MS favours software stocks over IT services as AI shapes 2026 view

Netcompany A/S

12/01/2026 11:45

** Morgan Stanley prefers software stocks over IT services, seeing the latter as a potential "value trap" in 2026 amid generative AI disruption

** The brokerage expects the GenAI disruption narrative around pricing pressure and service disintermediation to continue to weigh on growth and valuations in IT services

** In contrast, software firms stand to benefit as the AI debate drives investment needs and competition, MS says

** Among IT services, it downgrades Capgemini CAPP.PA, Netcompany NETCG.CO, SoftwareOne SWON.S and Tietoevry TIETO.HE to "underweight", saying valuation multiples are unlikely to rally in 2026

** It also cuts Spanish defence contractor Indra Sistemas IDR.MC to "equal weight" based on a more challenging set-up for 2026 outperformance as its valuation now aligns with European defence peers

** Within software, MS cuts Swedish cloud communications firm Sinch SINCH.ST to "underweight", saying the valuation looks relatively demanding for the growth and risk profile

** The broker's top picks are SAP SAPG.DE in software and Adyen ADYEN.AS in payments, driven by prospects of accelerating revenue growth

RATING AND PT CHANGES:

COMPANY
RATING
OLD RATING
PT
OLD PT
Capgemini
underweight
equal-weight
EUR 142
EUR 145
Netcompany
underweight
equal-weight
DKK 332
DKK 312
SoftwareOne
underweight
equal-weight
CHF 7.90
CHF 8.10
Tietoevry
underweight
equal-weight
EUR 18
EUR 18.75
Indra Sistemas
equal-weight
overweight
EUR 60
EUR 47
Sinch
underweight
equal-weight
SEK 27.50
SEK 22.50
Nemetschek NEKG.DE
equal-weight
-
EUR 114.50
EUR 116.00
IONOS Group IOSn.DE
equal-weight
-
EUR 32.40
EUR 31.50
TeamViewer TMV.DE
equal-weight
-
EUR 8.25
EUR 8.35
Springer Nature SPGG.DE
overweight
-
EUR 28.30
EUR 31.20
SAP
overweight
-
EUR 285
EUR 300
Sopra Steria Group SOPR.PA
equal-weight
-
EUR 168
EUR 160
Dassault Systemes DAST.PA
overweight
-
EUR 31
EUR 36.50
Arabian Internet and Comms Services 7202.SE
underweight
-
SAR 236
SAR 238
Computacenter CCC.L
equal-weight
-
3,425p
2,425p
Informa INF.L
overweight
-
1,080p
1,070p
Adyen
overweight
-
EUR 1,925
EUR 1,925

(Reporting by Marta Frackowiak)

((marta.frackowiak@thomsonreuters.com))