sport football: Software: From Eating The World To No Terminal Value?

Rabu, 11 Februari 2026

Software: From Eating The World To No Terminal Value?

Welcome back! We'll have our normal Thursday piece for you tmrw.

But we've been posting a Wall Street Rollup Investment Club ("WSR IC") piece every week so far this year and we want to keep the streak going! With how topical the software industry has been this year, we realized we need to put a piece out to walk through where we are today, where we're going, and some of our thematic views.

WSR IC includes pieces like these as well as writeups on individual names and rundowns on notable positions and trades from top hedge funds. We're going to be concluding our 40% off monthly plan soon, but are also offering a 20% off for our annual plan.

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Let's get into it.

Software: From Eating The World To No Terminal Value?

Summary: The software sector, as measured by iShares Expanded Tech-Software Sector ETF (ticker: IGV) is down ~27% from all-time highs as investors are worried about AI-driven disruption in the sector. This weak performance has been driven by multiple compression with earnings estimates for the sector largely unchanged. Historically, software has generally been considered one of the highest quality business models / sectors, driven by the high degree of recurring revenue, high gross margins, and low capital expenditure needs. This perception, along with meaningful earnings growth, drove long-term outperformance relative to the S&P 500 (see first chart below).