Thoma Bravo CEO on SaaS stocks: "the most incredible buying opportunities

Thoma Bravo CEO Orlando Bravo said SaaS valuations have fallen enough to create "incredible buying opportunities," especially for niche market leaders that can use AI to accelerate growth. He said the firm, with $183 billion in assets under management, is focused on profitable, defensible software businesses with deep management expertise. The comments are constructive for selected software names, but the article is primarily an investing thesis rather than a market-moving event.

Analysis

This is less a broad software bull case than a dispersion event. In an AI-skeptical market, capital is rotating toward the subset of software names with clear product indispensability, pricing power, and enough current cash generation to self-fund AI adoption; the rest face a classic multiple trap where “AI feature” is mistaken for moat. The second-order effect is that buyers like PE firms become a backstop for high-quality public SaaS, which can tighten valuation floors even before operating fundamentals re-accelerate.

The market is likely underestimating how quickly AI commoditizes undifferentiated software categories. If a workflow can be replicated with a lower-cost model layer or bundled into a broader platform, weak niche players lose both growth and exit optionality; that creates a widening gap between category leaders and everyone else over the next 6-18 months. In other words, the right trade is not “long software,” but long cash-generative vertical software with embedded switching costs, short high-multiple SaaS with low NRR and no clear path to FCF.

The contrarian miss is that lower valuations alone do not create a durable bottom: if private buyers are the marginal bid, public equities may stay rangebound until reported numbers prove AI is improving, not cannibalizing, unit economics. The best catalyst is earnings season over the next 1-2 quarters, where management teams that can show AI-driven seat expansion, attach rates, or lower churn should re-rate sharply. Conversely, any evidence of slower net retention or slower billings among non-profitable SaaS would likely trigger another leg down in the weakest cohort.

Key Decisions for Investors

• Long a basket of profitable vertical SaaS leaders vs short a basket of unprofitable, non-differentiated SaaS names for the next 3-6 months; target 2:1 upside/downside as dispersion widens into earnings season.
• Buy selective calls on high-quality software names with demonstrated FCF and niche dominance into the next print; structure 60-90 day calls to capture a re-rating if guidance confirms AI-driven monetization.
• Short high-multiple SaaS with negative FCF and slowing net retention; use a 1-2 quarter horizon, as these names are most exposed if growth decelerates further and private-market buyers stay selective.
• If portfolio mandates allow, accumulate any forced-deleveraging dislocations in category-leading software on market-wide risk-off days; the backstop dynamic from strategic/PE buyers should provide a better asymmetry than chasing momentum after earnings.