In the volatile landscape of the 2025 software capital markets, a distinct narrative has emerged. While the broader SaaS ecosystem has spent the last year clawing back from valuation troughs—riding the waves of AI hype and recovering public indices—one vertical has quietly cemented itself as the gold standard for premium valuation: Supply Chain Software.
According to the Q3 2025 Software Capital Markets Report by GLC Advisors, the software market is no longer a monolith. It is a bifurcated landscape where “best-in-class” assets command massive premiums while the rest fight for attention. In this selective environment, the Supply Chain vertical has distinguished itself not through the explosive, speculative growth that characterized the 2021 boom, but through something investors currently prize far more: unrivaled profitability and mission-critical resilience.
This deep dive explores the current state of the Supply Chain software market, unpacking the valuation drivers, the dominance of the “Rule of 40,” and why this sector is trading at a significant multiple premium compared to its SaaS peers.
Part 1: The Valuation Gap – A League of Its Own
The headline story of Q3 2025 is the stark valuation gap between Supply Chain software and the rest of the market.
As of September 30, 2025, the median Enterprise Value to Revenue (EV/Revenue) multiple for public SaaS companies stood at 5.5x. This represents a healthy recovery and a return to historical normalcy. However, when we isolate the Supply Chain vertical, the median multiple jumps to 8.5x.
To put this premium in perspective, consider how Supply Chain compares to other major software categories tracked in the GLC report:
- Supply Chain: 8.5x EV/Revenue
- General Business Software: 6.7x EV/Revenue
- Security: 6.6x EV/Revenue
- Vertical SaaS: 5.9x EV/Revenue
- Sales & Marketing: 2.5x EV/Revenue
The Flight to Quality
Why is a Supply Chain company worth nearly 4x the revenue multiple of a Communications or Sales & Marketing company? The answer lies in the concept of “mission-criticality.”
In an economic environment where capital is expensive and buyers are selective, retention is the new growth. Sales and Marketing tools are often viewed as discretionary—subscriptions that can be cut when budgets tighten. Supply Chain software, conversely, runs the logistical backbone of the global economy. You cannot turn off the software that manages your inventory, shipments, and procurement without halting operations.
This “stickiness” creates a floor for valuations. Investors in Q3 2025 are willing to pay a premium for safety. The GLC report notes that while high-growth small-cap stocks are down 13% year-to-date , the “High Profitability” index is up 23%. Supply Chain fits squarely into this high-profitability, high-safety thesis.
Part 2: Profitability is King – The “Rule of X”
If the valuation premium is the “what,” the operating metrics are the “why.” The GLC report makes it clear: in 2025, growth at all costs is dead. Efficient growth is the only metric that matters.
The Supply Chain vertical is the poster child for the “Rule of 40” (the principle that a company’s revenue growth rate plus its profit margin should equal or exceed 40%).
The Metrics That Matter
The median Rule of 40 score for the Supply Chain sector is an impressive 37.6%. What makes this figure unique is how it is achieved. Unlike early-stage AI startups that might hit the Rule of 40 through 100% growth and -60% margins, Supply Chain companies achieve it through sheer profitability.
- Median EBITDA Margin: 24.3%.
- Median Revenue Growth: 11.9%.
Compare this 24.3% EBITDA margin to other verticals:
- Sales & Marketing: 6.7% median margin.
- Security: 9.5% median margin.
- General SaaS Index: 10.0% median margin.
The Supply Chain sector is generating more than double the profit margins of the broader SaaS index. This cash-flow generating capability drives the sector’s median EV/EBITDA multiple of 28.0x. Investors are essentially saying they prefer a reliable 12% grower that prints cash over a 30% grower that burns it.
Part 3: The Titans of the Chain – Company Analysis
The aggregate data tells a compelling story, but the individual company performance within the GLC report highlights the specific winners driving these averages. The sector is dominated by “A+ Assets” that are executing near-perfectly.
1. WiseTech Global: The Valuation Outlier
WiseTech Global stands as the absolute outlier in the dataset, commanding a staggering 25.2x LTM Revenue multiple.
- Why? WiseTech is a “Rule of 40” monster, boasting a score of 59.9%.
- The Secret Sauce: It combines respectable growth (14.0%) with massive profitability (45.9% EBITDA margins). This combination of mid-teens growth and nearly 50% margins is rare in public markets.
2. Descartes Systems Group: The Consistent Performer
Descartes represents the steady heartbeat of the sector.
- Valuation: 11.5x EV/Revenue.
- Rule of 40: 53.8%.
- Profitability: 41.1% EBITDA margin. Descartes reinforces the sector thesis: operational discipline is being rewarded more richly than speculative innovation. A 41% profit margin is an immense protective moat in uncertain economic times.
The Laggards: Growth Without Profit?
Even within this premium vertical, the market punishes inefficiency. Trimble, which showed negative revenue growth of (3.7%), trades at a significantly lower 5.8x multiple. Similarly, SPS Commerce, despite having higher revenue growth (20.5%) than WiseTech, trades at a much lower multiple (5.5x).
Part 4: The M&A and Private Equity Landscape
The robust health of the Supply Chain public market has direct implications for M&A and Private Equity (PE) activity. The GLC report highlights that Private Equity accounts for the majority of buyers in the current market, sitting on $174.4 billion in dry powder specifically for technology.
Why PE Loves Supply Chain
Private Equity firms traditionally use leverage (debt) to finance acquisitions. In a high-interest-rate environment (indicated by the 3-Year SOFR average hovering around 4.3%), debt is expensive. This makes it difficult to buy money-losing companies because they cannot service the debt.
Supply Chain companies, with their median 24% EBITDA margins, are the perfect target for PE. They generate enough cash to service acquisition debt immediately. This makes the vertical a prime hunting ground for the “Add-on” strategies that currently comprise nearly half of all PE deals.
Part 5: The AI Factor – Efficiency over Hype
No Q3 2025 market analysis is complete without discussing Artificial Intelligence. The GLC report notes that “AI has quickly become a powerful driver of market interest and enterprise value”.
In the Supply Chain vertical, AI is being deployed primarily for internal efficiencies and core product enhancement. It is about route optimization, demand forecasting, and automated procurement—features that directly improve the bottom line (EBITDA).
This aligns perfectly with the sector’s “efficiency first” valuation driver. While some verticals are using AI to promise future growth, Supply Chain leaders are likely using AI to defend and expand their already impressive profit margins. The report highlights that innovative leaders in the middle market are using AI to “create internal efficiencies” , which will likely sustain the high EBITDA margins that investors are currently paying 28.0x to access.
Part 6: Conclusion – The New “A+” Standard
The GLC Advisors report defines an “A+ software business” as one with 30%+ growth, 110%+ Net Revenue Retention, and 20%+ EBITDA margins.
While the median Supply Chain company may not hit the 30% growth target (median is ~12%), they are over-indexing so heavily on the profitability and retention side that they have become the market’s de facto safety trade.
For founders and CEOs in the supply chain space, the roadmap from GLC Advisors is clear:
- Protect the Core: Your valuation is tied to your mission-critical nature. Ensure Net Revenue Retention remains high.
- Optimize for Margin: In this vertical, the market pays more for a 40% margin business than a 40% growth business.
Leverage AI for Efficiency: Use the current AI supercycle to further widen your profit moats, making your business even more attractive to the cash-rich Private Equity buyers scanning the market.
—John Mecke is Managing Director of DevelopmentCorporate LLC, providing M&A advisory and strategic consulting for early-stage SaaS companies. With over 30 years of enterprise software experience including executive roles at KnowledgeWare, Sterling Software, Saba Software, Inovis, Easylink, and Stonebranch. He helps founders develop competitive intelligence, pricing strategies, and exit-ready operations. Contact: john.mecke@developmentcorporate.com
