Jefferies-Software Digital Download–Silver linings-20251214

We have come to the end of a 3 week marketing trip across Europe and theUS, with similar feedback. Namely, overall caution as investors question therole of AI and search for catalysts for the sector to clear these AI debates.However, sentiment is so cautious, it's arguably a contrarian indicator.Furthermore, improving IT services sentiment could well be a sign we areat the inflexion point now.

Services over software: Following on from last week, this was another week with servicesdominating software. Overall, the average share price across the 24 companies we trackincreased 0.5%, but the portfolio of services companies increased c1%, helping to offset ac0.5% decline in software. The broader market (Euro Stoxx 600) was broadly unchanged(-0.1%), so this was a week of 0.6% outperformance. However, it's going to take much morethan that to save the year. Year to date, the sector is still down 0.7%, underperforming thebroader market (+13.9%) by c15%. Meanwhile, out of the 24 companies we track, only 9 arepositive for the year.