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Investing.com -- Foreign exchange volatility and tariff-related risks are expected to be the defining headwinds for European financials in the upcoming Q2 2025 earnings season, according to BofA Securities sector playbook released on Tuesday.
The report flags that FX shifts, specifically a 5% year-over-year decline in the USD/EUR exchange rate in Q2 2025 compared to a 2% increase in Q1, pose earnings risks, particularly for software firms with 30–50% of their revenue exposed to the U.S. market.
Companies like SAP and Sage are expected to see lower reported revenue and earnings due to this currency pressure, despite stable underlying forecasts.
BofA cut its 2025 revenue and EPS estimates for SAP by 0.3% each, while Sage’s were lowered by 0.7% and 0.8% respectively.
The software sector remains comparatively resilient, with expected Q2 organic growth at 9.9%, up slightly from 9.5% in Q1.
However, the bank noted that even strong performers such as Dassault Systèmes and Planisware are seeing downward estimate revisions due to FX effects.
In IT services, the outlook remains more subdued. BofA forecasts a 5% organic revenue decline in Q2, flat with Q1, citing ongoing macro uncertainty and the looming implementation of new U.S. tariffs.
Atos’ 2025 revenue estimate was reduced by nearly 7%, while Bechtle’s price objective was adjusted upward due to a lower cost of equity, despite underlying demand concerns.
Netcompany’s forecasts were revised downward on lower utilization in Denmark and broader end-market softness.
The payments sector is expected to see further deceleration, with Q2 growth slowing to 4.7% from 5.3% in Q1.
Adyen’s net revenue is forecast to grow 18.6% in Q2, or 20.7% on a constant currency basis, below consensus expectations.
For the full year, BofA projects 19.4% revenue growth and a 51.4% EBITDA margin, both roughly 3–4% below consensus.
Worldline saw the sharpest downgrade, with its price objective cut from €7 to €4 amid concerns about exposure to high-risk merchants and increased macro sensitivity.
Across the broader coverage universe, BofA revised 2025 revenue estimates down by 0.2% for software, 1.3% for IT services, and 0.2% for payments.
Estimated 2025 organic growth was reduced by 1.3 percentage points. The report also noted that positioning in the sector is lighter than usual, with only a 14% net overweight in June, according to its latest fund manager survey.