LIVE MARKETS-European software: a better year ahead?
European software stocks underperformed in 2025 due to AI disruption fears. JPMorgan analysts highlight ongoing challenges but see potential in enterprise-focused software companies like SAP and Temenos. They predict SAP to achieve 20% EPS CAGR and Temenos 17% FCF CAGR from 2026-2028, with modest long-term upside due to earnings growth and lower valuations.
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EUROPEAN SOFTWARE: A BETTER YEAR AHEAD?
European software stocks have had a rough ride in 2025, underperforming the wider market by more than 20% as fears over AI disruption have weighed heavily and driven a sharp de-rating.
JPMorgan analysts say the sector still faces headwinds from new entrants and pressure on seat-based revenue models as companies cut headcount thanks to AI tools. They believe the space would need clear catalyst to reverse current scepticism.
However, it’s not all doom and gloom.
“The more enterprise-focused, complex end-market, mission-critical software… companies are most insulated from AI and should be best placed to capture any AI agent upside,” they write, flagging SAP (SAPG.DE) and Temenos (TEMN.S) as top picks.
Incumbents in many cases have scale, data and distribution on their side, and JPM sees “modest upside” materialising over the longer term thanks to earnings growth and lower valuations.
SAP should deliver around 20% EPS CAGR in 2026-2028, while Temenos is seen posting 17% FCF CAGR over the same period, according to the US bank.
(Danilo Masoni)
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