Top Latin American Tech Stocks, According to Morgan Stanley

Morgan Stanley highlights resilient Latin American tech leaders amid macro headwinds, but recent earnings/guidance are mixed: TOTVS grew recurring revenues 15% and posted 25% consolidated adjusted EBITDA margin, while AI-enabler product sales rose to 19.4% of management recurring revenues (+140 bps YTD) and the price target was cut from BRL53 to BRL51 due to higher Brazil rates. Globant expects AI-native revenues to reach at least $110m ARR by year-end (+38% vs prior guidance) and targets a 11% free-cash-flow margin, yet its Q2 revenue slightly beat while EPS missed and Q3/full-year guidance lagged—prompting a downgrade. CI&T delivered Q2 net revenue +21.9% organically (above guidance) and is expected to grow 9.0% YoY in constant currency in 2027, but adjusted EPS missed forecasts amid higher commercial spend and elevated interest rates.

Analysis

The market is treating this as an AI stock-picking exercise, but the real driver is discount rate plus revenue quality. GLOB looks most vulnerable because it needs AI monetization to outrun slower legacy demand, and that usually leaves the stock exposed to multiple compression before the operating leverage shows up. CINT is the cleaner relative winner in the near term because large-project ramps create better visibility, but it is still a Brazil-rate-sensitive duration asset rather than a pure AI beneficiary.

Second-order, AI adoption can be a headwind for services vendors before it becomes a tailwind: if clients automate lower-value work, utilization falls faster than pricing can reset. That argues for favoring more productized, recurring models over labor-heavy delivery, and it makes GLOB’s AI narrative riskier than it appears on the surface because some of the “AI growth” may simply replace legacy billable hours. If local rates stay elevated for 1-3 months, that valuation pressure likely dominates any incremental revenue beats.

Contrarian view: consensus may be over-crediting pipeline and under-crediting conversion. In this part of the cycle, a better signal than AI branding is whether bookings translate into durable free cash flow and whether management can hold guidance through the next print. The thesis is falsified if GLOB re-accelerates bookings materially or if Brazil yields fall enough to re-rate the whole software complex over the next 6-12 months.

Key Decisions for Investors

• Short GLOB on rallies or via a 1-3 month put spread; the setup is favorable if the stock remains a high-duration multiple story with fragile guide confidence. Cover if next-quarter bookings or FY guidance inflect meaningfully higher.
• Pair trade: long CINT / short GLOB for 1-3 months. CINT has better project visibility and less valuation air; GLOB carries more execution and rate-risk. Stop the pair if GLOB proves it can convert AI pipeline into sustained cash flow, or if CINT disappoints on commercial spend.
• Set a watch item on Brazil long-end yields and the next central-bank signal. If local rates ease, reassess the bearish stance on both names; if they stay elevated, the multiple headwind should persist into the next earnings cycle.
• Do not chase broad Latin American tech beta here; wait for either a lower entry in GLOB or a cleaner confirmation print from CINT before adding exposure.