In Q4, software stocks were more resistant to macroeconomic factors than expected, as can be seen by the stabilisation in our dataset. During this past quarter, we saw ongoing geopolitical instability, rising energy prices and supply chain disruptions from Q3 as a result of the continued Russia-Ukraine conflict.
Our data shows that EV/Revenue multiples not only stabilised in Q4 but showed significant growth in certain categories and sectors such as UK companies (+12%) and security companies (+17%). After decreasing by 22% QoQ on average over Q1 and Q2, the software markets have steadily normalised and returned to levels similar to pre-2020 levels.
Market sentiment continues to place higher importance on profitability as opposed to forecast revenue growth, which can be seen by the 7% average increase in EV/EBITDA multiples over Q4.