On November 18, 2025, we hosted a live webinar titled “IT Services in the AI era”. The webinar was presented by Marcin Majewski, Managing Director and Filip Drazdou, M&A Director.
You can now watch the full webinar replay below. If you would like to download the presentation material used during the session, you can easily do so by clicking the download report button on the left (if you are using a computer) or by scrolling at the very end (if you’re using a phone).
Below is the full transcript of the discussion, edited or paraphrased for clarity, flow, and briefness.
Marcin kicked off the session by highlighting how quickly the IT Services landscape is shifting, especially with the rise of AI.
The session’s agenda focused on:
- How AI is Reshaping IT Services Valuations
- Leaders vs. Laggards in AI Era: IT Services Segments
- How to Build AI Capabilities into IT Services Businesses
- What Acquirers Want: AI Readiness in IT Services Deals
- When AI Starts Writing Code, The Developer’s New Role
Marcin Majewski:
Good afternoon, good morning, and good evening to everyone joining us. Welcome to our webinar on IT Services in the AI Era. I’m joined here by Filip. For those of you who don’t know us, we are Aventis Advisors, an M&A boutique focused on IT services and software.
We’ve put this session together because we’ve been closely watching how AI is impacting the IT services sector. After several weeks of preparation, we’ve developed a clearer picture of what’s happening, even though the landscape continues to evolve rapidly. What we’ll share today should give you better insight into how to move your businesses forward, whether that’s scaling, investing, or preparing for an exit.
How AI is affecting IT Services valuations
Filip Drazdou: Let’s go through the agenda for today. We’ll go through how AI is affecting valuations, what’s happening in the public markets, trends we’re seeing, and who the winners and losers are. We’ll also discuss what it takes to build AI capabilities and what buyers are looking for. At the end, we’ll open the floor for discussion on AI’s future in coding and the evolving role of developers.
Let’s begin with one of our standard slides, which shows the last ten years of NASDAQ 100 performance alongside a custom index of global IT services companies we track.
Marcin Majewski:
Looking at this timeline, the IT services sector is holding up quite well. The NASDAQ is catching up, mostly driven by the “Magnificent Seven” and the broader AI trend, which some people are calling a bubble. We’ll see if that impacts IT services if or when it bursts, but so far things are looking good.
Filip Drazdou:
When we looked at valuations a year ago, some companies were trading at 25 to 30 times EBITDA, which was very high. That wasn’t reflected in the private markets, so we knew a correction was coming. And it did. Companies like EPAM, Endava, and Globant have come down significantly, especially on the software outsourcing side. Some of them now have negative earnings.
That kind of environment actually attracts certain investors, the ones looking for turnaround stories. So now, with these lower valuations, we’re probably closer to the bottom than we were a few months ago.
IT Services: Winners and Losers in the age of AI
Filip Drazdou:
We analyzed 187 companies in our index to see who’s doing well and who’s not. On the winning side, we saw companies focused on space, defense, cybersecurity, niche areas that are getting attention and funding. The AI winners are still mostly in software, like NVIDIA and the Magnificent Seven. But in IT services, we haven’t seen many clear AI-driven winners yet.
The companies that are struggling, like Endava, Globant, Grid Dynamics, and Unisys, have a few things in common. First, they were highly valued before. Some traded at 40x EBITDA, and those multiples came down hard. Second, their business models are now being questioned. Can they keep up their growth rates with AI around? Are their models still viable? Investors are more cautious now.
Also, the losers tend to be large companies. They’re less agile and slower to pivot. The winners, on the other hand, are smaller and can move faster. A single defense contract or a cybersecurity project can have a big impact on their growth.
Geography is also shifting. The U.S. used to dominate, but now we’re seeing winners across different regions. That old valuation gap between U.S.-listed and Central European-listed companies, which used to be three to four times, is gone. Things are more balanced now.
Fastest growing IT Services segments in the AI Era
We looked at LinkedIn data to find the companies with the highest headcount growth over the past year, used as a proxy for revenue growth. The fastest-growing ones were working in AI, machine learning, data platforms, analytics, and cybersecurity. Some are doing a bit of marketing spin, rebranding themselves as AI firms, but the underlying demand is real.
We also saw growth in cloud infrastructure services, things like AWS and Azure migrations, and some data center operations. The trend is still strong even if it’s not accelerating. And enterprise platform specialists, companies focused on SAP, Salesforce, and so on, are still growing, often by taking market share from others.
IT Services valuations in the AI era
Marcin Majewski:
Now on to valuations. The average EV/EBITDA multiple across our index has stayed around 10x for years. On the surface, that looks stable. But EBITDA margins have declined steadily since COVID and are now back at 2018 levels. That could mean the industry is being devalued, or we’re simply returning to normal after a boom period.
My sense is that margins will stabilize around this range. The market is adjusting, and we’re likely moving back to the 8 to 10 percent EBITDA margin band we saw pre-COVID.
IT services is a very competitive space. Margins are under pressure, and we’re unlikely to see those COVID-era highs again. But 10 percent is probably a sustainable level, similar to the S&P average.
As long as profitability holds, we think the 10x EBITDA multiple is fair. Profitability remains the most important driver of valuation. If margins drop further, that’s when we’d need to reassess.
We also tracked quarterly year-on-year revenue growth. The long-term trend clearly shows a slowdown. The industry is maturing. It’s large and can’t keep growing at the same pace forever. The big question now is what comes next.
There was a slowdown driven by uncertainty around tariffs and events in the US, including lockdowns. We also saw a cut in public spending on IT services in the US. But I think we’re past that now. From here, things should improve.
Filip Drazdou:
So, while revenue growth might slow and margins might compress, we’re also seeing changes in EV/EBITDA multiples by region. India’s multiples continue to decline. Six months ago, they were around 20, but now they’re at about 16 to 16.5 times EBITDA. That might drop further. Indian markets tend to follow their own rules, but companies are definitely being re-rated
Meanwhile, European companies have overtaken North American firms in valuation—not because Europe is booming, but because North America is seeing a decline. That’s due to reduced federal spending and troubles among major US-based outsourcers, most of whom serve US clients with offshore delivery from Latin America or Europe. They’re struggling.
Companies are reacting in three main ways. First, there’s a quiet but steady shift to India. For example, EPAM’s annual reports show continued growth in India, while other regions are flat or declining. Many companies are making similar moves to offset margin pressure by leveraging India’s lower costs.
Second, we’re seeing headcount reductions. This year, many large IT service firms have initiated layoffs and headcount declines. It’s not just geographic shifting—it’s also about doing more with less. AI plays a role here, especially in reducing the need for junior roles that are easier to automate.
Third, there’s a wave of consolidation. When margins fall, M&A activity rises. Companies merge to cut operational and administrative costs. Private equity funds are increasingly interested, viewing struggling firms as opportunities for turnaround. We expect more big M&A deals in the years ahead—some firms might even go private.
How can IT Services firms leverage AI
Marcin Majewski:
Now, we’ve been thinking a lot about the future of IT services. Will this sector disappear due to AI? Our conclusion: not anytime soon, if ever. That’s both reassuring and challenging.
The business is definitely changing. We’ve gathered insights from recent conversations and identified what’s working. We’ve organized these by opportunity size in a pyramid.
At the top are smaller but strategic moves. Many companies are open to experimenting with AI—even though 95% of these efforts don’t deliver ROI. That’s fine; experiments often don’t. But these small projects are great door openers. They let vendors get on the approved list, sell a starter project, and start building deeper relationships. These initiatives are often backed by C-level execs, which leads to high-level conversations and insights into broader client needs.
Next, we see AI being used to boost delivery efficiency. Developers using AI tools are reportedly 2 to 3 times more productive, and the same applies to contact center support. This is a big profitability lever. Firms that adopt this well will thrive. Those who resist change will struggle. It may not be a huge opportunity today, but in the mid-term, it will matter a lot.
Lastly—and most significantly—is data. Data is the foundation for all AI. Without clean, high-quality data, AI simply doesn’t work. Investors and clients alike are prioritizing this. Companies that specialize in data are seeing strong demand. Once you manage a client’s data well, you become hard to replace. It also sets the stage for additional work with the same client.
Clients are waking up to this. Even to do something simple like a chatbot, you need to know where your data comes from and how to train and improve the AI. That requires robust data systems. The “garbage in, garbage out” principle dominates here.
When AI Starts Writing Code, The Developer’s New Role
Marcin Majewski:
Yes, the elephant in the room—where is AI right now? This chart we’re looking at shows how AI models are progressing in tackling software development problems. It’s not exactly exponential growth, but the speed of improvement is impressive. We’re also seeing leading models from different vendors converging, which tells us this is definitely happening.
I think we can all agree that humans won’t be coding everything forever. But at the same time, I believe there will always need to be a human in the loop. Machines just can’t understand the complexity of the real world, human psychology, or experience. There will always be elements of mystery that machines can’t replicate.
That creates ongoing opportunities for people—and for IT services companies. As long as enterprises are spending on IT, AI won’t capture all of that budget. Humans will still be needed to provide real services. If anything, AI will boost productivity and give both customers and service providers more leverage to deliver better results. Everyone will be pushed to perform at a higher level.
So competition will increase, but that will also raise standards across the board. I expect we’ll see improvements in the quality, functionality, and comprehensiveness of what IT service firms deliver. Budgets might even grow rather than shrink. We’re quite comfortable with the future of IT services.
However, we do expect a transition—and it won’t be easy. People in IT will need to reskill, and not everyone will be able to. So there will be some turnover.
But the roles of developers and consultants won’t disappear. They’ll bring the human perspective that AI can’t provide—understanding user needs, sensing what works, making architectural decisions, checking quality, and applying domain expertise. Vertical knowledge will become even more valuable.
Mindsets will also need to change. The era of months-long projects is ending. With tools like Lavable or Replit, customers will expect faster results. Prototyping will need to be quicker.
Creativity will become a defining trait for IT service providers. They won’t just follow specs anymore. They’ll shape their clients’ futures, while AI handles the repetitive tasks.
That’s how I see AI changing the IT services world. It’s going to reshape how we all work. And yes, the transition will be hard. I’ve read developers’ takes—many are skeptical and frustrated. But that resistance is part of why larger IT firms are struggling. They’re too slow to adapt.
So we’ll see a shift in value—from just writing great code to using soft skills, understanding business needs, and delivering tailored, creative solutions. AI can write technically perfect code, but it tends to be generic. Real value will come from creativity, problem-solving, and knowing what people actually want.
We’re headed for change, and there may be regional shifts too. Countries that once led in engineering might be overtaken by those stronger in soft skills.
That creates opportunity. Someone needs to build, maintain, and adapt those systems. AI is a bigger threat to software than to services, because it makes building so easy. But that also opens the door for service providers to do more—and do it better.
Marcin Majewski:
To sum it up, we believe the IT services market remains strong. It’s adjusting quickly, with companies shifting to lower-cost regions, resizing, and consolidating. Those with strong technical skills and customer understanding are thriving. Generalist firms are struggling.
There’s a clear strategy for success: focus on complex work that needs deep expertise and stay close to your clients. Specialized firms are doing well, while generic ones are taking a hit.
