EMEA Tech Sector Navigates Trade Headwinds Amid Mixed Earnings

The EMEA tech sector is grappling with a dual challenge: balancing strong growth in renewable energy and AI-driven services against the disruptive impact of U.S. trade policies. Meanwhile, Washington’s latest tariff moves—targeting non-reciprocal trade practices—highlight both risks and opportunities for the region’s companies. Here’s what investors need to know.

EMEA Tech Earnings: Growth in Energy, Challenges in Telecom

The first-quarter earnings season underscored a sector in transition. Companies are pivoting to higher-margin segments as they navigate trade-related headwinds and mature markets.

Solutions30 SE (France/Germany): Strategic Selectivity Pays Off

While Solutions30’s Q1 revenue fell 12.3% year-on-year, its focus on profitability is bearing fruit. The Energy segment surged 19.1%, driven by photovoltaic projects in Germany and France. Germany alone contributed a 20.7% revenue jump, aided by government infrastructure investments. Meanwhile, the Connectivity segment dropped 20% as the firm exited low-margin fiber contracts in France and Spain—a move CEO Gianbeppi Fortis called “strategic pruning.”

The company’s backlog grew 8%, signaling confidence in future demand. Key stat: Energy now accounts for 30% of French revenue, up from 20% in 2024.

Capgemini (France): AI and Sovereignty Drive Resilience

Capgemini’s Q1 revenue held steady at €5.55 billion despite macroeconomic headwinds. The firm’s AI and cloud services were standout performers, contributing over 6% of bookings through partnerships with NVIDIA and Google Cloud. CEO Aiman Ezzat emphasized that “agentic AI” is reshaping client demand for automation and cybersecurity—a trend aligned with Europe’s push for data sovereignty.

Honeywell (U.S./EMEA): Tariff Mitigation in Action

Honeywell’s Q1 results highlighted the tension between regional growth and global trade friction. Middle East sales rose 8%, while European industrial automation faced a 2% decline due to demand weakness. The firm raised its full-year sales guidance to $39.6–$40.5 billion, citing tariff mitigation efforts, including operational efficiencies and the $2.2 billion Sundyne acquisition.

Porsche (Germany): Trade Tensions Cut Forecasts

Porsche’s Q1 results were a stark reminder of the automotive sector’s vulnerability. The firm slashed its 2025 sales forecast to €37–38 billion (down from €39–40 billion) due to U.S. tariffs and weak Chinese EV demand. EBITDA margins are now expected to drop to 16.5–18.5%, underscoring the cost pressure of retaliatory tariffs.

U.S. Trade Policy: Reciprocity Rules, but Risks Linger

President Trump’s April 2025 reciprocal tariff policy introduced a 10% levy on all imports (excluding exemptions), with higher rates for key trade partners. The goal? Address a $1.2 trillion 2024 U.S. goods trade deficit and non-reciprocal practices like the EU’s 10% auto tariff versus the U.S.’s 2.5%.

Key Impacts and Exemptions

• Auto Industry Relief: Clarified exemptions for existing Section 232 tariffs on steel/aluminum and autos. This eased immediate pressure on firms like GM, which had withdrawn guidance over tariff uncertainty.
• China Dynamics: U.S. tariffs on Chinese imports hit 145%, but Beijing quietly reduced duties on U.S. semiconductors—a potential de-escalation signal. However, cargo shipments to the U.S. fell 60%, risking supply shortages.
• Agricultural Shift: The U.S. agricultural trade surplus has flipped to a projected $49 billion deficit under current policies, signaling a need for revised trade strategies.

Trade Deal Progress

Commerce Secretary Howard Lutnick reported nearing agreements with an unnamed country and India, which could reduce reliance on punitive tariffs. However, the March 2025 U.S. trade deficit surged to a record high as businesses front-loaded imports ahead of April 5 tariffs.

Interplay of Trade and Tech: Opportunities Amid Uncertainty

The interplay between U.S. tariffs and EMEA tech earnings is complex:
1. Renewables Win: Solutions30’s Energy segment thrives as the World Bank projects a 17% drop in 2025 energy prices, easing input costs.
2. AI as a Hedge: Capgemini’s AI-driven services are less exposed to tariffs than physical goods, making them a safer bet for growth.
3. Tariff Mitigation Costs: Honeywell’s $2.2 billion Sundyne acquisition and operational changes highlight the expense of offsetting trade barriers.

Conclusion: Navigating the Tightrope

The EMEA tech sector is in a precarious balancing act. On one hand, energy transition projects (like Solutions30’s solar growth) and AI-driven services (Capgemini’s cloud bookings) offer solid growth avenues. On the other, U.S. tariffs threaten margins for firms reliant on global supply chains (e.g., Porsche’s auto division).

Investors should prioritize companies with:
- Geographic diversification (e.g., Solutions30’s German government contracts).
- Exposure to non-tariff sectors (e.g., AI, cybersecurity).
- Tariff mitigation plans (e.g., Honeywell’s operational efficiencies).

While the U.S. trade deficit hit $1.2 trillion in 2024, the region’s tech firms are proving resilient—if selective. As the World Bank notes, energy cost declines and AI adoption could offset some trade-related losses. Yet with China’s cargo shipments down 60%, the sector’s path forward remains fraught with uncertainty.

Final Take: EMEA tech stocks with strong ESG credentials and digital transformation plays (like Capgemini’s AI focus) are worth watching, but investors must remain cautious on automotive and traditional telecom names until trade tensions ease.