SaaS-Pocalypse

The compression in software multiples looks less like a fundamental earnings problem and more like a positioning unwind in a crowded quality/growth factor. That matters because when valuations get this stretched on the downside, the next 2-3 quarters of results can be “good enough” and still fail to re-rate the group unless net new spending accelerates. In other words, the market is likely pricing in a prolonged demand freeze, not just slower growth.

For cybersecurity specifically, the competitive read-through is more nuanced than a simple “buy the dip” call. AI-native security vendors can benefit from buyers consolidating around platforms that promise automation and lower staffing burden, but that same consolidation favors incumbents with broader suites and distribution, which can cap standalone multiple expansion for smaller names. The second-order winner is often the channel and adjacent platform vendors that can bundle security into larger enterprise contracts.

The main catalyst sequence is timing: near-term multiple expansion can happen on any sign that IT budgets are stabilizing, but durable upside likely requires evidence of better retention, larger deal sizes, or faster cross-sell over the next 2-4 quarters. Tail risk is that bargain valuations stay cheap for another year if higher rates keep compressing long-duration cash flows and if security buyers keep standardizing on fewer vendors. The contrarian miss is that the market may be underestimating how much current prices already discount mediocre execution; at these levels, a merely stable quarter can be enough to outperform.