The Great SaaS Valuation Reset

Over the last year, software and tech valuations have undergone a dramatic correction, with market-cap-to-revenue multiples declining significantly across almost every major public company between February 2025 and February 2026. This valuation reset has been driven by a confluence of slowing growth, tighter macroeconomic conditions, and investor scrutiny around efficiency and less optimistic sentiment.

Broad Valuation Compression Across SaaS and Tech as a Whole

In order to keep things simple and based on easily available sources as well as compare apples to apples for singled out companies I am using Market cap / Revenue for public listed companies and an average EV / NTM for averages based on data from multiples.vc.

From February 2025 to February 2026, companies such as Salesforce, Adobe, Workday, monday.com, and Intuit saw their valuation multiples fall by 30–50 percent. Adobe’s multiple dropped nearly 49 percent while monday.com and Workday fell more than 50 percent. This sharp repricing aligns with industry-wide observations indicating that public SaaS valuations retrenched toward roughly 3,1 X EV/NTM revenue in late 2025, a significant decline from the double-digit multiples commonly observed during the 2021 peak.

Stock performance has suffered as a result

The decline in valuation multiples is also reflected in stock prices as a whole, following roughly the same tendencies regarding sector impact, where high-flying SaaS firms like HubSpot and monday .com lost well over half their value, while even stable giants like Microsoft and Salesforce were down 15–20%, despite solid financial results. The ones that seems to be hit the hardest are legacy platforms such as typical workflow organizer platforms that rely on carefully defining static workflows and manually updating tasks. Another subsector that is suffering is legacy enterprise SW, such as CRM. Both segments are characterized b being tools that act as graphical interfaces on top of databases with high friction due to rigidness, feature creep, and complex proprietary customization options.

Although multiples continue to rise for AI-centric stocks such as Nvidia, the sentiment has cooled regarding stock performance, with a flat stock performance in the same period, as questions regarding long-term demand for their chips have emerged.

Sector-Based Divergence in Repricing

The severity of valuation declines has varied by sector, as well sa between publicly traded and privately owned companies. Design and engineering software, exemplified by companies like Adobe and Autodesk, remained higher than general SaaS at around 5,5 X EV/NTM revenue. In contrast, sales and marketing automation software dropped to approximately 1,9 X during the same period. Vertical SaaS also demonstrated resilience, trading near 3,3 X overall, but reaching 4,3 X in high-switching-cost industries such as automotive. These sector-level patterns help explain why some companies experienced steeper declines than others.

Efficiency and Retention as the New Premium Factors

A recent Windsor Drake report on lower‑middle‑market SaaS M&A transactions emphasized that valuation resilience was tied not just to growth, but to efficiency and retention. Specifically, companies achieving net revenue retention (NRR) above 110 percent and adhering to Rule of 40 discipline secured premium valuations in the 7–9X revenue range, compared to a median of 4.6X. This insight mirrors our cluster analysis, which grouped efficient, mature SaaS companies into a mid-range cluster that endured multiple compression yet maintained relative valuation strength.

High-Growth SaaS Remains Premium even After Correction

Tech companies known for hypergrowth, such as Datadog, Snowflake, and Shopify entered February 2025 trading at exceptionally high multiples near 18–19X Market Cap / Revenue, then declined to the low‑to‑mid teens. Although these are notable reductions, their multiples remain well above average public SaaS valuations. This reflects broader trends, as reports show BI, analytics, and AI-enabled software continue to command valuations of 4–5 X EV/NTM revenue.

Macro-Economic Headwinds ignited the Reset, AI agents added fuel to the fire

A J.P. Morgan analysis of the “software valuation recession” highlighted the primary drivers behind the valuation adjustment: rising interest rates, diminished risk appetite, slowing cloud investment, and concentrated AI spending. As discount rates rose, future revenue streams were repriced downward, impacting high-growth Software-as-a-Service companies most acutely. However, as the possibility of AI agents replacing many traditional workflows entered the discussion, the sentiment for SaaS took an additional turn for the worse.

Nvidia: The Singular AI Infrastructure Exception

Among all the companies analyzed, Nvidia stood alone with a multiple increase of approximately 3.5 percent between early 2025 and 2026. Its market-cap-to-revenue multiple surpassed 24.5 X by February 2026, a reflection of its extraordinary revenue acceleration from around $130 billion to $187 billion and its dominant position in AI computing. This singular performance underscores the market’s growing bias toward AI infrastructure providers amid an AI-fueled investment boom.

At the end of the day

The comparison of valuation multiples between February 2025 and February 2026 paints a clear picture: nearly every major SaaS and software company experienced significant multiple compression, with declines ranging from 10 to over 50 percent depending on sector and growth consistency. Companies characterized by high retention, operational efficiency, and strategic vertical positioning showed greater resilience. Meanwhile, Nvidia emerged as the only name bucking the trend, gaining valuation multiples due to explosive AI-driven growth.

The broader conclusion is that the “growth at all costs” era in software valuation has ended, while at the same time new technology is challenging both business models and traditional design principles for enterprise software. Moving forward, investors are placing greater emphasis on durable growth, profitability, and AI-driven differentiation. Premium valuation multiples require strong retention, efficiency, and relevance.