European software and IT services Q2 financial reporting season: solid performance, but the implementation of AI proves to be the real driver of stock prices (Deutsche Bank)
Deutsche Bank predicts that the overall performance of the European software and IT services industry in the Q2 financial reporting season will be solid, but stock prices will be mainly affected by factors other than fundamentals - the actual application of AI
Deutsche Bank predicts that the overall performance of the European software and IT services industry in the Q2 financial reporting season will be solid, but stock prices will be mainly affected by factors other than fundamentals - the actual application of AI has become the focus of market attention. SAP is the first choice in the large-scale software field (it has the strongest monetization path at the AI level). The engineering software field prefers high-quality targets with a high proportion of recurring revenue and low cyclical exposure. In the field of IT services, Capgemini is the first company with lower risk exposure in the Middle East. The current market expectations for AI in European software stocks have been partially reflected in valuations, but the key to truly distinguishing who can enjoy higher valuations is whether major companies can clarify the financial framework for AI business in 2027. At present, AI's promotion of stock prices is in the "storytelling" stage and is transitioning to the "data-seeing" stage. One sentence conclusion: The Q2 financial report of European software stocks is not the focus. The focus is whether the management can provide convincing evidence of AI implementation - the market is no longer satisfied with slogans, it wants numbers. Good/bad: Good for SAP, Amadeus, Dassault, Capgemini and other companies with clear AI monetization logic. Bad news for software companies with weak AI stories and reliance on traditional licensing. Price in situation: The AI premium of the leading company (SAP) is already high, but the contribution of middle- and lower-ranked AI to profits has not yet been priced. Catalysts: 1) Q2 performance and AI-related business revenue guidance from major companies such as SAP; 2) A clear timeline for each company’s AI business financial framework in 2027; 3) Quarterly survey of European companies’ AI procurement budgets.