Communication Services is an attractive universe where investors can gain exposure to underlying services such as Media, Telecommunication, Entertainment, and Information Sharing. They can also benefit from technological advancements across various domains that offer growth opportunities and diversification. The sector has become attractive due to widespread digital connectivity and strong integration with AI capabilities.
One factor that will heavily influence business outcomes within the Communication Services is AI advancements. However, many businesses are still struggling when it comes to optimal utilization of AI technologies. On December 10, Deloitte published its Tech Tends 2026 report, which also addressed the so-called AI dilemma. As per the report, apart from adapting AI capabilities in data, models, applications, and infrastructure, businesses should also focus more on AI-enabled defense systems against cyber threats. The report included the following comments from Broadcom’s CIO:
”Without focusing on a specific business problem and the value you want to derive, it could be easy to invest in AI and receive no return.”
Despite these challenges, the sector still offers lucrative growth opportunities in select areas. In a mid-December report, Cartesian, a specialist consulting firm focused on the global telecommunications, media, and technology (TMT) industries, said that “the lines between linear, streaming, and social media consumption have blurred”. For Telecoms, they argued that operators will increasingly focus on retaining market share through enhanced streaming bundles, content integration, and upgrade incentives. Agentic AI will help optimize network capabilities, and AI-driven customer experience will partially shape operators’ engagement and operational strategies.
That said, the S&P 500 Communication Services Sector Index has outperformed the S&P 500 for the past three consecutive years, with gains of 32.4%, 38.9%, and 54.4% in 2025, 2024, and 2023, respectively.
With that background, let’s explore our 20 Most Favored Communication Services Stocks According to Hedge Funds.
Copyright: bluebay / 123RF Stock Photo
Our Methodology
To identify relevant stocks for this article, we began by screening U.S.-listed companies within the communication services sector having market capitalizations above $2 billion. We then added a filter to exclude companies with share prices below $5 to avoid penny stocks. We also shortlisted only stocks with at least 10% upside potential according to TipRanks consensus. Therefore, some well-known names, such as Alphabet or Comcast, may not appear on this list.
In the final part of the screening, we identified the number of hedge funds that held positions in these stocks as of the end of the third quarter of 2025. Finally, we selected 20 stocks with the highest number of hedge funds holding stakes and ranked them in ascending order.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 427.7% since May 2014, beating its benchmark by 264 percentage points (see more details here).
20. Imax Corporation (NYSE:IMAX)
Sector/Industry: Communication Services (Entertainment)
Share Price: $34.13
Potential Upside: 28.9%
Number of Hedge Fund Holders: 25
IMAX Corporation (NYSE:IMAX) is one of the best communication services stocks according to Hedge Funds.
On January 5, Mike Hickey from Benchmark Co. reiterated his Buy rating for IMAX Corporation (NYSE:IMAX). The analyst set a price target of $42, which results in an upside of 23%. He labeled the stock as a 2026 Entertainment & Digital Media (EDM) Top Idea, based on several structural factors, including a favorable outlook on the company’s global box office share that currently stands above $1.25 billion.
Hickey also referred to the company’s rising operating leverage and network expansion that backs his bullish stance, following a record performance during 2025. These factors have pushed the company’s adjusted EBITDA margins up to the mid-40% range. He sees IMAX’s differentiation in its asset-light platform, which offers high utilization and strong free cash flow conversion rates.
On December 18, Wells Fargo analyst Omar Mejias also reaffirmed his Buy rating for the company. Based on his bullish views, he raised the stock’s price target from $40 to $47. His revised estimates give investors an attractive upside potential of almost 38%.
Mejias increased his price target based on the company’s diversified business model that is strongly positioned to benefit from evolving trends within the industry. The analyst highlighted an accelerated demand for premium, event-driven cinema and local-language hit-making. Mejias sees Imax Corporation (NYSE:IMAX) as being well prepared to capitalize on such a noticeable shift, given their enhanced visibility, expansion of total addressable market, and a high level of operating leverage.
IMAX Corporation (NYSE:IMAX) operates within the entertainment industry and functions as a technology platform. The company runs globally through content, technology, and services segments. They specialize in motion-picture technologies, as well as large-format motion-picture presentations. Other offerings include film remastering, streaming technology software, film and digital cameras, and post-production services.
