation metrics as described by BofA.