SaaS growth outlook and valuations remain subdued

The average SaaS company enterprise value multiple of 2025 estimated revenue was 6.4 at the end of the September quarter, down from 6.5 last quarter. For 2026 estimated revenue, the average multiple was 5.6, flat with last quarter. Analysts now expect average revenue growth of 14.0% in 2025, up from 13.1% last quarter, as companies continue to guide conservatively and earnings generally beat expectations. However, the 2026 average revenue growth outlook dropped to 12.0% from 12.5% last quarter.

Our SaaS universe companies lost 0.3% on average in the September quarter, underperforming the S&P 500’s 7.8% gain. The last day of the quarter seemed to characterize the month: On Sept. 30, the S&P 500 hit new highs, while the average stock price for the broad SaaS universe was down over 2%.

Performance within our SaaS universe of 89 companies continued to vary widely, with 11 gaining more than 20% and 11 losing over 20%. Excluding the “other SaaS” group, the vertical SaaS and healthcare groups posted the largest average stock price gains. The enterprise productivity and e-commerce optimization groups lost the most on average.

Correlations between enterprise value multiples of estimated forward revenue and revenue growth rates were down from the recent quarters’ solid levels. For 2025 estimated revenue, the correlation was down to 0.53 from 0.60 last quarter. The correlation for 2026 declined to 0.57 from 0.63 last quarter.

Our SaaS universe companies experienced a 0.3% average stock price decline in the September quarter, underperforming the S&P 500’s 7.8% gain. Eleven companies (12%) appreciated by more than 20% in the September quarter, and 11 declined by more than 20%. Excluding the “other SaaS” group, vertical SaaS (6.8% average gain) and healthcare (5.4% average gain) led the quarter. This may be evidence of a broadening of investor attention within the universe given the cybersecurity and data visibility groups have been the leaders in many recent quarters. The groups that lost the most on average were enterprise productivity, down 6.4%, and e-commerce optimization, down 5.6%.

The average SaaS company enterprise value multiple of 2025 estimated revenue was 6.4 at the end of the September quarter, down from 6.5 last quarter. For 2026 estimated revenue, the average multiple was 5.6, flat with last quarter. Analysts now expect average revenue growth of 14.0% in 2025, up from 13.1% last quarter, as companies continue to guide conservatively and earnings generally beat expectations. However, the 2026 average revenue growth outlook dropped to 12.0% from 12.5% last quarter.

The last day of the quarter seemed to characterize the month: On Sept. 30, the S&P 500 hit new highs, while the average stock price for the broad SaaS universe was down over 2%. Very large-capitalization artificial intelligence stocks seem to have taken all the air out of the room, with final-day performance perhaps related to quarter-end window dressing. It has not helped that our SaaS universe average growth rate is expected to slow to 12.0% in 2026, the lowest level for forward growth we can remember, outside the pandemic.

We removed two companies from our SaaS universe, bringing the total to 89. We removed AvidExchange (AVDX) and Couchbase (BASE) due to their acquisitions announced in the June quarter.