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 1.16.25 - December Inflation

3 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 1.3.25 - 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 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.

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.
Get a weekly roundup of the best Substack posts, by hacker news affinity:

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 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 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 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 10.25.24 - 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 11.14.24 - 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 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 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 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 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 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 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 2.29.24 - Shads of 2021

16 implied HN points • 01 Mar 24
💼 Business Valuation Metrics Market Trends
  1. Venture markets are showing similarities to 2021, with rounds at high valuations and lots of pre-empted deals causing FOMO
  2. Investors are motivated by 'not losing relevance' and may overlook risks in high valuation rounds
  3. SaaS businesses are valued based on revenue multiples, with different growth brackets affecting valuation

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 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.

Clouded Judgement: IPO Process Overview - Are IPO Markets Opening Soon?

12 implied HN points • 02 Aug 23
💼 Business Market Analysis Investor Relations Market Dynamics
  1. The IPO process involves selecting investment banks known as the "Bakeoff" where the company chooses banks to help with the offering.
  2. Before going public, a company prepares the S-1 document, audited financials, and a presentation for potential investors.
  3. After the IPO pricing, the company completes the Roadshow to meet with investors and determine allocations, leading to the first day of trading.

A Look Back at Q1 '23 Public Cloud Software Earnings

12 implied HN points • 20 Jun 23
💼 Business Earnings Metrics Guidance Performance Valuations
  1. Analysis of Q1 public cloud software earnings provides insights for startup entrepreneurs on managing their businesses.
  2. Indications suggest a potential bottoming phase in the software industry with hopes for reacceleration by the year's end.
  3. Metrics such as revenue performance, growth, and sales efficiency play key roles in evaluating the success of a quarter for cloud businesses.

Clouded Judgement 5.19.23

13 implied HN points • 19 May 23
💼 Business Software Stocks Earnings Valuation Metrics
  1. Cloud software companies saw a boost in stock prices, but operating performance is not as positive.
  2. Companies added less new ARR in Q1 '23 compared to the previous year, indicating a headwind in new bookings.
  3. Median revenue growth rate declined in Q1 '23, along with net retention rates, CAC payback periods, but FCF margins showed improvement.

Clouded Judgement 5.26.23

12 implied HN points • 26 May 23
💼 Business Finance Software Earnings Valuation Metrics
  1. Snowflake reported weakening consumption trends in April/May compared to Feb/March.
  2. The change in data retention policies by customers was a big factor in consumption weakness for Snowflake.
  3. Snowflake's report raises questions about the anticipated acceleration in consumption software and highlights the volatility of consumption models.

Clouded Judgement 6.23.23 - Atlas Consumption and Q1 Earnings Trends

10 implied HN points • 23 Jun 23
💰 Finance Software Metrics Valuation
  1. MongoDB Atlas consumption trends showed a drop in Q2 of last year but picked up in Q1 and may continue. Monitoring this trend is key.
  2. Quarterly metrics trends like growth, net retention, sales efficiency, and FCF margins have been fluctuating in the recent quarters.
  3. Valuation metrics like EV/NTM revenue multiples and growth rates are important for understanding the relative valuation of software companies.

Clouded Judgement 6.9.23

10 implied HN points • 09 Jun 23
💼 Business Software companies
  1. Consumption trends in Q1 '23 show some positive signs for certain software companies.
  2. Some companies like Mongo and Azure are showing strength, while others like AWS and Snowflake are facing challenges.
  3. Overall, the sentiment on consumption software trends suggests a possible back half acceleration in the future.