Tech Services Stocks to Watch Now

The Technology Services Industry: A Growing Sector with Strong Prospects

The Technology Services industry has experienced significant growth since the pandemic, driven by the rapid adoption of remote work and the acceleration of the global digital transition. Technological advancements such as 5G, blockchain, artificial intelligence (AI), and machine learning (ML) have played a crucial role in propelling this expansion. Additionally, growing concerns about data security have further fueled the industry's development.

Key Players in the Industry

Several companies are well-positioned to benefit from these trends. Futu Holdings (FUTU), Dave (DAVE), and Coherent Corp. (COHR) are among the notable players that stand to gain from the current market dynamics.

Overview of the Technology Services Industry

The Zacks Technology Services industry includes companies involved in producing, developing, and designing various software support, data processing, computing hardware, and communications equipment. These offerings range from integrated powertrain technologies, advanced analytics, technology solutions, and contract research services to semiconductor packaging and interconnect technologies, collaboration software, specialty printers, and data acquisition and analysis systems. This industry serves both consumer and business markets, catering to diverse end markets and customer segments. Some companies also offer advanced analytics, clinical research services, data storage technology and solutions, and technology-enabled financial services for consumers and small business owners.

Factors Shaping the Future of Technology Services

Rising Demand Environment:
The industry is mature, with demand for services remaining strong over time. Revenues and cash flows are expected to eventually reach pre-pandemic levels, helping most industry players maintain stable dividends.

Economic Recovery:
The sector benefits significantly from the broader economy and service activities. According to the Bureau of Economic Analysis, GDP grew at an annual rate of 3.8% in the second quarter of 2025 after a slight decline in the first quarter. Economic activities in the non-manufacturing sector remain robust, with the Services PMI measured by the Institute for Supply Management staying above the 50% mark in 11 of the past 13 months.

Technological Advancement Takes Center Stage:
The global shift toward digitization creates opportunities in various markets, including 5G, blockchain, and AI. The United States, a major player in the IT sector, is poised for growth due to the widespread adoption of smart technologies and increased investments in security. Companies are increasingly adopting generative AI, ML, blockchain, and data science to gain a competitive advantage. According to Statista, the GenAI market is anticipated to reach $59 billion in 2025, with a compound annual growth rate (CAGR) of 37.6% from 2025 to 2031.

Zacks Industry Rank Indicates Bright Near-Term Prospects

The Zacks Technology Services industry, housed within the broader Zacks Business Services sector, currently holds a Zacks Industry Rank #94. This rank places it in the top 39% of more than 243 Zacks industries. The group’s Zacks Industry Rank, which is the average of the Zacks Rank of all member stocks, indicates continued outperformance in the near term. Research shows that the top 50% of Zacks-ranked industries outperform the bottom 50% by a factor of more than two to one.

Before discussing specific stocks, let’s examine the industry’s recent stock market performance and current valuation.

Industry Beats Sector & S&P 500

The Zacks Technology Services industry has outperformed the broader Zacks Business Services sector and the Zacks S&P 500 composite over the past year. The industry has jumped 53% over this period, surpassing the 7.5% decline of the broader sector and the 17.9% rally of the Zacks S&P 500 composite.

1-Year Price Performance

Industry's Current Valuation

On the basis of EV-to-EBITDA (enterprise value to earnings before interest, tax, depreciation and amortization), which is commonly used for valuing staffing stocks because of their high debt levels, the industry is currently trading at 17.19X compared with the S&P 500’s 18.33X and the sector’s 10.49X. Over the past five years, the industry has traded as high as 17.19X and as low as 8.85X, with the median being 12.44X, as shown in the charts below.

EV-to-EBITDA

3 Technology Services Stocks to Bet On

Futu Holdings (FUTU):
This company is a digitalized securities brokerage and wealth management product distribution service provider operating across Hong Kong and globally. FUTU’s AI-backed internal operations are key to its financial success. In the second quarter of 2025, FUTU’s top line surged 69.7% year over year, with the operating margin expanding 1,570 basis points (bps), reflecting its ability to scale. On the consumer front, the company added 262,000 funded accounts during the quarter, taking the total to 2.7 million. FUTU’s ability to expand into regions aside from Hong Kong led to 42% year-over-year growth in funded accounts. Its strategy to incorporate AI through offerings like Futubull AI and moomoo AI has helped expand its global reach. FUTU currently has a Zacks Rank #1 (Strong Buy). The Zacks Consensus Estimate for its 2025 bottom line has increased 6.2% in the past 60 days. Earnings are expected to grow 74.7% year over year in 2025. FUTU shares have soared 81.3% in the past year.

Dave (DAVE):
This company leverages its platform to provide multiple financial products and services in the United States. DAVE’s customer-centric approach has resulted in expanding its membership base, leading to robust financial performance in the third quarter of 2025. With 843,000 members added, Dave witnessed its monthly transacting members grow 17% year over year. This had a positive impact on the company’s top line, which surged 60% year over year. The company boosted its ExtraCash originations by 49% year over year in the third quarter of 2025. DAVE currently sports a Zacks Rank #1. The Zacks Consensus Estimate for 2025 EPS has moved up marginally in the past 60 days. Earnings are expected to soar 98.5% year over year in 2025. Dave shares have skyrocketed 552.9% over the past year.

Coherent (COHR):
This global leader in photonics is riding on the AI and data center boom, with COHR at the forefront of optical components and modules supporting the AI-led infrastructure. In the fourth quarter of fiscal 2025, the company registered 16.4% year-over-year growth in its top line. The main growth driver can be attributed to the surging demand for 800G transceivers. COHR’s R&D prowess resulted in innovative products that complement the growing demand for high-speed data center components. The company introduced the 1.6T transceiver and realized its first revenues in the quarter, highlighting COHR’s aim at capturing the AI boom. The company recorded a significant boost in its margins, with the non-GAAP gross margin improving 290 bps from the year-ago quarter. COHR presently carries a Zacks Rank #2 (Buy). The Zacks Consensus Estimate for its fiscal 2026 bottom line has increased marginally in the past 60 days. Earnings are expected to rise 30% year over year in fiscal 2026. Coherent shares have rallied 37.6% in the past year.