European software earnings: where is the AI disruption?
XLK•More companies due to report this week
Twelve more sector companies report this week.
TeamViewer TMV.DE reported soft sales today, hitting its shares. Nexi NEXII.MI, Sage SGE.L and Sopra Steria SOPR.PA are due on Wednesday, Atos ATOS.PA, Capgemini CAPP.PA and Nemetschek NEKG.DE on Thursday and Amadeus AMA.MC on Friday.
European software and IT stocks hold up despite AI selloff
Europe's battered software and IT companies are quietly standing out in a tech sector where enthusiasm for AI is being tested by sharp selloffs in global semiconductor stocks.
Recent weeks have brought growing investor scrutiny of the AI trade, as concerns about Chinese competition combine with fears that massive infrastructure spending in the U.S. may result in weaker free cash flow and delayed returns.
BofA sees solid results and little evidence of AI disruption so far
Against this backdrop, early earnings from European software, IT services and payments companies point to a solid picture overall, says BofA Global Research, with sales beats and sharp share-price gains from depressed positioning.
Five of the six companies in its coverage that have reported so far beat revenue expectations. SAP SAPG.DE and Dassault Systemes DAST.PA have rallied around 14-15% since earnings day on stronger bookings and top-line growth.
Crucially, BofA analysts including Frederic Boulan say there is so far little evidence of AI disruption, with results showing "no signs of AI disintermediation or macro impact/disruption" linked to uncertainty surrounding the Middle East conflict.
The main AI-related focus, according to BofA, may be instead costs rather than demand. SAP's profit miss, driven by higher R&D spending and AI token costs, suggests investors may increasingly scrutinise whether companies can capture AI-driven revenue growth without sacrificing margins.
