Market Performance

June brought continued stabilization for B2B software stocks. Our index of 270+ public software companies gained 0.8%, underperforming the broader indices: the S&P 500 rose by 3.5% and the Nasdaq by 4.6%.

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Despite modest performance, year-to-date growth for B2B software reached 1.3%, keeping pace with the S&P 500 (3.6%) and Nasdaq (3.4%). The environment was shaped by steady U.S. policy rates and a slight uptick in inflation to 2.4%, still near its lowest levels since early 2021. In contrast, the ECB cut rates by 25bps as eurozone inflation hovered around its 2% medium-term target.

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Market Valuations

Valuations remained stable:

• EV/Sales multiples inched up to 6.3x, close to the 10-year average (6.4x), and up significantly from the April low (5.0x).
• EV/EBITDA multiples hovered at 23.8x, still below the 10-year average of 27x but recovering from 19.9x in April.
• High-growth companies (>20% revenue growth) led the rebound, now trading at 12.0x EV/Sales. Rule of 40 companies also traded at a premium of 7.9x.
• North American software companies widened their valuation premium over European peers to 58% (6.7x vs. 4.2x), driven by stronger SaaS penetration, better cash generation, and a deeper universe of listed growth names.

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Deal Flow

Q2 2025 saw the highest level of corporate M&A activity since Q1 2024, alongside a sharp increase in venture capital round sizes driven by mega-deals like OpenAI’s €37B raise. While PE buyouts remained stable in volume, deal values trended slightly lower.

Notable transactions included:

• ‍Xero's $3B acquisition of Melio, aU.S. SMB payments platform, at a 13.4x EV/Sales multiple, aimed at integrating payments within its accounting suite.‍
• Vista Equity’s acquisition of Amtech Software, supporting its shift to SaaS and modernization of packaging ERP solutions.‍
• Great Hill’s investment in Peter Park, backing a 274% growth leader in parking infrastructure.‍
• Arcos' funding from Bain Capital, to expand its utility workforce management platform.

In venture capital: Cyera raised $540M to scale its AI-powered data security platform, and UniUni secured $70M to extend its last-mile logistics operations.

These deals underscore the continued appetite for vertical software, automation, and AI-driven infrastructure.

What to Watch

IPO momentum and public market sentiment

While IPO volumes remain far from 2021 highs, Q2 saw some movement:

• ‍Julong, a niche cash-processing software player, went public with a modest $5M raise.
• Healthcare and cloud infrastructure companies continued to attract strong multiples in public markets (e.g., recent IPOs in health tech (7.7x EV/Sales) and cloud (14.8x) posted solid performance).

Expect IPO windows to remain selective, with preference for growth efficiency and AI integration.

Macro stability, valuation gaps persist

Despite geopolitical pressures, inflation remains contained,and central banks are navigating rate normalization cautiously.

• The Fed held rates, balancing stable inflation with slowing growth.
• The ECB cut rates for the seventh time since June 2024.

Valuation gaps between growth and mature cohorts, and between U.S. and European markets, remain material. SaaS-heavy, high-growth platforms continue to attract premium multiples.

Segment trends and earnings insights

June earnings were strong, with all software companies in our index reporting YoY growth. Standouts include:

• ‍Oracle (+28.6%), Cloudflare(+76.6%), and Zscaler (+72.9%), reflecting strength in cybersecurity andinfrastructure.‍
• Snowflake (+43.5%), MongoDB, and Palantir(+88.9%) beat expectations, driven by GenAI adoption.
• Laggards included Asana (-36.2%) and Five9(-34.5%), signaling pressure in productivity and communication segments.

Investment watchlist

Top names drawing attention this month:

• ‍Cloudflare: Massive contract wins and strong developer traction justify its 70%+ rally YTD.‍
• Palantir: Trading at 80x EV/Sales,reflecting investor conviction in its AI leadership.‍
• Xero: Strategic M&A execution to build an end-to-end financial stack for SMBs.‍
• Cyera and UniUni: Private names with compelling growth trajectories in cybersecurity and logistics AI.

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