Market Performance

October was a challenging month for B2B software stocks. Our index of 250+ public companies declined by approximately –1.8%, underperforming the broader equity markets:

• B2B Software Index: –1.8%

• S&P 500: +2.3%

• Nasdaq: +4.7%

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This continues the 2025 divergence between major benchmarks and the B2B software universe: while the S&P 500 is up ~16% YTD and the Nasdaq up ~23% YTD, B2B software is lagging at ~+3% YTD.

By segment, majors such as Microsoft, Oracle, Amazon, and Alphabet continued to outperform, up nearly +30% YTD, contributing disproportionately to overall index performance. Infrastructure and industrial software showed solid gains, supported by accelerating AI workloads and renewed investment in industrial digitization.
On the downside, ERP, CRM, HCM, supply chain, procurement, marketing technology, and e-commerce platforms remain under pressure as investors increasingly reassess competitive risks linked to GenAI.

On the macro front, U.S. inflation ticked up to 3.0%, driven primarily by shelter and energy costs. The Federal Reserve cut rates by 25bps, its second rate cut of the year, citing cooling labor markets and slowing job creation. In Europe, the ECB kept rates unchanged at 2.0%, pointing to weak growth, persistent inflation, and an unusually high degree of macro uncertainty.

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Market Valuations

Valuations remained stable in October, extending the recovery that began in late Q3. The B2B software universe now trades at:

• EV/Sales: 6.2x (vs. 10-year avg. 6.4x)

• EV/EBITDA: 22.7x (vs. 10-year avg. 26.8x)

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High-growth companies (>20% revenue growth) continue to command a meaningful premium, trading at 12.9x EV/Sales and standing out as the only cohort with positive YTD performance (+23%). Mid-growth firms (10–20% growth) trade at 6.1x, while low-growth peers remain anchored around 4.0x.

Rule of 40 companies trade at 11.0x EV/Sales, while sub-20 Rule companies hover near 3x.

The North America vs. Europe valuation premium widened further to 89% (7.0x vs. 3.8x), driven by a sharp divergence in expected growth: 11% in North America vs. 3% in Europe.

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Deal Flow

Private equity and corporate M&A activity remained strong entering Q4, reinforcing 2025 as a true rebound year for transactions. Mega-deals returned, supported by improved debt financing conditions and a renewed appetite for buyouts.

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Notable transactions included:

• Nexthink acquired by Vista Equity Partners for $3B at roughly 10x EV/Sales, marking one of Europe’s largest digital employee experience (DEX) deals.

• Navex acquired by Goldman Sachs, with BC Partners retaining a minority stake, another validation of the resilience of GRC software.

• OSTTRA, a financial services software provider, acquired by KKR for $3B+, continuing momentum in the vertical financial software category.

• PSI Software taken private by Warburg Pincus and JAMP, part of the ongoing trend of public-to-private conversions.

• Jamf acquired by Francisco Partners, extending consolidation in the Apple-focused mobility management ecosystem.

• S&P Global acquired With Intelligence for $1.8B, at a premium 13x revenue multiple, underscoring demand for specialized financial data assets.

• Septeo acquired stp.one, strengthening its position in European LegalTech.

On the venture side, AI continues to dominate deal activity, with nearly $160B invested YTD and 70%+ of capital flowing into mega-rounds exceeding $500M.
Standout raises include Anthropic ($13B), Mistral AI ($1.5B), Nscale ($1.5B), Cerebras ($1.1B), Databricks ($1B), and Momenta AI ($6B).
Significant application-layer investments also appeared across martech (Sierra), automation (Invisible Technologies), fraud & risk (Seon), and CFO software (AppZen).

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What to Watch

IPO momentum and public market sentiment

2025 IPO activity continues to strengthen, with $54B raised across more than 300 listings, surpassing 2024 and approaching pre-COVID levels.

Recent listings showed mixed results:

• CoreWeave surged to nearly 3x its IPO price.

• Figma corrected sharply after an initially strong debut.

• Navan, global travel and expense management company, fell more than 20% post-IPO likely due to regulatory risks.

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Macro stability and valuation gaps persist

The Fed’s dovish pivot is supporting U.S. software valuations, while Europe continues to lag amid weaker GDP expectations.
The transatlantic valuation gap is now at its widest in five years.

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Segment trends and earnings insights

Q3 earnings revealed a bifurcated market:

• Cloud hyperscalers reaccelerated simultaneously for the first time since 2021:

• AWS: +20% YoY

• Azure: +40% YoY

• Google Cloud: +33% YoY

• Meta reported +26% revenue growth but saw a –15% share decline due to record AI-infrastructure spending ($72B).

• Select vendors beat expectations:

• Temenos: stock +19% as cost control drove higher EBIT growth (+36%)

• Amazon: 20.2% AWS revenue growth, fastest pace since 2022

• Alphabet: reported first-ever $100B revenue quarter, Google Cloud growing 34% YoY

• Signs of pressure in verticals:

• SPS Commerce: first revenue miss in 15 years (stock –21%)

• Dassault Systèmes: life sciences down –3%, guidance cut

AI spending acceleration and cloud growth remain the dominant themes across the earnings landscape.

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Investment Watchlist

Top names this month:

• ServiceNow – workflow automation leader with robust FCF margins and strong AI-driven expansion.

• Dynatrace – attractive entry point following valuation reset.

• Adobe – attractive valuations supported by stable growth and sustained free cash flow margins.

• HubSpot – renewed affordability with strong profitability and AI momentum.

• Veeva Systems – stable, high-margin vertical SaaS leader in life sciences.

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