North American investors show stronger interest in European software, while execution and AI-risk debates remain stock-specific.

Overview

This weekly European Software & Services update combines feedback from a North American marketing trip with views on AI and SaaS, Netcompany’s new NHS contract, potential portfolio simplification in information services, and Temenos’s earnings path.

Core views

Morgan Stanley says its New York, Toronto and San Francisco marketing trip produced a more constructive view of European software than earlier European meetings in the summer. Discussion shifted from whether the sector was structurally impaired toward identifying relative winners, with greater confidence in durable growth. SAP remained central, while Amadeus, RELX and Nemetschek were frequently discussed. RELX holders were constructive but saw few obvious near-term catalysts and expected AI debates to persist. Amadeus attracted investors assessing travel-related pressure on current performance alongside perceived limited AI risk. Nemetschek drew interest after its share price had fallen more than 25% year to date, with investors focused on mid-term growth durability and the HCSS acquisition. IT Services sentiment remained sceptical; Capgemini was discussed mainly as investors tested whether there was a reason to become more constructive. The report reiterates the AI bull case for SaaS through the “A.L.I.V.E.” framework. Software is expected to remain the application layer on which AI agents operate rather than the main replacement target; lower seat dependence means fewer seats need not reduce total addressable market; model commoditization may strengthen SaaS differentiation and margins; AI can expand spending from software budgets into labor budgets; and existing distribution remains a durable advantage. Morgan Stanley notes positive views within US coverage on ServiceNow and Atlassian, lower conviction on Workday and Intuit, and a modestly improved view of Salesforce following a better rate of change in upside to guidance. For Netcompany, a £215m five-year partnership to operate and transform digital services supporting NHS England’s adult screening programmes is viewed as strategically important and material against Morgan Stanley’s pre-existing approximately £113m FY26e UK revenue forecast. The programmes issue more than 15 million invitations annually. Because UK partners will deliver part of the contract and at least 33% of revenue is committed to small and medium-sized businesses, Morgan Stanley expects Netcompany to book total contract revenue while offsetting partner revenue in costs. Depending on the ramp, more than £30m, or approximately DKK260m, of FY27e revenue could represent 2.5% upside to the FY27e forecast and help sustain high-single-digit organic growth, outperforming the broader IT Services sector. The firm nevertheless remains Underweight: it sees growth potential but wants greater confidence that recently weak free-cash-flow conversion can rebuild. On information services, Morgan Stanley discusses an unconfirmed Bloomberg report that S&P Global may be exploring a spin-out of Capital IQ Pro, which is less than 6% of group revenue. The report says strategic options could ease the AI-risk overhang on S&P’s Market Intelligence segment, but uses the event principally to examine whether portfolio simplification could address AI-related valuation concerns. Diversified portfolios can be harder for investors to assess across numerous businesses and products, and concern around one product can disproportionately affect the broader equity story. Management must therefore judge whether a scrutinized asset is fundamentally challenged and whether a sale or spin can unlock more value by removing a valuation drag than the asset contributes on a standalone basis. For Temenos, Morgan Stanley expects 3Q to substantially repair the 2Q miss, after Subscription & SaaS revenue declined approximately 13% in constant currency and was about 18% below consensus because a small number of large European deals slipped beyond quarter-end. Management said most of the approximately $20m shortfall had been signed in the first three weeks of July, supporting confidence in at least 30% 3Q Subscription & SaaS growth. However, the report argues that 4Q is the real test: even at 30% 3Q growth, nine-month growth would be only about 8% constant currency against the more than 9% FY26 guide. Morgan Stanley estimates Temenos needs approximately $171m of 4Q Subscription & SaaS revenue—a record quarter—and likely more than 20% year-on-year subscription-licence growth for a third straight year. At approximately 23x CY26e P/E post-SBC for an estimated 8% FY26-28e EPS CAGR, Morgan Stanley sees limited tolerance for execution risk and remains Underweight with a CHF59 price target.

Analysis framework

Morgan Stanley combines investor-feedback observations with company events, management guidance, revenue and earnings estimates, and valuation comparisons. It uses relative stock analysis to distinguish companies with clearer growth, AI positioning, catalysts, and execution risks.

Methodology notes

• Competition & strategyEconomic Moat and Competitive Advantage

  SaaS “A.L.I.V.E.” framework

  The report assesses whether SaaS businesses retain competitive advantages in an AI era through control of applications, distribution, differentiation, margin leverage, and a broader value opportunity.

• Valuation methodsP/E and PEG Valuation

  Temenos CY26e P/E relative to projected EPS growth

  Morgan Stanley compares Temenos’s approximately 23x CY26e post-SBC P/E with its estimated 8% FY26-28e EPS CAGR to judge the valuation’s room for execution risk.

• Industry AnalysisUpstream-Midstream-Downstream Transmission

  Netcompany contract revenue and partner-cost pass-through

  The report distinguishes total revenue booked by Netcompany from partner-delivered revenue expected to be offset in the cost base when assessing the NHS contract’s earnings relevance.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Netcompany

  The NHS England contract could support FY27e revenue growth and sector outperformance, but Morgan Stanley remains Underweight pending better free-cash-flow conversion.

  Strengths

  Strategically important UK public-sector wins and potential high-single-digit organic growth.

  Weaknesses

  Recently weak free-cash-flow conversion.

  Comparison

  Morgan Stanley expects the UK to remain Netcompany’s highest-growth geography and to outperform the broader IT Services sector.

  Risks

  Partner delivery and contract ramp may reduce the direct revenue contribution timing.

• Temenos

  A 3Q recovery may repair the 2Q miss, but 4Q execution determines whether the company can meet its FY26 path.

  Strengths

  Most of the approximately $20m 2Q shortfall was reportedly signed in early July.

  Weaknesses

  Requires a record approximately $171m 4Q Subscription & SaaS result.

  Comparison

  At c.23x CY26e P/E for c.8% FY26-28e EPS CAGR, Morgan Stanley sees limited room for execution risk.

  Risks

  Failure to achieve the required Subscription & SaaS exit rate could weaken the FY27 and medium-term ARR story.

• RELX

  Investor holders were constructive on the equity story but saw limited near-term catalysts.

  Strengths

  Constructive holder sentiment.

  Weaknesses

  Lack of obvious near-term catalysts.

  Risks

  AI-related debates may persist.

• Amadeus

  Investors sought to understand the story amid travel-related pressure and relatively limited perceived AI risk.

  Strengths

  Perceived limited AI risk.

  Weaknesses

  Travel-related headwinds are weighing on current performance.

• Nemetschek

  Investor interest focused on mid-term growth durability after sector-lagged share performance and the HCSS acquisition.

  Strengths

  Potential mid-term growth durability.

  Weaknesses

  Share price remained down more than 25% year to date.

  Comparison

  Lagged the sector in share-price performance.

  Risks

  Integration and growth implications of the HCSS acquisition.

Key data

• Netcompany NHS England contract£215m over 5 yearsDigital-services partnership for adult screening programmes covering more than 15 million invitations annually.
• Potential Netcompany FY27e revenue contribution£30m+ / DKK c.260m+Could imply 2.5% upside to Morgan Stanley’s FY27e revenue forecast, depending on contract ramp.
• Netcompany UK revenue forecastc. £113m FY26eReference base against which Morgan Stanley judges the NHS contract material.
• Netcompany UK revenue growthc.14% CAGR from DKK338m in 2018 to DKK982m / €132m FY26eGrowth stated excluding M&A.
• Temenos 2Q Subscription & SaaS resultc. -13% constant currency; c.18% below consensusShortfall was attributed to timing of a small number of large European deals.
• Temenos 4Q Subscription & SaaS requirementc. $171mMorgan Stanley’s estimate for a record 4Q needed to meet the FY26 growth path.
• Temenos valuationc.23x CY26e P/E post-SBCCompared with Morgan Stanley’s c.8% FY26-28e EPS CAGR estimate.

Impact & implications

The report sees improving sector sentiment and a more credible AI-era case for SaaS, but stresses that individual outcomes remain driven by catalysts, execution, cash conversion, and the ability to address AI-related valuation concerns. Netcompany’s contract supports its growth outlook, while Temenos must demonstrate a strong 4Q to validate its FY26 and medium-term trajectory.

Risks

• AI-related concerns can continue to weigh on valuation perceptions, particularly for diversified information-services portfolios.
• Netcompany’s growth case still depends on rebuilding free-cash-flow conversion.
• Temenos faces material execution risk in delivering a record 4Q Subscription & SaaS result.

What to watch

• The ramp and accounting pass-through of Netcompany’s NHS England contract.
• Whether Temenos achieves at least 30% 3Q Subscription & SaaS growth and the approximately $171m 4Q requirement.
• Further evidence that SaaS growth, margins, and distribution advantages remain durable in the AI era.
• Whether management teams pursue portfolio simplification to reduce AI-related valuation overhangs.