The stock market keeps setting new records, yet the software segment trades as if it is headed for extinction.
Guggenheim Securities calls that divergence the buying opportunity of a career and the fear driving it a hallucination.
Software — as tracked by the iShares Expanded Tech-Software Sector ETF (NASDAQ:IGV) — is down 12% year to date, trailing the S&P 500 by 20% and the Nasdaq by 25%.
That comes on top of roughly 11% of underperformance against the S&P in 2025.
The selloff has a nickname on trading desks: the “SaaSpocalypse.” The fear is that agentic AI will hollow out demand for the seat-based subscription software enterprises run on.
Salesforce, Inc. (NYSE:CRM) has taken the brunt of it, down nearly 40% year to date.
The Market Is Pricing Software for Extinction
Guggenheim’s argument, laid out in a pair of reports led by analyst John DiFucci, is that valuations now imply many software companies will decline into perpetuity, an outcome far more extreme than anything the data supports.
Roughly 73% of the software names the firm tracks trade at or below the multiple that assumes the business never grows again: 5.4x forward recurring revenue for cloud names, 6.2x for on-premise.
The only stretch when more names were that cheap was the Global Financial Crisis, when 82% sat below that floor and the financial system itself was in question.
“We believe there is little downside over time to many SaaS companies trading below 5.4x EV/NTM Recurring Revenue,” DiFucci said.
Why a Falling Stock Doesn’t Mean a Falling Business
Software is less like a widget-maker that must sell more units every year and more like a landlord collecting rent.
Most revenue is recurring, so it does not fall off a cliff when customers stop signing new deals. It erodes slowly, at the rate of attrition.
Nearly all of the profit comes from renewals, which carry little sales and marketing cost. For revenue to collapse, the software has to be ripped out and replaced — a disruptive, risky move for enterprises that rarely tear out systems that still work.
The Math Behind the Call
“This is simply because of math, not "gut feel" or ambiguous data points,” DiFucci said.
New ARR, the annualized value of newly signed contracts, returned to a normalized 15%–20% growth rate in 2025 and held there in the first quarter of 2026, after three years of digesting the pandemic-era spending binge of 2020 and 2021.
Because new bookings feed future subscription revenue, Guggenheim expects the revenue-growth deceleration in place since 2022 to stabilize in 2026 and possibly accelerate into 2027 — a turn not yet in consensus estimates.
Federal software spending, roughly 8%–9% of the global total, has also swung positive after nearly a year of declines.
1999–2018: The Company That Refused to Die
Guggenheim’s worst realistic case is not zero — it is Computer Associates.
When the firm began covering it in 1999, CA was the fourth-largest software company on earth, with about $4 billion in revenue and an $18.3 billion market cap.
It never bridged into the client-server or cloud eras, and its relevance flatlined for two decades. It also never collapsed.
Customers kept paying that $4 billion a year, investors banked a roughly 3% dividend, and Broadcom Inc. (NASDAQ:AVGO) acquired it in 2018 for $18.9 billion — 5.5x recurring revenue.
Even that stagnation cleared the multiples the market is assigning software today.
“We don’t believe this will dismiss the AI fear as it pertains to traditional Software, but it will likely make it much less loud (and result in Software multiples higher) than the Armageddon scenario reflected today,” DiFucci said.
Guggenheim Upgrades Salesforce to Buy
The firm upgraded Salesforce to Buy from Neutral with a $228 price target, about 46% above the June 30 close of $156.66.
At 3.7x recurring revenue, Guggenheim argues, CRM is priced as if revenue declines 5% every year in perpetuity — a doomsday scenario the firm considers detached from reality.
The $228 target implies 5.0x recurring revenue, still below the 5.4x floor that assumes no growth at all. Guggenheim also upgraded Check Point Software Technologies Ltd. (NASDAQ:CHKP), trading near 4.3x, and flagged ServiceNow, Inc. (NYSE:NOW) at 5.9x, growing faster than either.
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