European Software, IT services & Payments: Q3 Playbook: investors warming up, jury still out on AI risk/reward

Q3 Playbook: investors warming up, jury still out on AI risk/reward. The MSCI Software and services index has outperformed the market by 27pp since mid July, erasing c half of the 32pp Jan to July underperformance, with some relief through the Summer on continuing solid prints across the Software and IT space, against a very bearish positioning. Going into Q3, we will monitor evidence of AI traction vs disruption signals. Software fundamentals remain solid with largely recurring business models; we expect Software organic revenue growth at 9.9% in Q3 vs 9.7% in Q2 – with a positive message on AI traction. Monetisation remains at an early stage. Stock selection: Buy SAP, SGE, PLNW, TEMN in Software vs. Underperform AMS; IT Services: Buy CAP, CCC, NETC vs. Underperform ATE, ATO;