September 2026 was the month central banks turned. The Federal Reserve raised rates for the first time since July 2023, the European Central Bank delivered its second hike of the year, and B2B software underperformed: the B2B Software Universe tracked by Dedale Intelligence fell 5.3%, while the S&P 500 fell 0.5% and the Nasdaq rose 1.9%. The headline numbers matter less than what sits behind them. The market is now paying for efficient growth and cash generation, punishing any sign of deceleration, and directing private capital toward AI-native niches such as Governance, Risk and Compliance (GRC).

This article summarizes the key findings of Dedale Intelligence's October 2026 Market Session. For last month's context, see our September 2026 Market Trends article.

Valuations: the market now pays for efficient growth

EV/Sales NTM multiples eased to 4.8x, near levels last seen in Q1 2017 and well below the 10-year average of 6.6x. The more telling shift is in what investors reward. The valuation premium for revenue growth over FCF margin has fallen from 77% in March 2025 to 1% in September 2026, its lowest level since May 2023. A point of growth and a point of margin are now valued equally, which means growth-at-all-costs stories no longer command a premium.

Cash generation is where the premium has moved. Companies with FCF margins above 30% trade at 8.7x EV/Sales, around 3x the 2.5x of low FCF margin peers, and Rule of 40 companies held steady at 8.6x while the Rule of 20 and 30 and Below 20 cohorts fell to 3.7x and 2.6x. Rule of 40 cohorts have been rather stable for two years because margin expansion has compensated for slowing growth, and fewer and fewer companies are achieving 20%+ NTM growth.

Performance is also concentrated. Majors, Cybersecurity and Infrastructure Software are the only segments trading above their historical averages, with Cybersecurity up 49% and Infrastructure Software up 25% year-to-date. The US-Europe premium widened to 105% (2.7x in Europe versus 5.6x in North America). Dedale Intelligence attributes this gap to European software being more mature with weaker cash generation, a higher SaaS mix in North America, and a US listed universe more than 3x larger, which provides more comparable growth stories.

Macro: why rate hikes weigh on software

Headline US CPI held at 3.4% in August. The Fed raised rates by 25bp to a 3.75% to 4.00% target range, and the ECB lifted its deposit rate to 2.50%, citing persistent energy-driven inflation from the Middle East conflict. This matters for software specifically: Dedale Intelligence has observed a negative correlation between software multiples and treasury yields since 2022, in North America and in Europe. With both central banks now tightening and the 10-year US yield above 5%, that relationship helps explain why software valuations fell in September while broader markets held up.

Download the full October 2026 Market Intelligence report

GRC deep dive: where AI creates value, and where it disrupts

GRC has ranked among the most active thematics in Dedale Intelligence's project work in every quarter of 2026, and the deal data shows why. Of around 139 GRC deals tracked year-to-date, VC and growth investors led around 79, corporates 53 and LBOs only around 8. Around 20% involve AI features, from AI agents and document analysis to compliance monitoring, reflecting strong appetite from both corporates and investors for AI-native compliance automation.

Demand supports that appetite. In Dedale Intelligence's GRC Survey of 100 customers, 73% expect their GRC software spending to increase over the next five years and only 4% expect a cut. But buyers are selective about what AI they value: predictive analytics and automated risk assessment, seen as enablers of proactive risk management, rank highest, while chatbots and report generation are viewed as operational aids rather than strategic differentiators.

The AI disruption risk is uneven. Governance tools are most exposed, because their high-ROI tasks such as reporting, data collection and minutes drafting are easily automated and their proprietary data moats are limited. Third-party risk management faces strong AI incentives too, but high accountability, low error tolerance and the need for proprietary risk logic moderate the threat. Core GRC platforms, EHS and business continuity remain the most defended, protected by sticky workflows embedded in legacy infrastructure. Explore more in Dedale Intelligence's Governance, Risk and Compliance coverage and our Private Market Leader 360 on Riskonnect.

Deals: AI capital is broadening beyond the mega-rounds

Corporate M&A reached around €28B across 228 deals in Q3 2026, more than double Q3 2025, driven by World Labs, GBTG and Miro. Venture capital normalized to around €20B after the OpenAI, Anthropic and xAI mega-rounds of H1. AI investment rebounded to $46.9B in September on a record 177 deals, and its composition changed: unlike the February and May spikes, no single round exceeded $10B. Deals below $500M rose back to 29% of the month's total, and their 2026 year-to-date volume of around $81B is on pace to exceed 2025's $71B, a sign that AI funding is reaching a broader base of companies.

IPOs tell the opposite story. September saw 9 IPOs against a long-term average of 32, with no significant B2B software listing, as weaker public valuations, AI disruption fears and high-profile postponements (Anthropic, OpenAI) push activity toward take-privates and M&A.

Earnings: the market priced the guidance, not the quarter

Of the 13 companies tracked, 12 beat consensus and 11 raised guidance, yet only 3 traded up. Shares rewarded leading indicators: Snowflake (+9.9%) on AI momentum and RPO up 30%, GitLab (+4.6%) on net ARR up 42%, and Descartes (+9.6%) on margin expansion. Any implied slowdown was punished regardless of the beat: Guidewire (-29.8%) on FY27 guidance of around 16% growth versus 23%, UiPath (-26.2%) on growth slowing to around 8%, and MongoDB (-18.7%) on 21 to 23% guidance after delivering 30.5%.

About the Dedale Intelligence Market Session

Dedale Intelligence publishes a monthly B2B software and IT services Market Session for private equity investors, corporate development teams and M&A advisors, combining valuation analysis of 257 listed software companies with deal monitoring and a segment deep dive drawn from Dedale Intelligence's expert interviews and proprietary surveys.

Download the full October 2026 Market Intelligence report

To discuss these findings or go deeper on a segment, deal or valuation trend, contact the Dedale Intelligence team