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2、s does and seeks to do business with issuers covered in its research reports.As a result,investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report.Investors should consider this report as only a single factor in making their investment d

3、ecision.Refer to important disclosures on page 48 to 51.Analyst Certification on page 47.Price Objective Basis/Risk on page 42.12871677 European Software,IT services&Payments Year-end outlook:improving macro visibility,gen AI debate in full swing Rating Change Macro+gen AI concerns combo A combinati

4、on of soft demand commentary and concerns on AI risks has led the European Tech sector to underperform the market by 8.4pp since the end of June and has now underperformed the market by 11pp YTD.The Q2 earnings season was soft with 42%revenues misses vs 33%beats,only a modest improvement vs Q1 with

5、30%revenue beat(Q424 46%and Q324 16%).Software sector growth accelerated to 10.7%in Q2 from 9.6%in Q1,while IT services slightly improved to still a weak-4.5%from-4.9%in Q1.We remain more constructive on Software with a defensive business profile and solid growth outlook despite macro uncertainties.

6、Positioning remains long on the space,with 23%net overweight in August as per our latest Fund Manager Survey(see report).Stock selection:we reiterate our Buy ratings on SAP,Sage,DSY,PLNW,SABR,PROS,HBX in Software,TMV upgraded to Buy(from Underperform),AMS downgraded to Underperform.Buy CAP,SOP and N