Why Barclays sees more downside risk for digital IT services

Barclays warned that digital IT services face greater near-term downside as AI-driven shifts are prompting clients to delay spending. The bank downgraded EPAM Systems and Grid Dynamics to Hold, flagged back-half weighted guidance and growing concerns over terminal value, and said sector valuations have de-rated sharply. With the group trading around single-digit P/Es, Barclays expects multiples to remain compressed unless organic growth materially accelerates. The note increases downward pressure on IT services stocks and implies continued sector underperformance until clearer revenue recovery emerges.