Author: Fiona Craig

Computacenter plc (LSE:CCC) has raised its full-year 2026 adjusted profit before tax outlook to at least £425 million following third-quarter trading that exceeded management’s expectations, supported by growth in Technology Sourcing and Professional Services.

The technology and services provider reported increased demand from hyperscale and neocloud customers in North America and the UK during the three months ended 30 September 2026.

Group Technology Sourcing revenue increased compared with the previous year, while Services revenue also grew, as higher Professional Services revenue more than offset a decline in Managed Services.

Computacenter ended September with a committed product order backlog of £12.6 billion, up from £9.3 billion at the end of June, representing an increase of £3.3 billion, or approximately 35.5%.

The company said its revised profit expectations reflect third-quarter performance and trading during the opening weeks of the fourth quarter.

North America Drives Growth in Technology Sourcing and Professional Services

Computacenter reported continued growth across its North American operations, supported by project completions and demand from hyperscale and neocloud customers.

The region recorded its highest level of project completions during the quarter, contributing to revenue growth in both Technology Sourcing and Professional Services.

North America also reported an increase in its committed product order backlog, reflecting additional customer orders.

The company identified the region as a principal contributor to its third-quarter performance, alongside continued demand from UK customers.

Group Technology Sourcing revenue benefited from customer activity in both markets, while Professional Services recorded organic growth, primarily driven by North America.

Managed Services revenue declined compared with the corresponding period last year, although growth in Professional Services was sufficient to deliver an overall increase in Group Services revenue.

Computacenter did not provide individual divisional revenue figures or regional growth percentages in its third-quarter update.

UK Technology Sourcing Revenue Increases as Germany Maintains Underlying Performance

Computacenter reported growth in its UK operations during the September quarter, with Technology Sourcing recording an increase in revenue.

Professional Services revenue also rose in the UK, contributing to the group’s overall Services performance.

In Germany, Technology Sourcing revenue increased compared with the prior-year period, while Professional Services revenue remained broadly stable.

The company said it continues to implement measures intended to improve operational efficiency and align resources with customer demand in Germany.

These actions were previously outlined in Computacenter’s half-year results.

The trading update did not provide additional financial details regarding the German efficiency programme or specify any associated costs or savings.

Committed Product Order Backlog Reaches £12.6 Billion

Computacenter reported a committed product order backlog of £12.6 billion at the end of September 2026, compared with £9.3 billion three months earlier.

The £3.3 billion quarterly increase reflects growth in committed customer orders, with North America contributing to the expansion.

The company also reported an ongoing pipeline of business opportunities in North America and the UK.

Computacenter said the backlog and current trading conditions were factors supporting its updated financial outlook.

The company did not provide a timetable for converting the full order backlog into revenue.

Computacenter Expects Adjusted Profit Before Tax of at Least £425 Million

Following the third-quarter performance and the start of fourth-quarter trading, Computacenter now expects adjusted profit before tax for FY2026 to be no less than £425 million.

The revised guidance follows the company’s first-half performance and continued growth in Technology Sourcing and Professional Services during the September quarter.

Computacenter said the increase in its full-year expectations reflects trading ahead of its previous assumptions.

The company did not disclose a revised full-year revenue forecast or provide additional guidance for individual business divisions.

The third-quarter trading information remains unaudited.

Capital Markets Event Scheduled for 24 November

Computacenter will host a Capital Markets Event on 24 November 2026 at its Hatfield facilities in Hertfordshire.

The event will be led by Chief Executive Officer Mike Norris and Chief Financial Officer Keith Mortimer, alongside presentations from senior management.

Topics will include the company’s growth opportunities in North America and its European data centre capabilities.

Attendees will also be offered a visit to Computacenter’s Hatfield Integration Center and its new Liquid Cooling Facility.

The company is scheduled to publish its next trading update on 28 January 2027, when it will provide a pre-close assessment of its full-year performance.

Why is trading in AI-related credit derivatives increasing?

Investors are purchasing more credit default swaps linked to major technology companies as borrowing to finance artificial intelligence infrastructure expands.

According to Morgan Stanley Research, CDS trading associated with bonds issued by Oracle (NYSE:ORCL), SpaceX (NASDAQ:SPCX), Alphabet (NASDAQ:GOOGL), Amazon (NASDAQ:AMZN), Meta (NASDAQ:META), Broadcom (NASDAQ:AVGO) and Nvidia (NASDAQ:NVDA) averaged more than $9 billion per week in September.

The figure represents a substantial increase from less than $2 billion in July.

Bloomberg data also indicate that trading in US corporate CDS indices has already surpassed the volume recorded for the whole of 2025.

The increase reflects demand from investors seeking protection against changes in corporate credit risk as technology companies expand their borrowing.

How has AI-related debt issuance changed?

Morgan Stanley estimates that AI-linked companies have issued approximately $466 billion of debt so far in 2026.

That compares with $101 billion during the corresponding period last year.

The borrowing is being used to finance data centres, semiconductors and other infrastructure required for artificial intelligence services.

The scale of investment has prompted closer examination of how quickly companies can generate revenue and cash flow from their infrastructure spending.

Investors are also considering the financial connections between AI developers, cloud computing providers and the companies supplying the necessary hardware.

Which companies have seen the largest increases in credit protection costs?

Several major technology companies have experienced record CDS spreads.

Meta’s five-year CDS reached 108 basis points this month, while Nvidia’s rose to 101 basis points.

Oracle’s spread increased to 322 basis points on Monday from 144 basis points at the start of 2026.

SpaceX’s CDS reached 226 basis points, compared with 110 basis points when trading began in late June.

Alphabet and Amazon also recorded all-time highs in their credit protection costs, while Microsoft (NASDAQ:MSFT) and CoreWeave (NASDAQ:CRWV) experienced increases.

A higher CDS spread means that investors must pay more to obtain protection against a specified credit event, although the price can also reflect market liquidity and demand for hedging.

Why are portfolio managers using CDS instead of selling their investments?

Credit default swaps allow investors to obtain protection against credit events without necessarily selling their existing securities.

Multi-asset and equity managers are using these instruments to manage risks associated with their exposure to AI-related businesses.

The approach has become more relevant because companies across the AI sector are linked through infrastructure contracts, financing commitments and commercial relationships.

“CDS has become a key bellwether of investor sentiment towards hyperscaler funding and the broader AI trade,” said Société Générale’s Manish Kabra.

The increased activity indicates that investors are monitoring corporate credit markets alongside equity valuations when assessing the sector.

What makes CoreWeave’s CDS pricing different?

CoreWeave’s five-year CDS spread reached approximately 1,090 basis points, substantially higher than the spreads reported for many larger technology companies.

At the quoted price, purchasing $10 million of protection would require an upfront payment of around $1.82 million, followed by quarterly payments of $125,000.

The pricing reflects the terms of the CDS contract and the market’s assessment of the risks associated with CoreWeave’s debt.

Robert Dafforn, chief investment officer at Polus Capital, pointed to the high levels of leverage used in parts of the AI infrastructure sector.

He also expressed concern that some capital expenditure may not produce sufficient returns.

What could influence CDS markets in the coming months?

Future demand for AI-related credit protection will depend partly on borrowing requirements, financing costs and the financial performance of companies developing AI infrastructure.

The expansion in debt issuance has increased the importance of assessing whether expected revenue can support investment and repayment obligations.

CDS spreads provide one market-based measure of changing credit conditions, but they do not independently establish whether a company will default.

The recent rise in trading volumes and protection costs indicates that investors are increasingly using credit derivatives to manage risks associated with the financing of artificial intelligence infrastructure.

What has Jefferies identified in the latest iPhone sales data?

Jefferies analyst Edison Lee has reported further signs of weaker demand for Apple’s (NASDAQ:AAPL) iPhone 18 Pro and Pro Max, citing changes in delivery availability, resale pricing and component orders.

In a Monday research note, Lee said the brokerage’s monitoring continued to indicate subdued demand for the two premium models.

The assessment contrasts with reported growth in overall iPhone sales in China, which Jefferies believes was partly supported by discounted sales of older devices.

Why are shorter delivery times significant?

Jefferies reported that delivery times for both iPhone 18 Pro models in China have declined to zero days.

The comparable waiting periods for the previous generation were six days for the Pro and 25 days for the Pro Max.

Delivery times in Japan have also shortened substantially year on year.

However, Jefferies noted that US delivery times for the Pro Max have increased, indicating that availability trends differ between markets.

Shorter lead times can reflect reduced demand, increased supply or a combination of the two factors.

What has happened to iPhone pricing in China?

Chinese online retailer PDD introduced discounts of 6% for the iPhone 18 Pro and 9% for the Pro Max on 16 October.

Jefferies also found that resale prices for the Pro models had moved below retail prices from 29 September.

By comparison, the equivalent devices last year were trading at premiums of between 1% and 6%.

The brokerage views these pricing changes as additional evidence that demand for the latest premium models may be below earlier expectations.

Are Apple’s suppliers receiving fewer orders?

Jefferies said industry contacts have reported reductions of approximately 10% to 15% in orders for certain iPhone components, including 2-nanometre chips.

The reported change in final assembly orders has been smaller, with some suppliers indicating a net reduction of around 2 million devices.

The difference suggests that the full effect of component order adjustments on finished-device production remains uncertain.

“We will continue to monitor supply chain feedback, but do believe further order cuts are possible if weak demand continues,” Lee wrote.

Apple has not confirmed the reported reductions in the information cited by Jefferies.

Why do overall iPhone sales figures present a different picture?

Reported iPhone sales volumes in China increased by more than 40% year on year during the first two weeks after shipments began.

That rate slowed to approximately 8% in early October.

Jefferies believes discounted sales of remaining iPhone 17 Pro and Pro Max inventory contributed to the initial increase.

As a result, the brokerage argues that overall iPhone sales growth should not be interpreted as a direct measure of demand for the iPhone 18 Pro range.

What is the outlook for Apple’s foldable Duo?

Apple’s foldable Duo recorded delivery lead times exceeding 90 days after pre-orders began on 16 October.

Jefferies estimates that this corresponds to a maximum of approximately 6 million to 7 million shipments during 2026, consistent with market expectations.

The extended waiting period differs from the immediate availability reported for the iPhone 18 Pro models in China.

Jefferies will continue monitoring supply chain information, retail pricing and delivery times to assess whether Apple makes further adjustments to production.

Evercore strategists have identified a series of financial market indicators that could signal a correction in artificial intelligence-related stocks following last week’s technology sector selloff.

In a research note published on Sunday, a team led by Julian Emanuel said the recent declines marked the beginning of a price discovery phase for AI investments, with investors reassessing valuations, borrowing costs and the financial requirements of large-scale infrastructure development.

The firm identified four indicators that could signal a transition from the current bull market into a correction, or potentially a bear market if economic conditions deteriorate into recession.

Despite the identified risks, Evercore reiterated its year-end 2026 target of 7,750 for the S&P 500.

Credit Spreads and Earnings Revisions Among Key Indicators

Evercore highlighted four market developments that it believes warrant close attention as investors evaluate the sustainability of the AI-related equity rally.

The first is an increase in investment-grade credit default swap (CDS) spreads above their March peak of 68.33.

The second is a rise in high-yield CDS spreads beyond their previous high of 411.04.

CDS spreads reflect the cost of obtaining protection against a borrower’s default. An increase generally indicates that market participants are demanding greater compensation for credit risk.

The third indicator is a reversal in the upward trend of analysts’ earnings-per-share estimates, which could suggest that expectations for corporate profitability are weakening.

The fourth is a rise in the yield on 10-year US Treasury securities above 5.62%.

According to Evercore, these indicators could help determine whether recent market weakness remains concentrated in technology stocks or develops into a broader reassessment of financial asset valuations.

US Treasury Yield of 5.62% Identified as Fiscal Warning Level

Evercore’s Washington policy team said a 10-year Treasury yield above 5.62% could increase concerns about US fiscal conditions and government borrowing costs.

The strategists noted that the recent yield peak of 5.36% provided a reference point for assessing further increases.

They described 5.62% as “a reasonable level at which alarm bells would be expected to ring.”

The team referred to such a development as a potential “fiscal alarm bell.”

Higher government bond yields can influence borrowing costs across the economy, including corporate debt financing and household lending.

They can also affect equity valuations by increasing the discount rates applied to expected future earnings.

This relationship is particularly relevant for growth-oriented technology companies, where a substantial proportion of market valuations may depend on profits expected several years into the future.

Evercore Questions Assumptions Behind AI Debt Expansion

The strategists also examined the financing requirements associated with the expansion of AI infrastructure.

Evercore referred to an estimated $1.3 trillion in investment by 2027, including spending on data centres, computing capacity and related infrastructure.

The firm questioned the assumption that major technology companies, often described as hyperscalers, could continue issuing debt regardless of market conditions, even if their free cash flow became negative.

Evercore characterised that assumption as “pure fantasy.”

The strategists argued that borrowing costs, investor demand and access to capital markets remain important constraints on corporate investment plans.

Their analysis suggests that the increasing use of debt to finance AI infrastructure could make the sector more sensitive to changes in credit conditions.

Previous Market Cycles Provide Historical Comparisons

Evercore compared current investor expectations with several previous periods of financial market instability.

These included the collapse of the dot-com bubble in 2000, the 2018 equity market decline associated with trade tensions and Federal Reserve rate increases, and the bursting of Japan’s asset price bubble in 1989.

The firm also referenced the prolonged period of economic stagnation that followed Japan’s market downturn.

“Last week reaffirmed the ‘this time is no different’ notion amid a perfect storm for the AI bull market, highlighting dividing lines that, if crossed, could tip the bull market into correction, or even bear market,” Emanuel’s team wrote.

The comparisons were used to illustrate the potential consequences of changes in market expectations and financing conditions.

They do not establish that the current AI investment cycle will follow the same pattern as those earlier episodes.

Evercore Maintains AI Equity Exposure With Risk Hedges

Although Evercore identified several potential warning signals, the firm maintained its recommendation to retain exposure to selected AI-related stocks while the specified market thresholds remain unbreached.

The strategists referred to their preferred group of companies as the “AI class of 2026.”

They also recommended maintaining hedges against potential volatility surrounding the November 3 US midterm elections.

The suggested strategies included exposure to negative-beta stocks, S&P 500 straddles and December Nasdaq-100 put spread collars.

Negative-beta securities may provide diversification when broader equity markets decline, while options-based strategies can be structured to manage exposure to market movements.

Evercore’s recommendations reflect its assessment of current market risks and potential investment positioning rather than a forecast that a correction will necessarily occur.

Technical Levels Could Influence Investment Positioning

Evercore also identified technical reference points that could prompt changes to its recommended equity exposure.

The strategists suggested that investors could increase long positions and remove hedges if the Nasdaq-100 tested its 200-day moving average, described in the source report as being around 674.

They identified a corresponding level of 725 for the S&P 500.

The reported figures appear inconsistent with the headline levels of the two indices and may refer to a different technical measure. The original information does not provide sufficient detail to resolve that discrepancy.

The strategists nevertheless presented these levels as potential conditions for adjusting market positioning.

S&P 500 Year-End Target Remains at 7,750

Evercore maintained its S&P 500 target of 7,750 for the end of 2026 despite the recent decline in technology shares.

The firm’s analysis distinguishes between short-term price volatility and developments that could indicate a more sustained deterioration in market conditions.

Its framework places particular emphasis on credit market spreads, corporate earnings revisions and Treasury yields as measures of financial pressure.

The report also highlights the importance of debt financing as technology companies expand their AI infrastructure investment programmes.

For now, Evercore’s outlook remains conditional on whether the identified market indicators cross their specified thresholds and whether broader economic conditions continue to support corporate earnings.

What prompted J.P. Morgan’s review of CoreWeave’s financing?

J.P. Morgan examined global banks’ exposure to CoreWeave (NASDAQ:CRWV) following a decline in the AI cloud infrastructure provider’s shares and bonds.

The market movements occurred amid growing scrutiny of the borrowing required to finance the expansion of artificial intelligence infrastructure.

CoreWeave has accumulated approximately $50 billion in debt while developing computing capacity for major technology customers.

Last week, the yield on its bonds due in 2031 approached 16%, while the cost of credit default protection rose to around 1,000 basis points.

The developments prompted questions about whether financial pressure at AI infrastructure companies could create risks for the banks providing their funding.

How much exposure do major banks have to CoreWeave?

According to J.P. Morgan, large US investment banks and Japan’s MUFG could each have between $1 billion and $3 billion in exposure to CoreWeave.

Most other European and Asian institutions are estimated to have exposures below $500 million.

The figures are based on simplified assumptions because banks do not provide comprehensive disclosures about their lending and investment exposure to the AI infrastructure sector.

J.P. Morgan therefore cautioned that the estimates should not be treated as precise measures of individual banks’ positions.

What protects banks involved in CoreWeave’s financing?

J.P. Morgan identified the structure of CoreWeave’s borrowing arrangements as an important factor in assessing lenders’ risks.

Much of the financing consists of delayed draw term loans, under which committed funds are released in stages as projects achieve agreed milestones.

These arrangements are largely managed through special-purpose vehicles and are supported by security arrangements linked to the financed assets.

CoreWeave has approximately $24 billion in committed delayed draw term loans, including $15 billion already drawn and $9 billion not yet utilised.

J.P. Morgan analysts led by Kian Abouhossein said the banks’ exposures were well managed and secured.

The brokerage’s assessment suggests that the structure of the financing may limit direct lender risks, although it does not remove the possibility of losses.

Why does CoreWeave still face financing challenges?

CoreWeave’s business requires substantial spending on data centres and computing equipment before the full revenue associated with customer contracts is received.

The company has secured agreements worth tens of billions of dollars with major technology businesses, but its infrastructure expansion continues to require external capital.

J.P. Morgan identified the timing difference between upfront investment and future customer payments as a central financial risk.

The brokerage expects CoreWeave’s free cash flow to remain negative until 2030.

This forecast indicates that the company may continue to require financing to support its capital expenditure and operating requirements.

What is J.P. Morgan’s outlook for CoreWeave shares?

J.P. Morgan maintains an overweight rating on CoreWeave, with a price target of $125 for the end of 2027.

The brokerage’s assessment of the banking sector focuses on the direct credit exposure of lenders rather than solely on movements in CoreWeave’s share price or bond yields.

Although the company’s debt securities have experienced significant selling pressure, J.P. Morgan estimates that most global banks have relatively limited exposure.

The analysis also highlights the uncertainty surrounding broader AI infrastructure financing, particularly because banks provide limited disclosure about their involvement in the sector.

For lenders, the principal considerations remain the security supporting individual loans, the progress of financed projects and the ability of borrowers to generate sufficient cash flow over time.