European Software and IT Services: Taking stock: Expect steady quarter, but sector needs trade reversal

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European Software and IT Services: Taking stock: Expect steady quarter, but sector needs trade reversal

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09 Jul 2026 00:00:00 ET │ 33 pages

European Software and IT Services

Taking stock: Expect steady quarter, but sector needs trade reversal

CITI'S TAKE

Balajee Tirupati, CFA AC

Into C2Q26 results, we take stock of the ongoing debates on most +44-20-7500-6682

discussed names and our recent catch-up with their IR teams. After steady balajee.tirupati@citi.com

to somewhat better updates in recent quarters couldn’t enthuse the sector

sentiment, investors’ view is in check waiting for catalysts for trade reversal. Pavan Daswani, CFA

In 2Q, focus is on the implications of macro uncertainty and possible growth pavan.daswani@citi.com

deceleration (comps tougher) when a broader sector de-rating has limited

room for relative outperformance. We see a slightly better 2Q print from SAP,

albeit unchanged 2026 outlook would imply somewhat lower organic view.

For Dassault, we expect steady 2Q and unchanged 2026 outlook, but more

weighted to 4Q. Sage’s revenue & ARR growth will stay elevated in F3Q and

despite near-term deceleration management should cite confidence into

FY27. CAPP will likely raise the 2026 rev. growth target, however, possible

near-term deceleration and 2H weighted margin view would stay in debate.

SAP: Focus on CCB growth, investment plans & AI uptake — SAP after a better 1Q

has still cited longer deal cycles in parts on macro volatility. CCB growth evolution is

firmly in focus, where we expect 2Q growth staying at ~25% vs. Cons ~24% (~1ppt

from acqn). We also see operating profit coming in modestly ahead and expect color

on future investment optimization plans. SAP would retain 2026 outlook, implying