Muted Growth, Rising AI Disruption: IT Services Sector Faces Uncertain 2026

The key second-order effect is that this is a margin-optimization cycle, not a demand-cycle inflection. In that regime, the winners are firms with higher mix of managed services, recurring revenue, and the ability to pass through labor normalization into utilization gains; the losers are more discretionary project-heavy peers that need a rebound in enterprise spend to leverage fixed costs. AI does not help everyone equally: near-term, it compresses the addressable scope for low-complexity work while expanding demand for higher-value transformation work, so the spread between execution-quality names and generalist IT services should widen over the next 2-4 quarters.

CTSH looks like the cleaner relative long because cost-focused clients and large-deal ramping can support bookings even without a macro re-acceleration. The more interesting angle is that subdued sector growth plus improving margins creates a “good enough” earnings backdrop, which can lift valuation multiples even if top-line upside stays capped; that favors names with visible guidance and conservative expectations. G is more of a quality-defense holding: if its commentary centers on IP build-out, the market may tolerate near-term reinvestment because that is one of the few credible ways to defend pricing power against AI-driven commoditization.

The contrarian risk is that the market is underpricing the speed of AI substitution on lower-end services rather than overpricing it. If model capability improves faster than enterprise change management, discretionary project pipelines can freeze for longer than consensus expects, turning this into a multi-quarter booking slowdown rather than a short-lived pause. The catalyst to reverse that view would be evidence that AI spend is additive rather than substitutive — specifically, sustained acceleration in AI-related deal conversion and an inflection in discretionary budgets, not just strong commentary.