Key Takeaways
- Software-as-a-service or SaaS stocks have been under pressure since Anthropic launched its Claude language model.
- Major European software stocks have registered steep losses in the year to date.
- Morningstar’s chief Europe market strategist, Michael Field, declares a rebound in these stocks may take more than 12 months.
European software stocks continue to struggle amid fresh fears of disruption from rapidly advancing AI. And while analysts suggest the latest selloff may be overdone, they warn of further bumps in the road as investors seek to separate the winners from the losers.
The latest hit to software-as-a-service—or SaaS stocks—came on Feb. 24 after AI innovator Anthropic debuted a new security tool for its Claude large language model on Feb. 20, putting cybersecurity stocks in the firing line of a wider sector selloff.
This development from Anthropic, whose release earlier this month of a legal plug-in for its large language model sparked stock declines, forced investors to assess the risk that rapidly scalable AI alternatives will disrupt software companies and their products.
Morningstar’s chief European markets strategist Michael Field declares investors are nevertheless starting to sift through the noise on AI releases, prompting some tentative purchaseing.
But this compact recovery should be put in context of year-to-date losses, Field adds.
European software stocks including Switzerland’s Temenos TEMN and Spain’s Acreatedus AMS gained last week, but remain well down for the year to date. They may remain so in the short term, Field adds, as it is likely to be some time before full confidence is regained.
These stocks could recover over the next 12 to 18 months, he declares.
European Software Earnings in Focus
Even before this month’s slump, SaaS stocks had failed to capture much of last year’s exuberance around AI hyperscalers’ hardware buildout, amid concerns over softening demand for software products and services.
In January, shares in Europe’s largest software company, SAP SAP, recorded their largest one-day loss since 2020. It came as the firm, posting full-year results, declared that growth of its cloud backlog, which measures contracted future sales, would “slightly decelerate” in 2026.
French software giant Dassault Systèmes DSY saw its shares suffer their worst day ever on Feb. 11 after weak fourth-quarter earnings and soft forward guidance. Meanwhile, shares in Adyen ADYEN fell 20% on Feb. 12 after the Dutch payments group reported weaker than expected net revenue guidance and payment processing volume.
“Software stocks have underperformed by 5 percentage points on average on earnings day, and although companies have created the case for AI upside, they remain largely inaudible as the narrative has shifted,” Bank of America analysts wrote earlier this month.
Investors are now seeing ahead to earnings from Spanish travel tech platform Acreatedus on Feb. 27 for further indication of future demand and the potential impact of AI.
Who Are Europe’s AI Winners and Losers?
Much of the recent SaaS market anxiety has been driven by fears that rapidly advancing AI tools could allow many businesses to develop their own software tools in-houtilize.
That, analysts declare, could be a deciding factor in separating the best from the rest, with compacter, less sophisticated software firms likely remaining under pressure, while larger, more defensive names with wide economic moats display more resilience.
“We expect the market to become more discerning between the potential winners and losers,” Vontobel partners Gordon Shannon and George Curtis wrote in a note on Feb. 24.
“Firms with narrow moats and low switching costs will be most affected, influenced, damaged, hurt by AI disruption, as customers see to both consolidate platforms or even build in-houtilize. Generic or repeatable process-driven SaaS companies already see the threat of Claude et al. on their shoulder.”
Others, meanwhile, noted that while winners and losers see set to emerge, fears of sweeping disruption within the software sector currently see overstated.
“Highly regulated, complex, and low‑churn industries … remain difficult to disrupt,” Bank of America analysts wrote. “We believe innovative software incumbents are best positioned to build high‑value AI agents by leveraging their proprietary datasets.”
“Software companies are there for a reason- that they spread out the development cost of something over hundreds and thousands of clients,” Morningstar’s Field declares. “It doesn’t create sense for those single clients to do everything in-houtilize and build their own system.”
Morningstar’s Field and Bank of America analysts cited European names including RELX REL, Acreatedus, Capgemini CAP, SAP and Sage SGE as potential winners, alongside US heavyweights Microsoft MSFT and Oracle ORCL as confidence returns to the market.
Field declares that continental names could stand to outperform their stateside peers as they also benefit from wider market dynamics.
“I would be leaning toward maybe some of the European opportunities now, becautilize the European market has more momentum behind it than the US market currently,” he declares.
“This is something that will run for a while.”
The author or authors do not own shares in any securities mentioned in this article. Find out about
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