Software Multiples Set for Six-Month Slide Despite 25-30% EPS Growth
Software multiples remain dead money and need a six-month washout before AI-driven monetization can justify charging double current subscription fees. Meanwhile, Nasdaq earnings per share are projected to grow 25–30% this year even as recent Big Tech momentum shows signs of fading and may not sustain.
1. Valuation Outlook for Software
Software sector valuations have stalled, with expectations for a six-month period of underperformance as investors await a deeper washout in multiples before re-entering positions.
2. AI Monetization Challenges
Although AI productivity offers deflationary benefits, software firms must demonstrate the ability to monetize AI by charging significantly more per subscription seat to offset flat or declining user growth.
3. Earnings Growth Resets Valuations
Robust earnings forecasts—25–30% EPS growth on the Nasdaq and 16% on the S&P—suggest that if the Nasdaq remains flat until year-end, valuation multiples could realign to 2015 levels.
4. Short-Lived Tech Momentum
Recent gains in large-cap tech stocks show signs of losing steam, indicating that without clear fundamental catalysts, the current rebound may not persist into the summer.