Software Index

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State of the Market

State of the Market

In July, equity markets demonstrated resilience in the midst of legislative and policy shifts. The Nasdaq closed at a new record on July 15, marking its eighth all-time high of 2025. This surge was driven by tech leaders like Nvidia, fueled by AI momentum. The S&P 500 also set multiple records, supported by solid earnings outlooks and easing inflation in select areas. Bitcoin surpassed $120,000 on July 14, driven by U.S. regulatory hopes during 'Crypto Week'.

The One Big Beautiful Bill was signed on July 4. It delivers permanent tax cuts, Medicaid limits, and federal spending redirects. The bill promises growth through tax relief for businesses and workers, but it could widen deficits and intensify long-term debt concerns.

Trade pressures are building toward an August 1 deadline for tariffs up to 30-40% on imports like drugs, chips, and goods from the EU, Mexico, and China, absent new trade deals. These pressures likely contributed to June’s CPI, which rose 0.3% monthly and 2.7% yearly. That annual rate was above estimates and the highest since February, due primarily to food and housing costs. In contrast, the Producer Price Index (PPI), a measure of wholesale costs, showed no monthly change in June. On an annual basis, PPI inflation slowed to 2.3% from 2.7% in May. This suggests that wholesale price increases are cooling faster than consumer prices, potentially reducing upward pressure on future inflation. At the same time, it highlights the uneven effects of tariffs across different stages of the supply chain.

Expectations for Fed rate cuts are muted for July, with near-zero odds, but they rise to 60% for September. These odds are shaped by inflation expectations and calls for bolder moves. June unemployment fell to 4.1% with 147,000 jobs added, though the pace was slower than in prior months.

In software, an intense AI hiring spree is dominating news as tech giants fiercely compete for high-level talent to build future AI capabilities, with Meta leading by poaching top executives like Apple’s AI models leader and offering packages up to $100-300 million to attract researchers from OpenAI, Google, and others. Google countered with a roughly $2.4 billion move to hire leaders from the AI coding startup Windsurf, underscoring the talent war.

Overall, equity markets and economic indicators reflect cautious optimism amid legislative boosts and recovering growth. However, persistent trade uncertainties and fiscal risks could temper gains, particularly if tariff escalations disrupt supply chains or inflation lingers. The software sector’s AI-driven talent competition signals robust long-term potential but also highlights workforce transitions that may exacerbate near-term volatility. Investors should monitor Fed actions, tariff negotiations, and AI developments closely as these factors converge to shape a potentially dynamic late-summer landscape.

Median

NTM Rev Multiple

4.8x

4.2% monthover month

Median

NTM Rev Growth

10.3%

0.3 points monthover month

Median

Gross Margin

75.5%

0 points monthover month

Top 10*

NTM Rev Multiple

15.1x

5.3% monthover month

Top 10*

NTM Rev Growth

21.3%

0.3 points monthover month

Top 10*

Gross Margin

76.8%

0.2 points monthover month

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

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%)

12.7x

Multiple
Growth

EV/NTM Revenue Multiple

Average Growth (10%-20%)

5.9x

Multiple
Growth

EV/NTM Revenue Multiple

Low Growth (< 10%)

3.7x

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 (76.4x, 33.1% NTM Growth) has been excluded to enhance visual meaning of this chart.

Enterprise Software Operating Metrics

Last updated Q1 2025

Powered by PublicComps

Median

Net Dollar Retention

108.0%

0.0 points quarter over quarter

Median

ARR Growth

13.4%

-0.6 points quarter over quarter

Median

Payback Period

35 months

3.2% quarter over quarter

Top 10*

Net Dollar Retention

114.0%

0.5 points quarter over quarter

Top 10*

ARR Growth

24.6%

0.3 points quarter over quarter

Top 10*

Payback Period

29 months

10.6% quarter over quarter

*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:

  • EV/NTM Rev: Enterprise value to next twelve months revenue.
  • EV $MM: Enterprise value, calculated as the market value of equity plus net debt and minority interest, in millions of USD.
  • LTM Rev $MM: The last twelve months revenue in millions of USD.
  • NTM Rev Growth: The expected growth rate of revenue for the next twelve months.
  • LTM Rev Growth: The growth rate of revenue over the last twelve months.
  • Gross Margin: The percentage calculated from gross profit over revenue.
  • Operating Margin: The percentage calculated from operating income (EBIT) over revenue.
  • FCF Margin: The percentage calculated from unlevered free cash flow over revenue.

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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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