European software and IT services shares suffered a marked selloff in the first quarter of 2026, dropping 27% in Q1 and extending a year-long slide to 38% through March. The rout reflects investor anxiety that artificial intelligence could diminish demand for traditional enterprise software and related services.
UBS flagged the risk of weaker-than-expected first-quarter performance at several large application vendors. The firm warned that Dassault Systemes SE (EPA:DAST) and SAP SE (ETR:SAPG) may report disappointing bookings and licensing revenue for Q1 after conflict in the Gulf disrupted March, a pivotal month for finalizing deals. UBS noted both companies have exposure to industries sensitive to oil prices.
Market participants are debating whether third-party AI platforms will become the primary interface for business operations, potentially relegating long-established enterprise software providers to a secondary role. There is also concern that AI-assisted coding tools could allow customers to develop in-house solutions, which would reduce upsell opportunities for software vendors and lower demand for IT services firms.
SAP’s chief executive, Christian Klein, addressed the company’s strategic transitions in a recent Financial Times piece, writing that SAP "had to accept short-term pain for structural gain" during its cloud shift and adding that "AI will be no different." UBS sees SAP’s cloud backlog growth easing to 24% in Q1 from 25% previously, in part reflecting customer hesitancy linked to the Gulf disruption. Separately, German newspaper Handelsblatt reported that SAP intends to limit third-party access to data in its systems, a measure that could help preserve its market position.
UBS also drew attention to rapid reported growth at AI providers, noting that Anthropic’s annual recurring revenue rose from $9 billion at the start of 2026 to $30 billion last week, a figure UBS said runs counter to claims that enterprise adoption of AI is slow.
Travel and distribution software provider Amadeus IT (BME:AMA) faces uncertainty related to the Gulf conflict, with UBS suggesting 2026 guidance may be withdrawn because of that unpredictability, though the bank continued to view the company’s 2028 targets as attainable. In consulting and services, UBS expects Capgemini to achieve management’s organic growth objective of 2% to 3% for Q1.
On company ratings, UBS downgraded Nemetschek AG O.N. (ETR:NEKG) to Sell from Neutral, warning that the firm may find it difficult to sustain growth as it begins to compare results with larger contributions from multi-year deals signed in late 2024.
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