Market Performance

November was a difficult month for B2B software stocks. The B2B Software Universe declined 4.9%, continuing to underperform major indices, with the S&P 500 flat and the Nasdaq down 1.5%. Year-to-date, the sector has now entered negative territory at –2.3%, significantly lagging the S&P 500 (+16.4%) and the Nasdaq (+21.0%).

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Sector performance remained uneven. Strength in Financial Services (+3%) provided some support, but this was outweighed by sharp declines across key horizontal and infrastructure categories, including Cybersecurity (–8%), Payment & eCommerce (–7%), and Infrastructure Software (–7%).

Macro visibility was also limited in November: no official October US CPI print was released due to the government shutdown. As a result, the Federal Reserve maintained its current policy stance, keeping the federal funds target range unchanged at 3.75%–4.00%. The European Central Bank likewise kept rates steady at 2.00%, citing weak growth and persistent inflation risks.

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Market Valuations

Valuations declined meaningfully in November, reflecting both equity performance and macro uncertainty.

• EV/Sales NTM: fell from 6.2x in October to 5.5x in November
• 10-year average: 6.4x
• EV/EBITDA: dropped to 20.5x, remaining well below the 10-year average of ~26.8x

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Year-to-date, EV/Sales multiples are down ~14%, falling from 6.4x to 5.5x. Despite this compression, Rule of 40 companies continue to trade at a premium, typically at or above 6.4x EV/Sales, underscoring persistent investor preference for efficiency and free cash flow generation.

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Deal Flow

Q4 2025 has seen robust M&A activity, with corporate and private equity deal values nearing €12 billion. Venture capital activity accelerated as well, with €19 billion deployed year-to-date, surpassing 2024 levels, driven especially by large AI-related transactions.

While most mega AI deals occurred earlier in the year, Q4 still delivered several notable transactions:

Private Equity & Corporate M&A

• Anthropic – €13 billion (AI foundation models)
• Forsta – €5.7 billion (customer experience & insights)
• Nexthink – €2.5 billion (digital employee experience)
• Navex – €2.1 billion (GRC software)
• Chronosphere – €2.8 billion (cloud-native observability)
• Synthesia – €2.5 billion (AI video generation)
• SEMrush – €1.6 billion (SEO & digital marketing analytics)

Both corporate and PE deal momentum remains broad-based, with early signs of continued activity into Q4 despite a historically quieter seasonal period.

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What to Watch

IPO momentum and public market sentiment

The IPO market continues to reopen gradually. Several companies delivered solid trading performance post-listing, though visibility remains uncertain. Investor appetite is strongest for high-growth, profitable, AI-adjacent segments.

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Macro stability and valuation gaps

With no October inflation data available in the US, monetary policy visibility remains constrained. The Fed and ECB have paused further tightening, but lingering inflation risks and fragile global growth continue to weigh on investor sentiment.

Valuation dispersion remains wide, with Rule-of-40 names and AI-infrastructure-exposed players maintaining premiums relative to horizontal productivity software.

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Segment trends and earnings insights

The B2B software sector delivered a strong Q3 earnings season, with:

• 21 out of 21 companies reporting YoY revenue growth
• 19 out of 20 companies beating consensus expectations

However, market reactions were mixed, reflecting sensitivity to subtle changes in growth trajectories.

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Key highlights:

• Palo Alto (-8.0%) and Zscaler (-16.1%): weakness in cybersecurity; both reported YoY growth but saw decelerating growth in product revenues and revenue beats.
• MongoDB (+20.6%): strong quarter driven by Atlas growth.
• Snowflake (–13.6%): beat consensus but delivered a lower product beat versus last quarter.
• Descartes (+10.6%) and Samsara (+11.1%): strong performance in supply chain management and connected operations.

Overall, AI-ready infrastructure, supply chain digitization, and operational technology remain bright spots, while horizontal categories face heightened competitive pressure.

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