Buy 2 AI-Led Engineering R&D Services Stocks to Tap Solid Price Upside

These stocks are: Quanta Services Inc. PWR and Innodata Inc. INOD. Each of our picks currently carries a Zacks Rank #1 (Strong Buy) or 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The chart below shows the price performance of our two picks year to date.

Image Source: Zacks Investment Research

Quanta Services Inc.

Zacks Rank #1 Quanta Services is well-positioned to capitalize on robust infrastructure spending across utility, power generation, technology and load center markets. The ongoing expansion of AI data centers, grid modernization, renewable generation and advanced manufacturing is driving customers to undertake larger, multiyear infrastructure programs.

Surging AI-related power demand and expanding utility investments are driving data center project opportunities, making data centers a central pillar of PWR’s long-term growth strategy. The company is heavily investing in deepening its vertical supply chain to offset the ongoing global uncertainties and rising inflation. 

PWR expects to invest $500-$700 million over the next several years in power transformer manufacturing facilities and related strategy, which is intended to double transformer manufacturing capacity.

Long-Term Prospects

PWR is well-positioned to capitalize on robust infrastructure spending across utility, power generation, technology and load center markets. Management believes that the company is still in the early stages of the current demand cycle, with larger utility-generation and technology/load center programs expected to build over the coming years.

These favorable trends helped drive total backlog to a record $53.4 billion as of June 30, 2026, up 49% year over year from $35.8 billion in June 2025. The increase was broad-based, with Electric Infrastructure Solutions backlog rising year over year to $43.8 billion from $30.3 billion, while Underground and Infrastructure Solutions backlog climbed to $9.7 billion from $5.6 billion.

Strong Guidance

Quanta raised full-year 2026 expectations. Management forecasts consolidated revenues of $39.3-$39.7 billion (compared with the prior expectations of $34.7-$35.2 billion) and adjusted EPS of $16.45-$16.95 (compared with the earlier projection of $13.55-$14.25). Adjusted EBITDA is projected in the range of $4.09-$4.21 billion, up from the earlier expectation of $3.49-$3.65 billion.

Solid Estimate Revisions

Quanta has an expected revenue and earnings growth rate of 38.4% and 49.9%, respectively, for the current year. The Zacks Consensus Estimate for the current year’s earnings has improved 1.5% over the last seven days. 

PWR has an expected revenue and earnings growth rate of 14.9% and 15.8%, respectively, for the next year. The Zacks Consensus Estimate for next year’s earnings has improved 2.7% over the last 30 days. 

Image Source: Zacks Investment Research

Impressive Price Upside Potential

The short-term average price target of brokerage firms represents an increase of 19.6% from the last closing price of $670.58. The brokerage target price is currently in the range of $690-$976. This indicates a maximum upside of 45.5% and no downside. 

Innodata Inc.

Zacks Rank #2 Innodata continued to benefit from strong demand for data engineering services used to develop, train, evaluate and deploy advanced AI systems. INOD supports training and post-training data creation, model alignment, safety evaluation and enterprise AI deployment. 

INOD appears to be entering a stronger phase of AI-driven expansion, supported by accelerating customer adoption, improving profitability and a widening set of growth opportunities. The growth story is shifting toward higher-value services. 

Product Innovations

Innodata specializes in finding, cleaning, prepping, and labeling messy data so that generative, agentic, and physical AI models can mine and model it. Sometimes this even involves creating new synthetic data. Beyond supplying training data, INOD provides reasoning datasets, trust and safety services, model evaluation, agent optimization and physical AI support. 

INOD continues to focus on building a stronger delivery framework that supports rising project volume and new customer engagements across major technology clients. By scaling its global operations and enhancing technical delivery, it intends to manage increasing demand for complex data and AI integration projects. It will enable the company to maintain a competitive edge in the fast-evolving AI services market. 

Innodata released two public benchmarks designed to identify model failure modes and support follow-on data-generation work. The company is also developing physical-AI capabilities through robotics data collection and a planned motion-capture lab, with successful pilots moving discussions toward enterprise-scale multimodal programs.

Innodata also released the first stage of its AI Cyber Training Suite, including 12 datasets and evaluation systems focused on secure coding and vulnerability repair by AI agents. The company said that enterprise adoption of agentic AI is creating demand for assurance capabilities tied to the research platform INOD uses with frontier-model customers.

Strong Guidance

Management reiterated its full-year 2026 revenue growth forecast of 40% or more year over year. The outlook reflects continued momentum across existing customer programs and a broadening customer base.

Solid Estimate Revisions

Innodata has an expected revenue and earnings growth rate of 42% and 28.3%, respectively, for the current year. The Zacks Consensus Estimate for the current year’s earnings has improved 9.3% over the last seven days. 

INOD has an expected revenue and earnings growth rate of 28.3% and 42.8%, respectively, for the next year. The Zacks Consensus Estimate for next year’s earnings has improved 1.2% over the last seven days. 

Image Source: Zacks Investment Research

Robust Price Upside Potential

The short-term average price target of brokerage firms represents an increase of 95.7% from the last closing price of $62.71. The brokerage target price is currently in the range of $111-$140. This indicates a maximum upside of 115% and no downside. 

Beyond Nvidia: AI's Second Wave Is Here

The AI revolution has already minted millionaires. But the stocks everyone knows about aren't likely to keep delivering the biggest profits. AI’s second wave is moving from infrastructure to implementation and these companies are at the forefront of this transition, positioned to become what Amazon and Google were to the internet era.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

This article originally published on Zacks Investment Research (zacks.com).

Zacks Investment Research