Guidance warning season
Despite rising geopolitical risk, European corporate guidance has yet to reflect the potential economic impact. In AIR’s recent management meetings, discussion focused almost entirely on AI, with little attention paid to the Iran conflict despite surging energy prices and supply-chain stress that historically drive earnings revisions. The combination of unpriced macro risk and AI-driven sectoral disruption creates a credible basis for expecting a meaningful wave of 2026 earnings guidance revisions across European equities in the coming weeks. And the performance gap between the companies on the right side of these structural shifts and those on the wrong side will broaden. Stock winners include AI infrastructure beneficiaries such as Arm, Elmos, Aixtron and STM, alongside defence exposure at Exosens and Indra Sistemas. Euronext and Auto1 are also seen as largely insulated. Under pressure are Stroeer, Freenet and SES. In IT services, the sector is splitting between “The Conquerors” (Accenture, Cognizant, Reply) and “The Endangered” (Capgemini, Atos, Sage, Dassault Systemes, SAP).
Edition: 232
- 20 March, 2026
WPP (WPP LN) UK
Communications
Doug Arthur comments on UK media reports suggesting Accenture and WPP have held preliminary talks about a potential transaction. The timing aligns with WPP’s appointment of Baiju Shah - Accenture Song’s former Chief Strategy Officer - to lead its struggling digital agency, AKQA. While ACN has rapidly built the world’s largest digital marketing platform (pre the planned merger of Omnicom and Interpublic), WPP remains challenged, with its stock near 20-year lows, FCF yield close to 16% and a 4x EBITDA multiple. Doug acknowledges the scepticism around a deal, but a buy-low strategy on WPP would quickly catapult ACN atop a consolidating industry. Stranger things have happened.
Edition: 216
- 25 July, 2025
Technology
A lot of IT Services companies that are employee-heavy and not prepared for the AI revolution, will get displaced by hardware- and software-based solutions. ACN has ~750k employees. Revenue per employee is lower than a restaurant group like Darden. The entire share price move during 2023-24 was ACN pitching themselves as an AI solution company; they have been trying to buy the expertise by doing small acquisitions but why would anyone hire them vs. using Microsoft or Amazon? ACN has negative organic growth in a massive AI tech spending boom and trades at a bigger multiple than MSFT! TP $200 (30% downside).
Edition: 185
- 03 May, 2024
Capgemini (CAP FP) France
Technology
Double downgrade to Short / Sell - 50% of respondents interviewed* reported softening demand with pessimistic trading outlooks. Spend levels increased by 6% YoY, trailing consensus estimates of 10.1% YoY in organic revenue growth for 4Q22. Some CAP clients decided to shift more work to Accenture and a few were impacted by budget cuts and IT spending reductions this quarter. Reduced spending was particularly prominent among big enterprise retailers.
*Woozle conducted interviews with 22 CTOs and IT service procurement specialists. Regional split: 56% from Europe, 11% North America and 33% Asia.
Edition: 151
- 06 January, 2023