AI structurally changing IT biz mix, Jefferies warns of managed services shrinkage ahead

The IT services sector is set for a structural shift as AI reshapes the core business mix, which will not only increase ‘cyclicality’ but also require an overhaul of talent and operating models, “thus adding risks”, a report by Jefferies has said.

The brokerage in its note ‘P(AI)n Not Over Yet; Stay Selective’ warns that AI-led shifts will likely shrink the traditional ‘managed services’ segment while increasing the consulting and implementation.

Despite a 16 per cent year-to-date fall, stocks still offer higher downside than upside, according to the report.