Software Index

State of the Market

Bending Spoons’ early-August agreement to acquire Airtable illustrates the market’s concerns about the long-term value of certain software assets. The all-cash transaction assigns an enterprise value of $1.285 billion to a business generating approximately $480 million in annual recurring revenue and still growing more than 20% year over year, a significant decline from Airtable’s $11 billion private valuation in late 2021. Growth equity and public-market investors remain hesitant to pay elevated multiples for non-AI technology companies, even when the underlying businesses continue to generate solid recurring revenue and growth. Bending Spoons itself, trading at roughly 13x LTM revenue, exemplifies a new type of market participant focused on leveraging AI, lean operating teams, and new product and service launches to create additional value from large, established customer bases.

In contrast to the weakness in software stocks, broader equity markets have remained relatively resilient despite mixed economic signals over the past month. The S&P 500 surpassed 7,800, rebounding from a relatively flat July, while the Nasdaq Composite initially lagged before participating in the broader recovery. More recently, however, investor sentiment has cooled as longer-term interest rates have moved higher, with the 30-year U.S. Treasury yield reaching 5.337%, its highest level since 2007.

July nonfarm payrolls declined by 23,000, missing expectations for modest gains and marking the first outright monthly job loss since December 2020. Prior months were revised lower by a combined 103,000, confirming a softer trajectory. The unemployment rate edged down to 4.1% from 4.2%, driven more by a shrinking labor force than by stronger hiring. Participation slipped to 61.4% from 61.5%, reflecting roughly 264,000 workers leaving the workforce or ceasing their job search.

Second-quarter GDP expanded at a 1.5% annualized rate, decelerating from 2.1% in the first quarter and falling short of consensus. Consumer spending remained the primary support, though government outlays acted as a drag. More recent data pointed to softer demand: retail sales fell 0.6% in July, the largest monthly drop in over a year. Weakness was concentrated in autos, gasoline stations, and nonstore retailers, partly reflecting the earlier-than-usual timing of Amazon Prime Day that pulled some spending into June.

Inflation continued a gradual cooling. July CPI rose 3.4% year over year, down from 3.5% in June, with core measures near 2.5%. The Federal Open Market Committee (“FOMC”) held the federal funds rate steady at 3.50-3.75% at its late-July meeting, with three dissenters preferring a hike. Markets now assign low odds to any near-term cut, reflecting persistent price pressures and mixed growth signals.

Energy markets remain sensitive to the protracted Iran conflict and restricted shipping through the Strait of Hormuz. Brent crude has traded near $89 per barrel in recent sessions after earlier spikes, as tanker attacks and stalled diplomacy limited supply flows. These disruptions continue to pose upside risks to energy costs and broader inflation.

Looking ahead, investors confront a balanced set of risks and opportunities. Softer labor data and moderating growth could eventually open the door to policy easing, while AI-related capital spending and resilient consumer demand offer support. Key markers include the September FOMC meeting, the next employment report, movements in long-dated U.S. Treasury yields, and any progress or setbacks on Middle East shipping and U.S.-China commercial discussions. Volatility is likely to remain elevated as these crosscurrents play out.

*Median multiple, growth rate, and gross margin for the top 10 companies based on EV/NTM Revenue.