Software stocks have been in a rout in the past few months due to investor concerns that “software will get automated away” in the wake of AI advancements.

Investor sentiment, which used to be extremely bullish on software stocks, has shifted to a more pessimistic outlook. In fact, the S&P Software & Services ETF (XSW) is down roughly 21% year-to-date.

Despite this pessimistic outlook, software firms aren’t going away anytime soon. Replacing deeply embedded and highly secure software solutions with AI agents and other vibe-coded alternatives is just too expensive and time consuming to undertake.

That’s why for now, software firms, especially those specializing in sticky Software as a Service (“SaaS”) offerings are still positioned to sustain and grow returns.

And one of those firms is Roper Technologies (ROP).

Roper Technologies owns and operates multiple companies across three verticals, Application Software, Network Software, and Technology Enabled Products.

The Application Software segment specializes in providing end-to-end software solutions and platforms to professional services firms, law firms, laboratories, healthcare companies, project-based businesses, educational institutions, payment platforms, and others.

This segment also owns companies that specialize in software solutions for supply chain, payment processing, financial analytics, and insurance applications.

Meanwhile, Network Software specializes in digital engagement platforms, software platforms, and other solutions for health care firms, pharmacies, health care providers, food industry companies, financial services, entertainment companies, construction firms, and others.

Finally, Technology Enabled Products owns firms that sell products used in diagnostic and therapeutic imaging, fluid metering, wireless sensor networks, surgical scrub and linen management equipment, metering systems, optical and electromagnetic measurement systems, badge card readers, and medical devices.

Roper Technologies generated nearly $8 billion in revenues in 2025, with Application Software generating the bulk at $4.4 billion while Technology Enabled Products and Network Software delivered $1.8 billion and $1.6 billion, respectively.

Roughly 85% of the company’s software revenues are recurring. It also boasts a gross retention rate of 95% across its enterprise solutions.

Aside from leveraging a recurring revenue model, Roper Technologies has built a strong business due to its status as a strategic acquirer. Since 2015, the company has acquired roughly 22 companies operating in multiple industries.

Roper Technologies’ acquisition strategy and business model have enabled it to deliver and grow its returns over the past few years. Its Uniform return on assets (“ROA”) has never fallen below 70% since 2020. And last year, it delivered a Uniform ROA of 219% and a Uniform asset growth of 24%.

Despite these strong returns, the company trades at a Uniform P/E of 15x, well below corporate averages. This valuation suggests that market sentiment on the company remains measured despite its strong profile.

That said, Roper Technologies’ status as a strategic acquirer and its ability to generate recurring revenues through its software solutions position it to support earnings growth and generate strong returns for years to come.

Best regards,

Joel Litman & Rob Spivey
Chief Investment Officer &
Director of Research
at Valens Research

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