Orlando Bravo: Many software companies in the public markets will be disrupted by AI

Summary

• Orlando Bravo, a major private equity software investor, argues the current sell-off in public software stocks is a bifurcated story of warranted vs. unwarranted punishment.
• Core thesis: AI will be a disruptive force for many public software companies, accelerating existing challenges and justifying recent valuation declines for some.
• However, he contends other "phenomenal" public software businesses have been "severely punished" unjustly and will be big winners in the coming "agentic" AI era.
• He contrasts this with his private portfolio of 77 companies, which he says are "crushing it," well-positioned for AI, and fundamentally different from the vulnerable public companies.
• On valuations: Notes public software forward EBITDA multiples have compressed from ~22x to ~17x, which he still considers "very healthy levels" for achieving excellent returns.
• States Thoma Bravo's private marks are not down by a similar magnitude (~25%) as the public S&P Software and Services Index, as they mark based on fundamentals, not just public comparables.
• Dismisses concerns about private credit exposure to software affecting his firm, citing strong fundamentals and reassured LPs after a detailed portfolio review.
• Implicitly responds to criticism from Apollo's John Zito about private equity marks by emphasizing his firm's long-term, fundamental approach and transparency with major institutional LPs.