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The public market in 1Q26 has seen a reset in SaaS valuations, driven more by macro uncertainty and evolving expectations around AI than by any meaningful deterioration in underlying business performance. While multiples have compressed across the board, public SaaS companies continue to generate strong revenue and profitability, reinforcing the durability of the model in a more volatile environment.
The SEG SaaS Index™ declined alongside broader equity markets as investors reassessed growth expectations and the long-term impact of AI, driving median EV/TTM revenue multiples down to 3.6x in 1Q26. Despite this reset, fundamentals remain strong, with continued growth, improving margins, and solid cash flow generation. Across more than 100 public companies and 2,700+ SaaS M&A transactions, the market remains active but increasingly selective, with buyers prioritizing businesses that are deeply embedded in workflows, data, and AI-driven use cases.
TTM SaaS deal volume reached 2,723 transactions, up 24% from 1Q25, marking the most active period SEG has tracked.
Average SaaS valuations reached 6.3x in 1Q26, the second-highest level in recent periods, trailing only 4Q25’s 6.9x, reflecting continued buyer willingness to pay for high-quality assets.
Median EBITDA margins reached 13.6%, an all-time high, reflecting continued gains in scale and operating efficiency across public SaaS companies.
Our SEG SaaS Index™ tracks the performance, valuations, and financials of 107 publicly traded B2B software companies. In 1Q26, the Index reflected a broad reset in SaaS valuations. Multiples declined alongside wider equity markets as investors reassessed growth expectations and the long-term impact of AI. The SEG SaaS Index™ fell roughly 25% during the quarter. This decline was not limited to software. Broader markets also moved lower amid geopolitical conflict, trade friction, commodity volatility, and policy uncertainty. Even the Magnificent 7 declined meaningfully, reinforcing that this has been a difficult start to the year for equities overall.
Even with this reset, the sell-off across SaaS has been broad and largely indiscriminate. Many businesses continue to deliver strong operating performance and still command premium valuations. Dispersion across the Index remains significant. The market continues to reward profitable and capital-efficient operators. Companies with strong fundamentals continue to stand out, especially those embedded in mission-critical workflows, data infrastructure, and AI-driven use cases. Sustained growth and margin expansion remain key drivers of premium outcomes relative to lower-performing peers.
SaaS valuation multiples declined across all product categories in 1Q26 as the broader market reset, though dispersion across the SEG SaaS Index™ remains pronounced. A select group of companies continues to command premium valuations, particularly those operating in data, infrastructure, and security, with names like Cloudflare (30.5x), CrowdStrike (21.7x), Shopify (13.8x), Snowflake (12.9x), and Datadog (11.9x) standing well above the broader Index. These outperformers are supported by strong operating metrics, as many of the fastest-growing companies are concentrated in DevOps & IT Management, including GitLab (+25.8%), JFrog (+24.1%), and MongoDB (+22.8%), while YoY EBITDA growth across the Index has been significant, with companies such as Zscaler (+1837.1%), Okta (+872.0%), monday.com (+536.1%), Samsara (+332.6%), and HubSpot (+251.1%) posting posted massive EBITDA growth.
SaaS M&A activity remains consistent heading into 2026, building on a record-setting 2025 that saw 2,698 transactions, up 28% year over year. Activity continued at a steady pace in 1Q26, with 659 transactions announced. On a trailing twelve-month basis, deal volume reached 2,734 transactions, up 24% from 2,209 through 1Q25, highlighting sustained expansion and continued momentum in SaaS M&A activity.
SaaS transactions accounted for approximately 60% of total software M&A activity, consistent with recent highs, as software remains a primary driver of broader M&A volume. Valuations also remined consistent, with a spread between median and average EV multiples indicative of a small group of assets trading at premium multiples, pulling up the average compared to the median. The broader impact of the dynamics resulting in public market volatility (AI, geopolitical risk) on the M&A market remains to be seen. While monthly deal activity has shown some variability, overall volume continues to reflect a durable and active market supported by ongoing demand for high-quality, strategically relevant assets.
Vertical software represented 55% of SaaS M&A activity in 1Q26, up from 49% in 1Q25. Analytics & Data Management and Content & Workflow Management remained the most active SaaS M&A product categories in 1Q26, with 121 and 115 transactions, respectively, continuing to account for a significant share of overall deal volume. Activity across both categories reflects sustained buyer demand for software embedded in core workflows, with Analytics & Data Management benefiting from ongoing investment in data infrastructure and AI-enabled decision making.
Sales & Marketing activity rebounded modestly to 89 transactions in 1Q26 following a slower 4Q25, highlighting continued buyer interest in platforms that support customer acquisition, engagement, and revenue generation. Other categories showed more variability, with Business Management declining to 49 transactions, while Financial Applications and Human Capital Management remained relatively stable at 47 transactions each, reflecting a more selective environment outside of the most strategically prioritized segments.
SaaS M&A transactions are evaluated based on acquirer backing, which we categorize into Strategic Buyers and Private Equity Investors. In 1Q26, private equity and venture-backed buyers participated in 60% of all transactions, though direct platform investments declined to 6.1%, reflecting increased selectivity. At the same time, activity has shifted toward more strategic forms of capital deployment, with PE-backed strategics and public buyers driving a larger share of deals. Together, these trends point to a market increasingly defined by add-ons and strategically motivated acquisitions rather than new platform creation.
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