Clouded Judgement

Clouded Judgement offers weekly data-driven analysis on SaaS companies, focusing on financial metrics, economic impacts, and market trends affecting the cloud software industry. It covers topics from IPO readiness and valuation methods to quarterly earnings and optimization cycles, providing insights into the health and future of software businesses.

SaaS Company Analysis Economic Trends and Their Impact on Technology Financial Metrics and Valuation IPO Process and Market Openings Quarterly Earnings Reports Software Consumption Trends Monetary and Fiscal Policy Effects on Markets

The hottest Substack posts of Clouded Judgement

And their main takeaways

Clouded Judgement 6.13.25 - The Battle for Data Ownership

7 implied HN points • 13 Jun 25
🕹 Technology Data Management Software Development Artificial Intelligence Cloud Computing SaaS
  1. You might think you own your data, but companies can make it hard to use. For example, Slack has new rules that limit how you can access your own conversation data.
  2. If other apps like Salesforce or Workday follow Slack's lead, it could become really tough for companies to use their data in AI projects. This means you might not have as much control as you thought.
  3. The fight for data ownership is a big deal right now. As software shifts towards AI, who controls the data will be a key factor in how companies operate.

Clouded Judgement 6.6.25 - How to Spot ERR

6 implied HN points • 06 Jun 25
💼 Business Finance Investing Entrepreneurship SaaS Market Trends
  1. It's important for companies to know the difference between ARR (annual recurring revenue) and ERR (experimental run rate revenue). ARR is more stable while ERR can fluctuate a lot, which can affect business decisions.
  2. Some signs of ERR include using products on a trial basis or having fuzzy ROI expectations. Companies should look out for these signs to understand if their revenue is dependable.
  3. Businesses should pay attention to where budgets come from and how contracts are structured. Knowing these details can help avoid unexpected revenue drops.

Clouded Judgement 5.16.25 - Net New ARR Trends

5 implied HN points • 16 May 25
💰 Finance Market Trends Investing Strategies Financial Analysis Earnings Reports
  1. Net new ARR, which shows the growth in quarterly revenue from cloud software companies, has decreased in the latest reports. This is concerning since a drop can suggest financial struggles.
  2. Valuation for SaaS companies is often based on revenue multiples, giving a quick way to compare their worth. The current median multiple is 5.5x, but top companies can reach much higher valuations.
  3. Companies with higher growth rates tend to have larger valuation multiples. It's essential for investors to watch these trends to better understand the market landscape.

Clouded Judgement 5.23.25 - AI Grows the Size of the Prize

2 implied HN points • 23 May 25
💰 Finance Investing Economics Market Trends Venture Capital Debt Management
  1. Venture capital returns can grow as fund sizes increase. The value of successful startups has been climbing, which could mean bigger returns for investors in the future.
  2. Inflation and rising yields are influencing the bond market. As government spending increases and investor concerns grow, yields on U.S. debt are going up, making it more expensive to borrow.
  3. Understanding how software companies are valued is important. These companies are often valued based on their expected revenue, and knowing the growth rates can help investors find the best opportunities.
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Bonus Clouded Judgement - Inference Time Compute

20 implied HN points • 28 Jan 25
🕹 Technology AI Computing Machine Learning Software Innovation
  1. DeepSeek has released a new AI model called R1 that is smaller, cheaper, and faster, while still being able to handle complex reasoning tasks. This marks a shift in how AI models are being developed and used.
  2. Inference-time compute is becoming increasingly important, as it refers to how much computation power models need to think and solve problems after being trained. This can lead to a significant increase in the demand for compute resources.
  3. There's an ongoing debate about the future of AI models—whether smaller, efficient models or larger, more powerful ones will dominate. Both types have their advantages, and it seems likely that we'll see a balance of both in the market.

Clouded Judgement 12.27.24 - 2024 Year End Review

8 implied HN points • 27 Dec 24
💰 Finance Market Trends Investment Strategies Financial Analysis Economic Indicators
  1. In 2024, the median multiple for cloud software stocks was 6.1x, showing stability throughout the year. This means that software companies were valued similarly at the beginning and end of the year.
  2. Only a few companies had impressive growth, with just 3 companies increasing over 100% in stock price. Most companies had mild performance, with half going up and half going down.
  3. Key companies like Cloudflare, CrowdStrike, and Datadog consistently ranked in the top ten for valuation multiples. This shows their strong market position over the past few years.

ServiceTitan: Benchmarking the S1 Data

11 implied HN points • 18 Nov 24
💼 Business Finance Technology Sales Marketing Economics
  1. ServiceTitan is a platform designed for trades industries, like plumbing and HVAC. It helps businesses manage things like scheduling, customer service, and payments.
  2. The company has a big market opportunity, aiming to capture a larger share of the $1.5 trillion spent on trades services annually in the U.S. and Canada.
  3. ServiceTitan has shown strong revenue growth at 26% over the last year and has a focus on improving its financial metrics, including gross and operating margins.

Clouded Judgement 1.3.25 - Domain Specific Models

7 implied HN points • 03 Jan 25
🕹 Technology AI Software Data Industry Enterprise
  1. In 2025, we will see a lot of special AI models that focus on specific areas of knowledge, like health or engineering. These models will learn from specialized and private data to perform better than general AI models.
  2. These domain-specific models will help industries that need deep understanding and accuracy, solving complex problems that generalized AI can struggle with. This means they can deliver the right answers when it matters most.
  3. As businesses create their own tailored AI models, the enterprise AI market will grow significantly. This will change how companies operate and improve efficiency in many fields.

Clouded Judgement 10.25.24 - Misaligned Incentives

13 implied HN points • 25 Oct 24
💼 Business Venture Capital Startups Investment Strategies Financial Markets Economic Trends
  1. Venture capitalists are changing how they work with founders. Instead of focusing on big wins together, some are now just trying to make quick money from management fees.
  2. Founders should be careful about raising too much money too early. Getting larger sums from investors can often come with higher valuations, which can hurt the business long-term.
  3. It's important for founders to know how many other companies their investors are supporting. If an investor has too many companies, they might not have enough time to help yours succeed.

Clouded Judgement 11.22.24 - Is Software Back?

10 implied HN points • 22 Nov 24
💰 Finance Investing Market Trends Economic Analysis
  1. There seems to be a shift happening where software companies are performing better while major tech stocks are lagging. This raises questions about whether this trend will continue.
  2. Recent earnings reports from software companies show strong results, suggesting that their business fundamentals might be improving significantly.
  3. There's a strong possibility that the market is looking for new investment opportunities, especially as some investors take profits from the longstanding success of major tech firms.

Clouded Judgement 2.7.25 - "Group + Triage" AI Systems

4 implied HN points • 07 Feb 25
🕹 Technology AI Systems Software Cloud Computing Data Management Automation
  1. AI can really help with organizing and prioritizing tasks in many areas like customer support and fraud detection. This means faster and more efficient decision-making for businesses.
  2. Cloud software companies like Amazon, Microsoft, and Google are seeing some slower growth lately. It's important to keep an eye on how they perform in future reports.
  3. The value of a software company is often based on its revenue, especially when it's not profitable yet. Understanding these valuation methods can help investors make smarter choices.

Clouded Judgement 2.14.25 - Jan Inflation + Software Earnings Check In

3 implied HN points • 14 Feb 25
💰 Finance Earnings Reports Market Analysis Investment Insights
  1. Software earnings season is happening, and the results aren't looking great so far. Companies are guiding their expectations but haven't been very optimistic.
  2. January's inflation numbers came in higher than expected, which may affect economic stability. This will likely impact how companies plan their financials this year.
  3. Investors are closely watching how software companies are valued against their growth. The numbers show some companies are seen as expensive, which could change depending on their future performance.

Clouded Judgement 1.24.25 - The Year of Enterprise AI

4 implied HN points • 24 Jan 25
🕹 Technology AI Software Data Innovation Business
  1. AI in businesses faces a big challenge called the 'last mile' problem, which means it struggles to give accurate answers for specific business needs. This is especially important when customers are involved.
  2. To make AI better for businesses, combining general AI models with specific company data helps create more reliable results. This approach can improve things like compliance checks and sales forecasts.
  3. The speed of improvement in AI technology is impressive, and future models might overcome current limitations. This could allow businesses to answer a wider range of questions more accurately.

Clouded Judgement 11.14.24 - Market Tipping to Growth

8 implied HN points • 15 Nov 24
💼 Business Finance Investing Economics Market Trends Technology
  1. The software market is shifting back to focus on growth after years of prioritizing profitability. Many companies are now showing better free cash flow, which is a good sign.
  2. Recently, market indicators suggest that investors are less focused on profitability and are starting to reward growth again. Companies that adapt will likely benefit.
  3. With advancements in AI and a more favorable economic outlook, companies are increasing their investments in growth. This could lead to a recovery in revenue growth, which many stakeholders are eager to see.

Clouded Judgement 1.16.25 - December Inflation

4 implied HN points • 17 Jan 25
💰 Finance Market Trends Economic data Investment Strategies Valuation Metrics Stock Analysis
  1. The stock market's current mood is cautious, as investors are eagerly waiting for important data about the economy. Strong data might mean higher interest rates could stay longer than expected.
  2. Recent inflation figures came in lower than expected, causing a positive reaction in the stock market, particularly with a significant rise in the Nasdaq index.
  3. SaaS companies are often valued based on their expected revenue growth. Despite some not being profitable now, their future growth potential can make them appealing to investors.

Clouded Judgement 1.10.25 - Rising Rates

4 implied HN points • 10 Jan 25
💰 Finance Economic Growth Interest Rates Inflation Investment Trends Market Analysis
  1. The 10-year Treasury yield is rising even as the Fed cuts rates. This is mainly due to people's expectations of ongoing inflation.
  2. Strong economic growth is encouraging investors to seek riskier assets, which pushes bond yields higher. With low unemployment and good consumer sentiment, the economy looks solid.
  3. Tariffs on imports are increasing costs for businesses, which leads to higher prices for consumers. This adds to inflation worries and drives investors to demand higher bond yields.

Clouded Judgement 1.30.25 - The Year of AI Applications

3 implied HN points • 31 Jan 25
🕹 Technology AI Software Business Models SaaS Innovation
  1. 2025 is expected to be a big year for AI applications because the costs of using AI are going down. This means businesses can try out more AI features without worrying about high costs.
  2. As the cost to use AI tools decreases, companies are likely to innovate more. This could lead to exciting new applications and services that impress users.
  3. SaaS businesses are usually valued on their revenue, and understanding these revenue multiples helps compare companies. As companies grow, their market value can change based on how they manage their costs and profits.

Clouded Judgement 12.6.24 - Is Software Cheap or Expensive?

5 implied HN points • 06 Dec 24
💼 Business Finance Investing Technology Software Market Trends
  1. Software company valuations can look cheap based on traditional revenue metrics but may seem very expensive when adjusted for growth. It's important to look at both perspectives.
  2. Profitability and free cash flow (FCF) in software companies have improved, offering more support for current valuation multiples. This suggests a more nuanced view of their worth.
  3. Overall market trends show significant variability in valuation based on growth rates. Higher growth companies generally maintain a premium in their valuations compared to low growth ones.

Clouded Judgement 10.18.24

7 implied HN points • 18 Oct 24
🕹 Technology Software AI Enterprise Data Cloud
  1. Enterprise software has always relied on systems that store data, but the real value comes from how people use that data in workflows. It's not just about the data, but how it's managed and processed.
  2. AI is set to change this by taking over the data entry tasks that humans typically do. This means less focus on user interfaces and more on how efficiently AI can handle and process data automatically.
  3. With this shift to AI-driven systems, we will see new ways of building applications that prioritize smart databases. This could make traditional systems less important and create a need for new tools to manage complex workflows.

Clouded Judgement 11.1.24 - Amazon, Google, Microsoft & Meta on AI and CapEx

6 implied HN points • 01 Nov 24
💼 Business AI Investments Earnings Reports
  1. AI is becoming a big money maker for companies like Microsoft and Google. They're seeing huge increases in AI-related usage and revenue.
  2. Big tech companies are planning to spend a lot more on capital expenditures (CapEx) in the next year. This means they're investing heavily in technology infrastructure to support their growth.
  3. Interest rates have gone up recently, changing how investors view future growth. They're now expecting fewer rate cuts from the Federal Reserve.

Clouded Judgement 12.13.24 - Beat and No Raise?

4 implied HN points • 13 Dec 24
💰 Finance Investment Market Analysis Software Stock Valuation Economic Trends
  1. Software companies generally performed as expected, with very little change in earnings estimates for 2024. Most stock prices did not move much either.
  2. Recently, there has been a notable increase in software valuation multiples, driven by stability in the economy and expectations of future AI revenue.
  3. Investors are feeling hopeful about tech investments, as they believe upcoming growth in IT budgets and AI could lead to better earnings next year.

Clouded Judgement 11.8.24 - Q3 Earnings + Fed Update

5 implied HN points • 08 Nov 24
💰 Finance Economics Investing Earnings Monetary Policy Market Trends
  1. The Fed has lowered interest rates by 0.25%, now sitting at 4.5% - 4.75%. This move aims to support economic growth and labor market stability.
  2. Software companies reported strong Q3 earnings, with all 29 companies exceeding estimates. There's a positive trend in guidance for future quarters as well.
  3. Overall, companies in the software sector are seeing good growth in metrics like Annual Recurring Revenue (ARR), which suggests a brighter outlook for the industry.

Clouded Judgement 1.5.24

24 implied HN points • 05 Jan 24
💰 Finance Stocks Valuation Earnings Metrics Investing
  1. Software stocks have seen a drop in the start of the year due to rising interest rates.
  2. Valuation of SaaS businesses is generally done based on revenue multiples for the next 12 months.
  3. The growth rate of a company plays a significant role in determining its valuation multiple.

Clouded Judgement 12.20.24 - The Fed Bomb

3 implied HN points • 20 Dec 24
💰 Finance Monetary Policy Market Trends Economic Indicators Investment Analysis Stock Valuation
  1. The Federal Reserve is expecting fewer interest rate cuts in 2025 than many had hoped. They now see only two cuts instead of three or four.
  2. The Fed raised its inflation projections, indicating that inflation might be a bigger problem than previously thought. This caused a noticeable drop in market values.
  3. Economic growth estimates for 2025 have improved slightly, but the Fed suggests it will be cautious moving forward, making investors nervous.

Clouded Judgement 10.11.24 - Budget Flush

5 implied HN points • 11 Oct 24
💰 Finance Market Trends Investment Strategies Economic Analysis Corporate Finance Startup funding
  1. A budget flush happens when companies spend leftover budget at the end of the year to avoid losing any funds. This can boost sales for software companies looking to close deals quickly.
  2. Last year's budget flush was stronger than usual, with companies spending more due to concerns over budget cuts. This year, a similar trend could happen, driven by a more positive economic outlook.
  3. The performance of software stocks is rising, signaling optimism in the market. Investors are hopeful that major companies will report good earnings, which could lead to more investments in the software sector.

Clouded Judgement 2.23.24 - Rule of X

15 implied HN points • 23 Feb 24
💰 Finance Market Analysis Valuation Metrics Company performance Investment Strategies Financial trends
  1. The importance of growth and profitability in the Rule of 40 for cloud software companies varies over time, with current public markets valuing growth 3.0x more than FCF margin in valuation multiples.
  2. 2024 guides from Q4 calls are not increasing consensus estimates, indicating companies are setting cautious expectations amidst market uncertainty.
  3. Valuation multiples for SaaS businesses are calculated based on their projected revenue, with growth, FCF margin, and NTM growth rate influencing stock valuations.

Clouded Judgement 11.29.24 - Big Tech Strength

3 implied HN points • 29 Nov 24
💰 Finance Investing Market Trends Tech Stocks Valuation Metrics Financial reports
  1. Big Tech companies showed mixed performance last week, with some like Amazon and Google doing well, while others like Nvidia and Tesla fell. It seems hard to predict a solid trend right now.
  2. Valuation for software companies often relies on revenue multiples, especially since many aren’t profitable yet. This helps investors compare companies within the same industry.
  3. Growth metrics matter a lot; high-growth software firms have higher valuations compared to slower-growing ones. This shows how investors are willing to pay more for potential future success.

Clouded Judgement 2.16.24

14 implied HN points • 16 Feb 24
💰 Finance Software Inflation
  1. Software companies are showing signs of a potential rebound in January based on earnings reports and early data, signaling green shoots for the industry.
  2. January inflation, especially the CPI, was higher than expected, impacting market expectations for future rate cuts and projections for the Fed Funds rate.
  3. Valuations for software businesses are often calculated based on multiples of revenue, with different growth rates affecting these valuations significantly.