SaaS valuations recover somewhat as AI perspective shifts

The average SaaS company enterprise value multiple of 2026 estimated revenue was 4.7 at the end of the June quarter, up from 3.9 last quarter. For 2027 estimated revenue, the average multiple was 4.0, up from 3.4. The market seemed to realize that many (if not most) software companies will not be replaced by AI.

Our SaaS universe stocks gained 18.9% on average in the June quarter, outperforming the S&P 500’s 14.9% gain but only recovering some of their recent losses.

The correlation between enterprise valuation multiples of estimated revenue and revenue growth for 2026 and 2027 declined from last quarter.

Two of our SaaS universe companies announced they would be acquired, bringing the year-to-date total to three. Normally, we expect 5% to 10% of our SaaS universe to be acquired each year, so we seem to be on track to the low end of that range in 2026.

Overview of our analysis

The average SaaS company enterprise value multiple of 2026 estimated revenue was 4.7 at the end of the June quarter, up from 3.9 last quarter. For 2027 estimated revenue, the average multiple was 4.0, up from 3.4. The market seemed to realize that the recent selling was overdone and that many (if not most) software companies will not be replaced by AI. We expect many software stocks will be the leaders in bringing AI solutions to their customers. Nonetheless, SaaS stocks would need to rise an average 40% to 50% just to recover their losses since mid-2025.

Revenue growth on average is expected to be 14.3% in 2026 and 11.3% in 2027. Historically, forward revenue growth estimates have tended to be conservative by a nominal 2 to 5 percentage points when first issued (the average 2026 estimate has already increased by 1.2 percentage points). We still do not see significant negative impact in estimated growth rates due to AI.

After declining 24.1% last quarter, our SaaS universe stocks gained 18.9% on average in the June quarter, outperforming the S&P 500’s 14.9% gain but only recovering some of their recent losses. The gains were very selective, with 20 companies in our 97-company universe gaining over 30% and three stocks more than doubling in the quarter while 29 stocks declined. The cybersecurity group led with an average 49.8% gain, helped by Tenable’s (TENB) 118.0% gain and Crowdstrike’s (CRWD) 95.5% gain, but all companies in the group appreciated in the quarter. The data visibility group also had strong performance, gaining 44.4% on average. The go-to-market group lost the most, 4.0% on average, dragged down by the 51.0% loss in ZoomInfo Technologies (ZI) and the fact that six of the 10 stocks in the group were down, including bellwethers Salesforce.com (CRM) and ServiceNow (NOW). The future-of-work group was down 2.2% on average.

We removed two companies from our SaaS universe, Udemy and Onestream, leaving 97. Udemy’s merger with fellow SaaS universe company Coursera closed in the June quarter (announced in December 2025). Onestream was purchased by Hg Capital.

Correlations of valuation to growth continue to drop

The correlation between enterprise valuation multiples of estimated revenue and revenue growth for 2026 and 2027 declined (shown in Tables 1 and 2). During the quarter, some companies recovered to high SaaS multiples (such as Crowdstrike at 26 times estimated 2027 revenue, up from 13 last quarter), while other companies continued to languish at some of the lowest multiples we have ever seen for the sector. The correlation between enterprise value multiple of 2026 estimated revenue and estimated revenue growth declined to 0.35 from 0.48, excluding Block (SQ), MongoDB (MDB), PowerFleet (PWFL) and Roblox (RBLX). For 2027, the correlation declined to 0.46, down from 0.52.

TABLE 1: Enterprise value/revenue versus estimated revenue growth 2026

Source: First Analysis, Capital IQ; as of June 30, 2026.
Notes: Excludes AIOT, MDB, RBLX and XYZ.

TABLE 2: Enterprise value/revenue versus estimated revenue growth 2027

Source: First Analysis, Capital IQ; as of June 30, 2026.
Notes: Excludes AIOT, MDB, RBLX and XYZ.

Among the six largest SaaS companies, four saw their stock prices decline in the quarter: SAP (SAP), ServiceNow, Shopify (SHOP) and Workday (WDAY). Crowdstrike was up 95.5% to new highs, and Snowflake was up 68.7%.

We believe the process of sorting the winners and losers has just begun. We think investors face an opportunity to discover which companies will be survivors or even winners in the AI era. We think most companies will be able to survive and thrive in the transition, but some may fall behind newer entrants that can now create new software more quickly. We think companies with deep domain expertise, suites of integrated functionality, and mission-critical (and money-moving) applications will likely bring AI to their customers. For example, we do not expect companies to consider using vibe-coded software for payroll, payments or cybersecurity.

Over time, we expect the correlation between revenue growth and enterprise valuation to strengthen; however, we think what matters most is growth over the long term (which we define as the “growth curve”), so focusing on 2026 and 2027 estimates may be too short term.

Two M&A transactions in the quarter

In the quarter, LiveRamp (RAMP) agreed to be acquired by Publicis for $2.2 billion ($38.50 per share), or about 2.5 times estimated fical 2027 (March) revenue and 2.3 times estimated fiscal 2028 revenue. Simulations Plus (SLP) also agreed to be acquired in the quarter by private equity firm Alteris for $375 million, or $18.50 per share. This was about 4.6 times estimated fiscal 2026 (August) revenue and 4.3 times estimated fiscal 2027 revenue. These announcements brought total acquisition announcements in our universe year-to-date to three.

Normally, we expect 5% to 10% of our SaaS universe to be acquired each year. We seem to be on track to the low end of that range in 2026. Many companies are trading well below levels at which they would be willing to sell, and buyers may not be able to obtain as much debt in the private credit markets as they did in the past. So far, we have not seen high-priced AI companies use their stock as currency to buy low-priced SaaS application providers, but that may increase the acquisition rate in the future.

SaaS universe outpaced the S&P 500 in quarter

The average stock in our SaaS universe appreciated 18.9% in the June quarter, above the S&P 500’s 14.9% gain. The gains were concentrated in a few subgroups and appeared to be generally related to AI.

The strongest-performing group was cybersecurity, which gained 49.8% on average as the market increasingly viewed AI as a tailwind for the sector, creating both new attack surfaces and new demand for security solutions. Next strongest was the data visibility group, which gained 44.4% on average, likely reflecting the belief that data management is a key to using AI effectively.

The go-to-market group was the laggard, losing 4.0% on average in the June quarter. Excluding the “other SaaS” group, which was down 3.5% on average, the future-of-work group posted the next-largest average decline, 2.2%.

The largest gainer was Datadog (DDOG), which gained 120.6%, reflecting solid earnings and guidance. Tenable gained 118.0% in the hot cybersecurity sector, beating even Crowdstrike, which gained 95.5%. Expensify (EXFY) was the third company that more than doubled (adding 105.8%). It rose to $1.79 per share after a self tender in the $0.98-$1.20 range that was only 29.2% subscribed; even the partial completion reduced outstanding shares by approximately 6.9% at the maximum $1.20 price. Twenty companies declined in the quarter, with ZoomInfo dropping 51.0%, Wix.com (WIX) down 49.6%, and Fastly (FSLY) down 36.8% (after being the largest gainer last quarter).

At the end of the quarter, 42 companies traded at enterprise value multiples of 2026 estimated revenue below 3, similar to the 43 such companies at the end of March. For 2027 estimated revenue, 58 companies were at multiples below 3, the same as last quarter. So, while we have seen some interest return to the SaaS universe, it has not reached many of the value names.

SaaS M&A: Notable transactions include MaintainX and Dragos

We highlight two noteworthy merger and acquisition announcements in the SaaS sector in the second quarter.

On May 28, MaintainX, a leading maintenance and operations solution, announced it would be acquired by design software company Autodesk (ADSK) in an all-cash transaction valued at approximately $3.6 billion. MaintainX is expected to close 2026 with over $135 million in annualized recurring revenue, implying the purchase price was at a premium 26.5 multiple. MaintainX is used by organizations to manage maintenance activity, asset information, inspections, work orders and operational workflows. Its solution is designed to capture valuable, high-frequency data on asset condition, maintenance history and performance in the field. The acquisition is part of Autodesk’s strategy to converge solutions for design, make and operations workflows. It will strengthen Autodesk’s ability to connect operations workflows with the broader life cycle, helping teams make faster, more informed decisions using its Autodesk Operations Solutions, which unify its operations capabilities.

MaintainX maintenance and asset management platform

Source: MaintainX.

On June 18, Accenture (ACN) announced its intent to acquire a majority stake in Dragos at an enterprise value of $3.2 billion. Dragos is a leading operational technology and industrial control systems cybersecurity platform supporting over 600 industrial protocols and the Neighborhood Keeper real-time threat-sharing network used by government entities like the National Security Agency and the Cybersecurity and Infrastructure Security Agency. The acquisition addresses the widening gap between IT security maturity and operational technology environments, which were historically air-gapped but are now deeply interconnected with enterprise networks and increasingly targeted by nation-state actors. Dragos brings a library of industrial control system threat groups and attack playbooks developed from years of industrial incident response, intelligence that cannot be replicated by adapting IT security tooling to operational technology contexts. Combining Dragos’s platform with Accenture’s global managed security services creates an end-to-end offering spanning advisory, deployment, monitoring and response for operators of power grids, pipelines, water systems and manufacturing facilities. Dragos was the largest of three acquisitions Accenture announced simultaneously with an aggregate enterprise value of $4.18 billion, all addressing these themes. The other two companies were RunZero and NetRise.

Dragos’ platform monitors industrial protocols across operational technology networks

Source: Dragos.

Select recent M&A transactions (sorted by date of announcement, $ in millions)

Source: Capital IQ, First Analysis.

SaaS Private Placements: Notable transactions include Stord and Exaforce

We highlight two noteworthy private placement announcements in the SaaS sector in the second quarter.

On May 26, Stord announced a $250 million Series F funding at a $3 billion valuation, led by existing investors and including Strike Capital, Kleiner Perkins, Founders Fund, Franklin Templeton, Baillie Gifford, G Squared, Bond and Lux. Stord provides independent brands a complete commerce technology and service stack including fulfillment network, software, and AI to deliver consumer experiences that rival Amazon Prime’s. It operates nearly 100 fulfillment facilities and processes over $15 billion in gross merchandise value annually across more than 1,000 customers. Stord noted it believes it has moved faster on AI adoption than the broader industry, enabling it to triple its software business in 2025 and double new bookings in the 2026 first quarter.

Stord connects disparate systems to get full visibility into the entire supply chain, including warehouse management, consumer experience and inventory planning

Source: Stord.

On May 12, Exaforce announced it had raised $125 million in Series B funding from investors including HarbourVest, Peak XV, Mayfield, Khosla Ventures and Seligman Ventures. This raise comes a little over a year after its $75 million Series A in early 2025, bringing total funding to $200 million. Exaforce was founded in 2023. It offers an AI-powered security operations center (SOC) platform that deploys autonomous AI agents to detect and respond to threats in real time. The platform targets the overwhelming volume of alerts that security analysts must sift through, most of which are false positives, to reduce manual workload by as much as 90%. A recently introduced feature the company calls “vibe hunting” allows security teams to query the platform in natural language to investigate potential threats. The proceeds from the funding will be used to expand the capabilities of its core platform and expand its global footprint, particularly targeting Japan and Europe.

Exaforce’s multi-model AI engine combines semantic, behavioral and knowledge models

Source: Exaforce.

Select recent private placements (sorted by date of announcement, $ in millions)

Source: Capital IQ, First Analysis.