Deutsche Bank has upgraded its outlook on select UK software and IT services stocks, citing a rebound in the sector and diminishing concerns over artificial intelligence’s impact on traditional business models.
The UK software and IT services sector has recovered strongly over the past three months, trading slightly above its early-2026 level and roughly 42% above its late-March low. The initial rebound followed positive company updates from firms such as Computacenter, Softcat, and Kainos, alongside shifting investor sentiment on AI’s role in business transformation.
Deutsche Bank upgraded Bytes Technology Group to a buy rating, citing the company’s July annual general meeting update. Bytes reported double-digit year-on-year growth in billed gross revenue and gross profit across both public and private sectors. The bank noted that Microsoft’s fiscal 2027 partner incentives now prioritize customer adoption, upselling, and cloud workload growth over simple software license sales—a shift Deutsche Bank views as advantageous for Bytes.
Cerillion received a similar upgrade to buy from hold, though its price target was reduced to 1,400 pence from 1,575 pence. The company’s shares have fallen about 27% over the prior three months. Cerillion reported new orders of £39.6 million in the first half, double the prior-year period, while its order backlog grew 64% to a record £82.1 million. The company’s sales pipeline expanded to £271 million. Deutsche Bank highlighted an estimated £10 million to £15 million in second-half revenue from its record contract with Omantel, a telecommunications provider in Oman, with a significant portion expected from high-margin software licensing.
Softcat, meanwhile, was downgraded to hold from buy despite a 50% year-to-date share price increase. Deutsche Bank raised its price target for Softcat to 2,140 pence from 1,800 pence, noting the stock now trades at roughly 24 times calendar 2027 earnings.
