Software & Services | Europe 2Q26 - Preview Book

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Software & Services | Europe 2Q26 - Preview Book

Foundation

July 16, 2026 11:01 PM GMT

Morgan Stanley & Co. International plc+MSoftware & Services | Europe George W Webb

Equity Analyst

2Q26 - Preview Book George.Webb@morganstanley.comMark Hyatt +44 20 7425-2686

Mark.Hyatt@morganstanley.com +44 20 7677-3663

Investor nervousness remains into 2Q as AI and macro spur William Richards

concerns around deal closure rates. Expectations look broadly ResearchWilliam.Richards1@morganstanley.comAssociate +44 20 7425-0269

manageable, but we don't expect 2Q to be a quarter of beats; we Morgan Stanley & Co. LLC

see greater risk around travel exposed names (Amadeus and Adam Wood

HBX) and IT Services. Our SAP checks were more reassuring. Adam.Wood@morganstanley.com +1 212 761-3656

Sentiment remains subdued heading into 2Q… Our coverage is generally trading Technology - Software & Services

towards the low end of year-to-date ranges, with recent headwinds to investor Europe

Industry View In-Line

confidence including IBM's weak 2Q earnings pre-release. Our average covered stock

is tracking down around 15% YTD, with Software bellwether SAP and IT Services

bellwether Capgemini both down >30%.

Our 2Q26 CIO Survey showed a minor improvement in the 2026 IT budget

outlook: The survey highlighted a third consecutive quarter of tick-up in expected y/

y growth, to 3.8% (from 3.4% in the first read on 2026), but ultimately these are

minor improvements, and the rate remains below longer-term pre-COVID averages

(c. 4.1%). However, there was an improved revision risk picture around 2026 IT

Budgets; for the first time since our 1Q24 survey, the near-term IT budget revision

ratio (a.k.a. up-to-down ratio) exceeded 1.0x (at 1.2x) implying net upside revision

risk through the balance of the year.