War in the Middle East, volatile energy prices and the prospect of higher interest rates have clouded the economic outlook for 2026. Yet Europe's private capital industry continues to push ahead. In its 2026 EMEA Private Capital Outlook: Midyear Update report outlook, Pitchbook concluded that the structural forces driving away from public markets and towards private ownership remain firmly intact.

Artificial intelligence is attracting record amounts of venture funding, private equity continues to expand its corporate footprint and Europe remains an attractive destination for investors despite growing geopolitical uncertainty.

Private markets keep expanding

The clearest structural trend is the widening gap between public and private ownership. Pitchbook's forecast that private equity-backed companies would outnumber listed firms by a record ratio of 2.3 times has already been achieved in the first quarter, months ahead of schedule (see Chart 1).

The milestone reflects less an explosion in private equity investments than the continued contraction of Europe's public markets. While the number of PE-backed companies increased only modestly during the quarter, the listed universe shrank much faster as delistings continued to outpace new flotations.

Weak IPO activity reinforces the trend. The data provider noted that only seven PE-backed IPOs were completed during the first five months of 2026, raising just €2.4bn (see Chart 2). Unless market conditions improve significantly in the second half, Pitchbook expects private ownership to capture an even larger share of Europe's corporate landscape.

US buyers pause

One prediction has failed to materialise so far. Pitchbook expected US investors to account for one-quarter of European private equity deals during 2026. Instead, their participation has fallen to 18.1%, down from 19.5% at the end of last year.

Geopolitical uncertainty and concerns over inflation and interest rates, together with falling software valuations in the United States, have made American sponsors more cautious, argued the firm's analysts.

Even so, US firms remain highly influential where it matters most. They participated in four of the five largest European buyouts completed during the first quarter and continue to hold record levels of dry powder. Should geopolitical tensions ease, cross-border dealmaking could rebound rapidly during the remainder of the year.

The IPO window stays open

Europe's IPO market has proved more resilient than many expected. Pitchbook's valuation and volatility indicators suggest the IPO window remains open despite geopolitical turbulence (see Chart 3).

Companies, however, are choosing patience over speed. Many venture-backed businesses appear ready to list but are delaying launches until market visibility improves. Around 38 IPOs were completed during the first quarter, although activity slowed during the second quarter.

The quality of companies coming to market also remains high. Roughly 80% of this year's IPOs have been profitable, compared with 87.3% in 2025 (see Chart 4). While profitability remains well above historical averages, the slight decline may indicate investors are becoming more willing to accept loss-making AI businesses in exchange for exposure to high-growth technologies.

AI dominates venture capital

If one trend has exceeded expectations, it is artificial intelligence.

By May, AI represented more than 60% of all European venture capital deal value, far above the 37.8% recorded last year. AI companies also accounted for almost 40% of all venture deals completed during the period, demonstrating that the sector is expanding both in value and in the number of funded businesses.

Despite the surge, Europe still lags the United States by a considerable margin. Median AI pre-money valuations stand at €8.3m in Europe versus €64.2m in the US, while median deal sizes remain less than half those seen across the Atlantic.

Pitchbook argued that this valuation gap should be viewed less as a weakness than as an opportunity. As Europe's AI ecosystem matures, valuations have significant room to converge towards US levels, creating attractive opportunities for investors.

Structural trends remain intact

Pitchbook's six predictions paint a picture of resilience rather than exuberance. Four are progressing broadly as expected—or even ahead of schedule—while only one, the expected increase in US participation in European buyouts, has clearly disappointed.

More importantly, the report argued that the industry's long-term direction remains unchanged. Companies continue to favour private ownership over public markets, AI is rapidly concentrating venture capital flows, and Europe remains an attractive destination for global investors despite war, inflation and interest-rate uncertainty.

In short, macroeconomic shocks may slow individual transactions, but they have yet to reverse the structural transformation reshaping global private capital.