Goldman Sachs Group Inc (NYSE:GS, ETR:GOS) expects third quarter 2025 results from North American IT services companies to show continued caution among enterprise clients, as businesses weigh AI-related infrastructure investments against limited discretionary budgets.
“We expect Q3 2025 reports to reflect ongoing uncertainty as enterprises balance AI infrastructure spending against limited discretionary budgets,” they wrote.
Goldman’s analysts anticipate that most companies will report stable, if unspectacular, results.
“Based on intra-quarter management commentary and Accenture PLC (NYSE:ACN)’s results, we expect largely in-line Q3 results for our IT Services coverage,” they wrote.
However, the tone of management commentary is likely to remain reserved, with visibility still constrained by policy shifts, tariffs, and uneven global demand.
“We expect 2025 guidance and Q3 commentary to reflect ongoing macro uncertainty with some signs of stabilization as enterprises continue to rationalize discretionary IT budgets given the impact of tariffs, shifting government policies, and the emerging impact of AI,” Goldman wrote.
According to the firm, the composition of IT spending remains heavily tilted toward efficiency-focused projects.
“We still expect 2025 IT budgets to focus on cost takeout (outsourcing) activities over new capabilities or other growth initiatives,” Goldman wrote.
The analysts added that while there are “early signs of discretionary recovery in select verticals,” overall investor sentiment is weakening as more participants view AI as a structural challenge rather than an immediate growth driver.
“We believe investor sentiment continues to deteriorate given the increasingly crowded consensus view that AI will be a structural headwind for the sector,” the firm wrote.
Top picks going into earnings
Goldman highlighted International Business Machines Corp (NYSE:IBM) and Epam Systems Inc (NYSE:EPAM) as its top picks heading into the quarter.
For IBM, the analysts wrote, “We believe IBM remains well positioned as software growth continues to reflect accelerating trends relative to history given management’s view of an improving macro environment.”
They expect third quarter results to track closely with market forecasts and foresee continued momentum from Red Hat and the new z17 mainframe introduced in June.
“We expect investors to focus on software growth re-acceleration (we expect software to return to low double-digits growth in H2) and z17 sales as key metrics,” the firm wrote.
However, Goldman noted that expectations may already be elevated following the company’s recent announcements in quantum computing and AI partnerships.
“We would point out increased investor expectations given IBM’s recent announcements (Quantum, AI with Anthropic) which could raise the bar for stock performance around the quarter,” the analysts wrote.
For EPAM, Goldman anticipates a solid performance supported by continued operational strength and early AI revenue contributions.
“For EPAM, we expect an in-line Q3 with a 2025 guidance uptick that reflects continued idiosyncratic outperformance,” the firm wrote.
“We believe the company is set to capture demand from clients seeking higher execution quality for new technology builds and other high-end engineering services.”
The analysts also noted growing investor attention toward “AI projects that are starting to drive incremental revenues.”