State of the Market
In June, equity markets continued to demonstrate a notably improved sentiment. Global indices showed resilience, recovering from the “liberation day” tariff announcements, with the MSCI All Country World Index reaching new highs. Market concerns about trade-related economic contraction have largely diminished, particularly as domestic legal challenges to the tariff regime gain traction. Additionally, US-China trade negotiations have shown promising developments, suggesting continued trade relations between the nations, albeit with elevated barriers.
Market optimism has been reinforced by corporate earnings guidance. Despite subdued expectations for 2025 due to tariff uncertainties, companies maintain a positive outlook for 2026. This forward-looking confidence has particularly benefited the IT sector, contributing to the broader market’s positive sentiment.
Credit markets have garnered significant attention, particularly regarding treasury auctions. Following Moody’s downgrade of US sovereign debt in late May, a 20-year auction saw notably weak demand. This tepid response, coupled with the progression of the “Big Beautiful Bill” through the US House, suggests growing concerns about US debt sustainability. While subsequent auctions have shown improved demand, long-term treasury yields continue to serve as a crucial barometer of investor confidence in the government’s ability to address mounting debt challenges.
Economic indicators have remained relatively steady. May’s unemployment rate held at 4.2%, with private sector growth, particularly in healthcare and hospitality, offsetting government sector job losses. The Consumer Price Index saw a modest 0.1% increase, reaching 2.4% annually, with food and shelter costs being the primary drivers.
While markets have found some stability following recent volatility, several key factors will shape the summer outlook. Investors remain focused on upcoming Federal Reserve decisions, congressional debt-ceiling negotiations, evolving trade discussions, and the continuing impact of the AI revolution.
Median
NTM Rev Multiple
5.0x
Median
NTM Rev Growth
10.1%
Median
Gross Margin
75.5%
Top 10*
NTM Rev Multiple
14.4x
Top 10*
NTM Rev Growth
21.0%
Top 10*
Gross Margin
76.5%
*Median multiple, growth rate, and gross margin for the top 10 companies based on EV/NTM Revenue.
Valuation Trends
Index Leaders
Top 10 companies in the Software Index based on current EV / NTM Revenue Multiple.
Multiples by Growth Tranche
Valuation multiples are strongly correlated to expected growth. Scalar has selected the tranches based on current market conditions.
EV/NTM Revenue Multiple
High Growth (> 20%)
11.2x
Multiple | Growth |
---|
EV/NTM Revenue Multiple
Average Growth (10%-20%)
6.1x
Multiple | Growth |
---|
EV/NTM Revenue Multiple
Low Growth (< 10%)
3.6x
Multiple | Growth |
---|
EV/NTM Revenue Multiple - Top Quartile
NTM Revenue Multiple and NTM Growth Rate for the top quartile of companies in the Scalar Software Index, ordered by NTM Growth Rate.
* PLTR (73.8x, 33.1% NTM Growth) has been excluded to enhance visual meaning of this chart.
Last updated Q1 2025
Median
Net Dollar Retention
109.0%
Median
ARR Growth
13.4%
Median
Payback Period
34 months
Top 10*
Net Dollar Retention
113.0%
Top 10*
ARR Growth
24.0%
Top 10*
Payback Period
30 months
*Median multiple, growth rate, and gross margin for the top 10 companies based on EV/NTM Revenue.
Pre- & Post- Money Deals
Averages for the trailing 6 months of successful software and SAAS fundraising, including rounds Series A through Series D.
Average
Deal Size
Average
Pre-Money Valuation
Average
Post-Money Valuation
The data for the Scalar Software Index is collected based on market data on the last trading day of the previous month.
Metric definitions:
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Data Sources: S&P Global Market Intelligence and PitchBook Data, Inc.
Enterprise Software Operating Metrics provided by Public Comps.
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