MarTech is Doing Fine

Nowadays the sentiment across the board is that software is back. That is a stark contrast to the situation just 6 months ago, when the market decided that all of the software companies will get displaced by AI.

The pessimism had real legs to stand on, after all, not all software is unique, proprietary or has some form of a moat, but it was indiscriminately applied to every single software name to such an extent, that the stock prices disconnected entirely from the business fundamentals.

This created opportunities in many names, the two we liked in particular were Zeta Global and Klaviyo. While both companies were growing their revenue at a rate of 20%+ organically and improving free cash flow margins, the stocks were getting dumped as “AI was coming”.

Since then, we now have two additional quarters of results and the market finally started to take notice that “hey, for many of these software names AI boosts their value offering.” The sentiment shifted and the software sector has been rallying off the lows in March 2026.

The two recent quarters made two things clear. First, AI will not displace software (or at least it will not displace it within the next 2-3 years). Second, not all software names benefit from the AI to the same extent.

There are companies, like Zeta, Klaviyo, DigitalOcean, or Dynatrace, that all demonstrated accelerating product adoption and usage driven by AI tools. They had a core product in place for the last few years with proprietary data, so applying AI helps them deliver greater ROI to their customers. The greater the ROI, the more customers are willing to spend.

This flywheel is not in place for all software companies. Names like Asana did not participate in the rally as much, and we still believe they will go lower in the long term.

Adoption and improvements in AI are functioning as a purge of the software sector. Those without clear data moats, robust workflows that deliver ROI to their customers, will continue losing in the long-term, while the others, will gain their market share and win.

The last quarter for the two MarTech companies in our coverage was more of the same. Let’s go through each release respectively and highlight how AI boosts their flywheel and TAM.

You can find our current coverage and links to initiation reports here.

The detailed earnings breakdowns, updated model checks, and thesis verdicts for both Klaviyo and Zeta Global are available to paid subscribers below.