The Fatal AI Bear Case on Software Is ... A Hallucination

研报英文原文证据摘录

The Fatal AI Bear Case on Software Is ... A Hallucination

since the Global

Financial Crisis, and while AI will pressure traditional software's climb in relevance, we

believe they'll at least persist into perpetuity, versus the perpetual decline implied in current

valuations. We estimate that the NPV of the recurring cash flow from $1 of recurring revenue

is $5.4 if the recurring revenue was run hyper-efficiently and never grew (or declined) again

($6.2 for $1 of recurring on prem revenue). Therefore, investors should consider purchasing

stocks trading at or below this threshold.

The Math of Growth ... Implies Subscription Stabilization and Acceleration. Analysis of

New ARR of our Software coverage (expanded to include names we track closely) indicates

that New ARR returned to normalized levels in 2025 and have remained there in 1Q26,

after three years of substandard levels following the Post-COVID Mardi Gras time of free

Government giveaways. It appears that we have digested the excess spending of 2020 and

2021. This is important because accelerating New ARR growth (to normalized levels) is an

early indication of stabilizing Subscription growth rates and perhaps acceleration into the

end of 2026 for many Software names.

Dan Ives is Right ... Buy Everything. Well, not everything. But patient investors should look

to buy Software stocks. Peruse our Weekly, "What Price is Right?" that is published every

Friday after the close for your favorite names trading at or below the value of the recurring

cash flow from their recurring revenue streams if they were run hyper-efficiently and never

grew (or declined) again. About 73% of Software names trade at or below this threshold.

What's Different ... And What's Not. What's different is that (1) AI is a major threat to