Market trends January 2026

Market Performance

2025 was a difficult year for B2B software equities. Our universe of 266 publicly listed B2B software companies ended the year net negative, significantly underperforming broader indices.

• B2B Software index ending in 2025: -2.3%
• B2B Software index weighted by market cap ending in 2025: +25.9%
• S&P500 ending in 2025: +16.4%
• Nasdaq ending in 2025: +20.4%

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Performance was highly polarized throughout the year. Large-cap software and mega caps delivered strong results on a weighted basis, with the weighted average performance up nearly +26%, driven by majors benefiting from accelerating AI adoption. Alphabet was up 60%+ in 2025, while Oracle ended the year with high double-digit performance after retracing part of its earlier gains.

In contrast, medium and small-cap software materially underperformed, with several segments ending 2025 down by wide double digits. This includes supply chain, procurement, CRM, CMS, ERP, HCM, payments, e-commerce, and productivity management, where growth slowed sharply and where investors increasingly priced in AI-driven disruption risks.

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Market Valuations

In line with stock performance, the B2B software universe ended 2025 at more normalized multiples and a more attractive valuation level versus recent years.

• EV/Sales: 5.6x (down from 6.3x at the start of 2025; just above the 2025 low of 5.3x)
• EV/EBITDA: 20.5x (down from 25.8x at the start of 2025; below the 10-year average of 27.5x)

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All growth cohorts ended 2025 down and rule of 40 valuation premiums also compressed meaningfully.

North America continues to trade at a strong valuation premium over Europe:

• NA vs EU premium: 85% (NA 6.3x vs EU 3.4x)
• Growth outlook remains structurally stronger in North America (11%) vs Europe (3%, down from 7% in 2024).

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Deal Flow

2025 saw a strong rebound in dealmaking, especially in private equity, where the market experienced a clear return of mega deals.

In private equity, B2B software deal activity reached:

• €49B total deal value in 2025
• 491 deals, the highest since 2020

Corporate M&A also strengthened materially, surpassing 2022–2024 levels, as more companies build internal corporate development teams to stay competitive, extend product capabilities, and demonstrate growth through accretive acquisitions.

Venture activity was largely driven by mega AI rounds such as OpenAI and Anthropic, driving a 2.5x increase in total deal amount vs 2024.

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Notable transactions included:‍

• Clearwater Analytics acquired by Permira & Warburg Pincus via a public-to-private LBO for $8.4B (investment accounting & reporting).
• ON24 acquired by Cvent via a public-to-private LBO for $400M (webinar, virtual events & digital engagement).
• Databricks raised a $4B Series L led by Insight Partners, J.P. Morgan and others.
• ServiceNow acquired Armis for $7.75B, at 26x ARR, with Armis growing 50% YoY (OT / IoT security expansion).
• Encora acquired by Coforge for $2.5B (tech-enabled IT services, AI, cloud & data engineering).
• Cyera raised ~$400M from Blackstone at a $9B valuation (data security posture management).

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What to Watch

IPO momentum and public market sentiment

IPO activity and total listings rebounded in 2025 versus the prior three years, surpassing pre-COVID 2019 levels, though still below 2020–2021 highs. This suggests an inflection point for B2B software IPOs, with renewed exit optionality heading into 2026.

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Macro stability, valuation gaps persist

2025 was shaped by three main macro drivers: high interest rates, geopolitical uncertainty, and moderating inflation. U.S. headline CPI slowed to 2.7% through November 2025.

The Fed pivoted toward easing, delivering ~75 bps of cuts to close 2025 with rates at 3.5%-3.75%, while the ECB cut rates to 2% in June and held steady thereafter amid weak European growth.

Markets are settling into a new baseline cost of capital around ~3.5%, compressing tech valuation premiums and reinforcing investor selectivity between growth and cash flow.

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Segment trends and earnings insights

Throughout 2025, certain segments maintained valuation premiums relative to 10-year historical levels, including majors, supply chain & procurement, and infrastructure software. Some of these premiums appear sustainable (notably majors), while infrastructure and supply chain may partly reflect AI-related valuation tailwinds and therefore call for caution.

Looking into 2026, several segments are expected to remain key growth areas to monitor, including CRM, CMS & marketing, payments & e-commerce, cybersecurity, and workflow & productivity management.

On Q3 earnings (late reporters), results remained fundamentally solid but market reactions diverged:

• Rubrik rose ~+30% post-earnings on 48% revenue growth and +27% YoY growth in customers above $100K ACV, alongside raised guidance.
• Oracle declined ~–16% after missing revenue consensus, with cloud applications growing 11% and capex burn reaching ~$10B (roughly 2x higher than consensus expectations) driven by continued AI infrastructure buildout.

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