Software Is Harvesting: Margins Widen, Stock Pay Shrinks, And Only 21 Of 102 Names Clear 40 On Owner Cash

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The answer in one page

The listed software industry in October 2026 is in a harvest phase. Across 104 companies with combined trailing revenue of $1,449.48B, the median grew revenue 15.21% and the revenue-weighted average grew 17.39%.

That is healthy growth. What has changed is what the industry is doing with it.

GAAP operating margins widened at 69 of 97 companies that disclose a comparable figure for both years. Stock pay as a share of revenue fell at 75 of 102. Diluted share counts fell at 55 of 88 companies with clean year-on-year comparisons.

Management teams are taking the gains from slower hiring and sharper cost control, rather than reinvesting them in the next leg of growth.

Three findings stand out.

First, owner cash is much thinner than stated cash. The median company converts 26.32% of revenue into operating cash flow. Take out capital spending, capitalised software and stock pay, which is a real cost paid in shares instead of cash, and the median owner cash margin falls to 12.93%.

Stock pay alone takes 8.37 points of revenue at the median, more than six times the 1.33 points that go to capex. Measured on owner cash, only 21 of 102 companies pass the familiar "growth plus margin above 40" test (Exhibit 2).

Second, stock pay is concentrated where growth is fastest, and it is falling. Security companies pay a median 61.69% of their operating cash flow in stock. Payroll and HR companies pay 5.38%.

Thirty of the 102 companies with positive operating cash flow pay more than half of it in stock. But the trend is turning: among the 20 largest names, stock pay fell as a share of revenue at 15 (Exhibit 5).

Third, the market is not paying for the harvest. For the ten names we have taken through a full reverse discounted cash flow, the growth in owner cash implied by today's enterprise value at a 9% discount rate ranges from slightly negative (Adobe) to 34.8% a year (BILL). In five of the nine names we can plot, the market asks for more owner-cash growth than the business is producing in revenue today (Exhibit 12).

1. The cohort: who is in it and how it is cut

The snapshot covers 104 companies with more than $1B of trailing revenue and a filed quarter ending March 2026 or later. We group them into seven sub-sectors by primary business.

The grouping is ours, not an official one.

2. Growth: still healthy, and still uneven

Exhibit 1. Security grows fastest; payments and payroll trail. Median trailing revenue growth is 20.16% in security, 16.83% in horizontal applications, 16.18% in infrastructure and data, 15.84% in marketplaces, 14.42% in vertical and engineering software, 9.22% in payroll and HR, and 8.91% in payments and fintech software.

The spread inside each group is wider than the spread between groups. In infrastructure and data, Palantir grew 78.92% while Rackspace grew 0.34%, Dropbox was flat (minus 0.05%) and Teradata grew 0.96%.

In vertical and engineering software, Synopsys grew 46.33%, mostly from its Ansys acquisition, while Blackbaud grew 0.65%. The fastest growers in the cohort are Palantir, Synopsys, Rubrik (42.45%), Zeta Global (35.91%), Cloudflare (33.53%) and Shopify (32.50%).

The slowest are Alight (minus 3.46%), Fiserv (minus 1.17%), Dropbox, Rackspace, Blackbaud and Teradata.

Three readings follow.

*Security still has pricing power.* Security budgets are among the last a company cuts, and the security group's median growth of 20.16% is the highest of any sub-sector with more than two members. Its growth is bought expensively, as Section 4 shows.

*Payments growth has slowed to single digits.* The payments and fintech group grew 8.91% at the median. That group includes some of the largest processors, where volume growth tracks consumer spending and pricing is under pressure.

The pure software names in the group, such as BILL at 13.03%, grow faster than the processors.

*Acquisitions flatter several headline growth rates.* Synopsys, Palo Alto Networks and others closed sizeable deals inside the comparison window. Our database does not separate organic from acquired growth.

3. Owner cash: the margin that matters

Stated free cash flow is operating cash flow less capex. It treats stock pay as free.

It is not: every share issued to employees is a share that existing owners no longer own, and most companies spend cash buying shares back to offset it. Our owner cash measure deducts capex, capitalised software and stock pay from operating cash flow.

In single-stock research we also deduct interest income, deferred-revenue builds and one-time tax items. Those three are not stored for most of the 104 companies yet, so the industry figures here are a partial version of the full measure, and generally flatter owner cash for companies with large cash balances or growing deferred revenue.

Exhibit 2. Only 21 of 102 names clear 40 once stock pay is a cost. The rule of 40 adds revenue growth and a profit margin. Using owner cash margin instead of the usual free cash flow margin, 21 companies pass: Adobe, Autodesk, Corpay, Datadog, Duolingo, Fair Isaac, Shift4, Fortinet, Gen Digital, Intuit, Palo Alto Networks, Paymentus, Paychex, Palantir, PTC, Roper, Shopify, Synopsys, Veeva, VeriSign and Clear Secure.

The list is a mix of two very different kinds of company. Some are compounders with very high margins and modest growth: VeriSign's owner cash margin is 58.04% and Clear Secure's is 46.48%.

Others are growers that have reached scale: Palantir pairs 78.92% growth with a 40.98% owner cash margin, which no other company in the cohort comes close to. Most of the industry sits in the band between 0% and 25% owner cash margin, growing 5% to 25%.

Eleven companies have negative owner cash: GitLab, Samsara, Cloudflare, Oracle, Rubrik, SentinelOne, SailPoint, Snowflake, Atlassian, ServiceTitan and WEX. Their reasons differ.

4. Stock pay: the second payroll

Exhibit 13. Stock pay eats more than half of operating cash at 30 of 98 names. Ranked by stock pay as a share of operating cash flow, the top of the list is SentinelOne at 561.72%, ServiceTitan at 155.70%, Snowflake at 131.01%, SailPoint and Atlassian at 118.73% each, Samsara at 114.65%, GitLab at 102.96% and Rubrik at 101.39%. For these eight, stock pay is larger than all the operating cash the business produces.

SentinelOne's figure is not a listing effect: it pays a steady $73M to $92M a quarter in stock against thin operating cash flow. The bottom of the list is the payroll processors and the old-line software and processing companies: Paychex at 3.93%, ADP at 4.46%, Alight at 5.38%, Corpay at 6.22%, Fiserv at 6.47%, Microsoft at 6.78% and VeriSign at 6.79%.

The median is 30.01%. In plain terms, at the typical large software company, nearly a third of every dollar of operating cash is matched by a dollar of value handed to employees in shares.

Exhibit 4. Security pays for growth in stock; payroll does not. By sub-sector, the median share of operating cash paid in stock is 61.69% in security, 39.02% in infrastructure and data, 36.46% in horizontal applications, 24.78% in vertical and engineering software, 22.29% in marketplaces, 14.97% in payments and fintech software and 5.38% in payroll and HR.

5. Reinvestment: R&D, gross margins and operating leverage

Exhibit 8. R&D intensity explains little of growth (correlation 0.31). Across the 88 companies that disclose R&D separately, spending more of revenue on R&D is only weakly associated with faster growth. The median company spends 18.39% of revenue on R&D.

Security spends a median 21.46% and infrastructure and data 21.40%. Payments and fintech spends 5.95%.

A weak link between R&D and growth is consistent with a maturing industry. Much R&D at large software companies now maintains existing products rather than opening new markets.

It also reflects acquisitions: companies like Synopsys bought growth rather than built it. The current edition does not separate R&D spent on superintelligence features from the rest, because companies do not disclose it.

That would be the single most useful addition to this exhibit, and we will track any company that begins to disclose it.

Exhibit 9. Software gross margins sit in the 70s; payments far lower. Of the 104 companies, 72 tag gross profit in their filings. Among those, median gross margin is 77.51% in infrastructure and data, 77.30% in horizontal applications, 76.80% in security, 74.21% in payroll and HR, 71.73% in vertical and engineering software and 26.72% in payments and fintech software.

6. Balance sheets

Exhibit 11. Infrastructure and security hold net cash; payments lean on debt. Median net cash (cash less debt including convertibles, excluding investment securities) is 27.24% of revenue in infrastructure and data, 24.83% in security and 11.74% in horizontal applications. It is negative in marketplaces (minus 6.39%), vertical and engineering software (minus 7.46%), payroll and HR (minus 32.79%) and payments and fintech software (minus 35.97%).

The extremes show two different strategies. Unity, Duolingo, CrowdStrike, Commvault, Cloudflare and Klaviyo hold net cash above half of a year's revenue.

Fair Isaac (minus 222.84%), Gen Digital (minus 149.48%), Corpay (minus 148.59%), Paysafe (minus 129.53%), Fiserv (minus 124.85%) and Sabre (minus 124.53%) carry net debt above a year's revenue. Fair Isaac's diluted share count fell 7.62% in a year alongside its net debt; the split between buyback funding and other uses is not in our data.

Payments and payroll balance sheets also include client funds, whose accounting varies by filer, so the sub-sector figures for those two groups should be read with care.

Because our cash figure excludes investment securities, companies that hold most of their liquidity in securities, such as Alphabet and Microsoft, look less cash-rich here than in their own presentations. That is by design: it is the same rule we use for enterprise value in single-stock research.

7. What the market is paying for

Valuation in this snapshot is expressed only as multiples of owner cash and the growth they imply. We do not chart share prices or price moves.

The reverse discounted cash flow asks a simple question: what annual growth in owner cash over the next ten years, with 3% growth afterwards, would justify today's enterprise value at a given discount rate? We have computed it for ten companies so far.

Exhibit 12. Where the market asks for more growth than the business delivers. At a 9% discount rate:

8. Sub-sector cards

Infrastructure and data (27 companies, $982.93B revenue). Median growth 16.18%, owner cash margin 9.83%, stock pay 12.02% of revenue, net cash 27.24% of revenue. The story is the hyperscalers' capital cycle.

Microsoft, Alphabet and Oracle are spending on data centres for superintelligence workloads at a scale that has turned Oracle's owner cash deeply negative and cut Alphabet's owner cash margin to 5.64%. Below the hyperscalers, the data and observability companies (Datadog, MongoDB, Snowflake, Cloudflare) grow fast but pay heavily in stock.

Palantir is the outlier on every measure.

Security (9 companies, $39.22B revenue). The fastest-growing group, at 20.16%, and the heaviest stock payer, at 61.69% of operating cash. Fortinet and Gen Digital show that a security company can run at high owner cash margins (37.48% at Fortinet).

SentinelOne and SailPoint show the opposite. Net cash is strong at 24.83% of revenue, led by CrowdStrike.

Horizontal applications (19 companies, $150.00B revenue). Median growth 16.83%, owner cash margin 17.62%. This is the group most exposed to the question of whether superintelligence agents replace seats.

Adobe, Salesforce, Workday, ServiceNow, Atlassian, HubSpot and Zoom all sell largely per user. Our monday.com research examines one company's attempt to move from seats to agents.

Stock pay is falling in this group, led by Workday.

Vertical and engineering software (22 companies, $74.50B revenue). The steadiest group: median growth 14.42%, owner cash margin 17.95%, and the highest median GAAP operating margin outside payroll at 17.46%. Vertical software is harder for general superintelligence tools to displace because it encodes industry rules and data.

It also carries more debt (net cash minus 7.46% of revenue), because the group includes serial acquirers such as Roper and Fair Isaac's buyback programme. Our Bentley and SS&C research sits here.

Payments and fintech software (19 companies, $105.42B revenue).

9. What changed this month

This is the first full edition, so there is no prior edition to compare with. From November, this section will list: companies whose new filings moved them across the 40 line in Exhibit 2; companies whose stock pay share of operating cash moved by more than five points; changes to owner cash anchors in our single-stock research; and companies added to or removed from the cohort.

One change already belongs here. Our The Trade Desk research has been revised.

Rebuilding the owner cash bridge from unrounded filing values gives an anchor of $161.20M excluding the working-capital release, against $161.10M before, and an implied growth rate at 9% of 10.79%, against 10.80%. The direction of the conclusion is unchanged.

10. Links to single-stock research, and the queue

Published single-stock research referenced in this snapshot:

• [Adobe: Claude Design hits Adobe](https://www.goldendoorasset.com/research/adbe-claude-design-hits-adobe-s-gwvb)
• [BILL: strip the float](https://www.goldendoorasset.com/research/bill-strip-the-float-and-bill-3bby)
• [Bentley: prepaid deposits decide the multiple](https://www.goldendoorasset.com/research/bsy-bentley-s-prepaid-deposits-decide-x65a)
• [monday.com: betting agents will replace seats](https://www.goldendoorasset.com/research/mndy-monday-com-bets-agents-will-o4w0)
• [Q2: the governed gateway](https://www.goldendoorasset.com/research/qtwo-q2-wants-to-be-the-nqsz)
• [SS&C: selling the back office](https://www.goldendoorasset.com/research/ssnc-ss-c-sells-the-back-r40j)
• [The Trade Desk: the agencies are now auditing it](https://www.goldendoorasset.com/research/ttd-the-agencies-that-built-the-wc08)
• [Zoom: trades like a slow grower](https://www.goldendoorasset.com/research/zm-zoom-trades-like-a-slow-mnf0)

Earlier research on Salesforce, Datadog, Microsoft, ServiceNow, Oracle, Snowflake and Klaviyo is also published and will be brought onto the current owner cash method.

Candidates for new single-stock research, chosen because they sit at the edges of this snapshot's exhibits:

• SentinelOne: the highest stock pay share of operating cash in the cohort.
• Palantir: the only company combining very high growth with very high owner cash margin.
• Oracle: owner cash deeply negative from data centre spending.
• Fair Isaac: net debt above two years of revenue.
• Workday and DocuSign: falling share counts alongside heavy stock pay.
• VeriSign: the highest owner cash margin in the cohort, with almost no growth.

Method and gaps

Data. All company figures are from SEC XBRL filings loaded into the Golden Door database, using each company's latest trailing twelve months and the trailing twelve months one year earlier. The cohort is the 104 covered companies with more than $1B of trailing revenue and a quarter ending March 2026 or later.

Sub-sectors are our own classification.

Owner cash. Operating cash flow less capex, capitalised software (where tagged) and stock pay. The full single-stock method also deducts interest income, deferred-revenue builds and one-time tax items; those are not in the industry data yet.

Industry owner cash margins are therefore partial and generally overstate the full measure for companies with large cash balances or growing deferred revenue.

Exclusions. Figma is excluded from stock pay and owner cash exhibits because its trailing period includes a $1,138.33M stock pay charge in its listing quarter (Q3 2025); excluding that quarter, its three-quarter stock pay is 269.98% of operating cash flow. Share count changes beyond 10% are flagged and not used.

Operating margin moves beyond 40 points are treated as one-offs.

Valuation. Reverse discounted cash flow at 8%, 9% and 10% over ten years with 3% terminal growth, on owner cash anchors from our single-stock research. Enterprise value excludes investment securities from cash.

Base values are set only for companies with three or more positive owner cash years, and none are shown in this snapshot.

Data gaps.

• Net revenue retention, customer counts and top-customer concentration (needed for the planned retention and concentration exhibits).
• Take rates for payments and marketplace names other than The Trade Desk.
• Interest income, deferred-revenue builds and one-time tax items for the industry set.
• Organic versus acquired growth.
• Pricing model tags (seats versus usage).