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
Atos (ATO FP) France
Technology
Operating profit fell a long way short of Teun Teeuwisse’s expectations due to much higher than anticipated restructuring, rationalisation, impairment, and “other” costs. Only a mysterious inflow from working capital (exactly how ATO achieved this remains unclear for now) saved cash generation. This, alongside unjustified adjustments to profitability, meant ATO managed to remain within covenants reporting a lower debt equal to the FCF beat. Perhaps the clearest signal about the quality of the business is that it spent more than €200m on addressing underperforming contracts. Teun is happy to remain short as he still sees very little value for the combined businesses.
Edition: 155
- 03 March, 2023
Atos (ATO FP) France
Technology
Close to fully utilising its commercial paper facility - implies clear breach of covenants. This means that additional to Teun Teeuwisse’s original short thesis (sustainable cash flow generation of €200m at best and €1.8bn of hidden debt in factoring, stretched payables, delayed tax and social securities, and from unpaid capex), a potential capital increase is now added. While Teun assumes further cash outflows in 2022 and more margin pressure, to bring real net debt/OMDA to a manageable 1.5x the company needs to raise €1.5bn vs. its current M/Cap of €2.5bn. Shareholders face massive dilution.
Edition: 134
- 29 April, 2022