Barclays has outlined a framework for assessing how exposed European software vendors are to the rise of artificial intelligence, concluding there is a marked gulf between likely AI beneficiaries and those that could face headwinds. The bank's analysts argue that while share prices have corrected and valuations look more attractive, uncertainty remains about a definitive trough in software equities.
In a note led by Sven Merkt, Barclays warns the sector continues to be sensitive to AI-related headlines and is heavily held by long-only investors, which complicates calls on a bottom. The analysts write that it is "difficult to call a definitive bottom in software," underscoring the ongoing headline risk surrounding AI developments.
Within that framework, Barclays highlights SAP as the company best positioned to gain from the integration of AI into enterprise workflows. The analysts point to SAP's extensive industry integration, its role as a system-of-record and its sizable data infrastructure as factors that should support monetization as automation penetrates finance, supply chain and procurement workflows. They stress that "SAP could be a real AI beneficiary if the company executes," and assign the stock an Overweight rating with a maintained price target of 240.
Barclays sees limited competitive risk to SAP from AI-native entrants and believes there is room for improved monetization as automation becomes more embedded across enterprise functions.
The bank also retains a favorable stance on Temenos, leaving an Overweight rating in place with a price target of 85 Swiss francs. Barclays describes the core banking software provider as "broadly unimpacted by AI," citing high barriers to entry, regulatory complexity and significant switching costs in core banking platforms. The analysts add, "We see limited risk that new players can replicate or displace Temenos' core products."
By contrast, Barclays took a more cautious position on TeamViewer, cutting the stock to Equal Weight from Overweight and trimming the price target to 5 from 7. The analysts argue that AI-driven automation could reduce the long-term need for traditional remote-support tools if users increasingly resolve issues through automated assistants.
Sage is flagged by the team as the most exposed name in its coverage, and Barclays retains an Underweight rating on the company. The analysts warn that AI-native competitors could heighten pricing pressure and reduce switching costs in the small-business accounting market.
Elsewhere in its coverage, Barclays keeps Overweight ratings on Amadeus and Nemetschek, while Dassault Syst c8mes remains rated Equal Weight.
Summing up their view of the sector, the analysts write that they "see significant long-term value opportunities emerging in the sector, but for investors with a shorter time frame, we believe the bigger opportunity is to separate the potential AI winner and losers in the sector for now."
Implications for markets and sectors
- Enterprise software vendors with deep data footprints and system-of-record positions - such as SAP - stand to benefit from AI-driven automation in finance, supply chain and procurement.
- Core banking software providers like Temenos may be insulated from AI disruption due to regulatory complexity and switching costs.
- Vendors of legacy remote-support solutions and small-business accounting platforms may face greater competitive pressure from AI-native entrants and automation.