Software companies are pouring record money into R&D, and AI has turned that spend into a running meter. Financial statements show what was spent, not what it earned, so investors and boards can't tell winners from cash burners.
That blind spot is where the next decade's software wealth gets made or lost. Whoever sees R&D return first backs the compounders and avoids the burners.
We grade 250 public software companies on one scale, the R&D Return Score (AAA–D), built only from SEC filings.
Every covered software company is evaluated through one standardized framework: quarterly financial statements and 5-year DCF models, published research pieces, and a single R&D Return rating formula.
Clean, scannable quarterly fundamentals, 6 core operating KPIs, explicit 5-year unlevered cash flow schedules, and WACC sensitivity matrices.
Published software equity research pieces, catalyst notes, and valuation teardowns with quantified operating value levers across the coverage universe.
One unified rating formula combining Buy / Watch / Pass verdicts, 1-year lagged R&D Return grades (AAA–D), and Rule of 40 efficiency.
Across 104 software companies with more than $1B of revenue, margins widened at 69 of 97 and stock pay fell as a share of revenue at 75 of 102. Count stock pay as a cost and the median owner cash margin is 12.93%, and only 21 names clear the rule of 40.
For a decade the big agency holding companies poured client budgets through The Trade Desk. In 2026 they started checking its fees instead.
Bentley Systems owns the engineering record for roads, rail, water and grid assets, and its owner cash has grown every year checked. Whether the stock trades at 43.3x or 33.8x depends on one line: nearly half a billion dollars of refundable prepaid cloud deposits.
Q2 Holdings releases Q3 2026 results on Oct 28 with no debt, a fresh buyback and its first positive owner-cash year behind it. The thesis is that regulated banks will route agents through governed platforms like Q2's Caliper API, and the print tests whether margins can keep paying for that position.
