Joel’s Market Pulse - Q3/2025

This quarter our star analyst Joel Liukkonen is away on a leave and thus we are providing a bit shorter summary of the third quarter of 2025.

The uncertainty in the market has risen to new levels as the possibility of trade wars has taken concrete steps and geopolitical crises have expanded, making the market more unpredictable and thus, the companies more hesitant to invest.

Global Political and Economic Situation

Stock markets have continued to show strength in spite of the geopolitical situation being quite precarious. For example, the S&P 500 index has been on almost a perfect linear upward trend and even the usually somewhat more volatile Nasdaq technology index has followed suit.

Some analysts and market commentators have found it surprising, since we certainly haven’t seen an end to wars in Ukraine or in Gaza. We haven’t seen a solution to Iran’s nuclear program or major positive developments in China considering Taiwan. On the contrary, we’ve seen tensions increasing between the USA and South American countries Venezuela and Columbia over narcotics topics. The more dramatic ones being the military strikes on Venezuelan vessels in international waters.

Trade wars and tariffs haven’t been discussed as prominently during Q3 than during the previous quarters and some agreements have been reached, but it would seem unlikely that these topics would’ve actually been cleared and put away. Thus, even these developments are hard to take as solid explanations of the stock market performance.

A few reasons behind the growth have been suggested though: consumer spending in the US, AI investments, lower real yields and positive trade negotiations.

Economy of Finland

Finland continues to be very dependent on the global economy compared to many other countries. (Good to note that the domestic savings measures are making exports even more important for finding growth.) Stock markets often move in tandem with the larger US indexes and this has happened during Q3 as well although not quite keeping pace with them.

However, in the real economy the small budding growth of the past quarters was quenched and we are back to zero growth. This is despite the trust in the economy in the business world improving. A cautious guess could be made that this indicates we have yet to see a turn in the economy and any relief for struggling companies may be quite far off. Thus, we are expecting the amount of bankruptcies to remain historically high and would advise businesses to be careful with their credit.

Etla has also predicted that the Finnish economy is growing less than anticipated due to households actually being more careful in consuming. In Finland people are afraid of possible unemployment (which might be at 9.3% at the end of the year), international crises and public cost saving. Export is anticipated to grow, however so is import for the Defense Forces - making net export not a viable solution for economic growth.

Despite the economic uncertainty, it’s good to remember that there are also differences between industries. The technology industry has been able to strengthen its orders and order backlogs even in spite of the changing tariffs, keep its demand and maintain its personnel count stable. The machine and metal industry has also increased the value of new orders. Explanations for this could be political consensus on trading terms that reduces uncertainty for businesses and an improved financing environment in Europe.

IT Service Market

When the domestic economy is not doing well, most often IT services companies are not doing well either. This was certainly the story for Q3. While we don’t yet have the summaries from companies Q3 performance, the Q2 was summed nicely by Inderes and the whole list of publicly traded companies was declining 5% in revenues.

As Q2 of 2024 was not a stellar period either, this indicates that the whole IT Services market in Finland continues to struggle. Further proof of this is that following the personnel negotiations with headcount reductions from Gofore and Vincit during H1, now it was Siili’s turn in Q3 to let go of some consultants. And as a final point, even the juggernaut TietoEvry lowered their growth target and is now indicating with relative certainty that their revenue will decline in 2025.

It is hard to think that continuing to cut costs would be a long term strategy for professional services businesses, thus the companies are likely desperately seeking for growth. The jury is out on what the effect of artificial intelligence will be on the long-term need for, say, software development consultancy, but over the short term it is widely viewed as the growth engine for the IT services industry as reflected in the company strategies. From the numbers, we are not seeing a lot.

Currently hiring in the IT industry is low, but not as low as in many others. The recruitment is rather more focused: employers are pursuing very specific skills. Especially competencies in AI, data, cloud and cyber security are in high demand. There is also often a strong need for expertise in a specific industry, such as finance.

One phenomenon that Joel has often highlighted is the potential market consolidation that can also be a means for seeking growth. A large move was seen in the beginning of Q3 as Gofore announced they were seeking to acquire Huld. The rationale communicated was clearly growth focused, which is often of course customary, but in this case also believable.

The acquisition was completed during the quarter. The acquisition rationale was an example of another key trend in the market besides AI. Gofore believes it will improve its position in the security and defense markets. With many governments and NATO looking to increase defense spending, perhaps even most companies are seeking to capitalize on this growing part of the market.

There’s not much of a positive note to leave the market outlook on, but at least most companies in the sector should’ve gotten a bit used to this and can be actively exploring the growth opportunities. Market consolidation may also offer some relief to active players in the area. There is enough money in the economy, the question is who and what can provide real value.