1Q26 Americas Software Benchmark: ARR Accelerates but Higher Sales Investment Drives a Modest CAC Rebound

Overview

The report benchmarks operating efficiency among its Americas software coverage universe in 1Q26, focusing on ARR growth, sales and marketing investment, CAC, LTV, LTV:CAC, revenue and EPS beats, revenue estimate revisions, and subsector performance. Overall, software demand and ARR growth improved, particularly in Infra / DevOps, driven by demand for AI application development, observability, and data modernization. However, faster sales and marketing expense growth prevented CAC from continuing to decline.

Core views

Goldman Sachs's core view is that software fundamentals showed signs of improvement in 1Q26, but not enough to materially change investor sentiment. Median ARR growth accelerated to 22.4%, net new ARR growth was approximately 56% year over year, and CY26 revenue estimates were revised higher across all five subsectors. However, median CAC rose sequentially to 2.08x and remained above the historical range of more than seven years, indicating that growth efficiency has not fully recovered. The report believes that returning CAC to pre-2024 levels and improving market confidence will require several consecutive quarters of ARR estimate increases and more favorable data on AI monetization.

Analysis framework

The report uses sample-company medians and comparable-company groups for quarterly comparisons, focusing on ARR growth, sales and marketing expense growth, revenue and EPS beats, EBIT margins, SBC as a percentage of revenue, CAC, LTV, and LTV:CAC across 1Q26, 4Q25, and 1Q25. At the subsector level, it evaluates unit economics across Infra / DevOps, Vertical, Security, Back Office, and Front Office software, supplementing the analysis with individual company cases to explain changes in CAC.

Methodology notes

• Unit EconomicsCAC

  Customer acquisition cost

  CAC is defined as trailing-twelve-month GAAP sales and marketing expense divided by net new ARR, and is used to estimate the sales and marketing investment required to acquire $1 of incremental annual recurring revenue. The report does not adjust for deferred commissions, foreign exchange, or M&A impacts.

• Unit EconomicsLTV

  Customer lifetime value

  LTV estimates the discounted value of $1 of recurring revenue. The formula considers gross margin, total revenue churn, and an 11% discount rate; Goldman Sachs estimates are used when churn is not disclosed.

• Unit EconomicsLTV:CAC

  Value-creation capacity of the growth equation

  A higher LTV:CAC means that, all else equal, a company acquires greater lifetime value with a lower CAC, allowing growth to translate more effectively into cash flow.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• PLTR

  Individual company case; representative of Infra / DevOps revenue estimate increases and CAC improvement

  Strengths

  Strong growth in U.S. commercial and U.S. government businesses, with AI deployment driving revenue growth and improved sales efficiency.

  Weaknesses

  Faces new competition; long-term differentiation and sustainability still require validation.

  Comparison

  Among the lower-CAC companies in the Infra / DevOps sample, with CAC of approximately 0.4x.

  Risks

  Intensifying competition in AI-agent deployment, changes in customer budgets, and valuation sensitivity to growth sustainability.

• DDOG

  Individual company case; beneficiary of AI-driven observability demand

  Strengths

  Core-customer growth is accelerating, AI-native customers contribute approximately 15% of revenue, and training-related workloads are driving demand.

  Weaknesses

  There remains debate over whether incremental competition will offset higher demand over the long term.

  Comparison

  One of the companies with the largest FY26 revenue estimate increases; Goldman Sachs raised its FY26 revenue estimate by 5.6%.

  Risks

  Observability-budget volatility, competition for multicloud workloads, and uncertainty over the durability of AI demand.

• DOCN

  Individual company case; Infra / DevOps low-CAC and AI-inference-workload beneficiary

  Strengths

  An additional 60MW of committed capacity supports guidance for more than 50% revenue growth in 2027, with a focus on AI-native customers and production AI use cases.

  Weaknesses

  Growth depends on new capacity coming online as planned and adoption of inference workloads.

  Comparison

  CAC of approximately 0.4x in Infra / DevOps, among the lowest levels.

  Risks

  Capacity-delivery risk, competition in AI infrastructure, and changes in customer concentration or demand timing.

• AKAM

  Individual company case of CAC deterioration

  Strengths

  A new $1.8 billion, seven-year frontier-model transaction validates its ability to participate in AI-computing demand.

  Weaknesses

  Revenue growth is slowing, the Delivery business is declining again, and sales and marketing investment is increasing.

  Comparison

  CAC declined year over year but rose 0.6x sequentially, making it one of the larger deteriorators this quarter.

  Risks

  Return on capital spending for AI-computing transactions and performance and cost competition with neoclouds and hyperscalers.

• CHKP

  Individual company case of year-over-year CAC improvement but sequential deterioration

  Strengths

  Emerging products are approaching 30% of ARR and growing more than 40%.

  Weaknesses

  Billings declined year over year and came in below market expectations; FY26 revenue guidance was lowered, with near- and medium-term results affected by GTM adjustments.

  Comparison

  CAC declined 1.3x year over year but rose 1.0x sequentially.

  Risks

  Sales-organization disruption, lengthening sales cycles, and delayed customer decisions due to AI-architecture evaluations.

• MDB

  Individual company case of CAC improvement

  Strengths

  Atlas growth was in the high-20% range, NER exceeded 120%, and self-service acquisition and upselling efficiency were strong.

  Weaknesses

  Some growth metrics reflect a higher base and product-mix changes and require continued validation.

  Comparison

  CAC declined 0.5x year over year and rose 0.1x sequentially.

  Risks

  Database competition, the pace of AI-platform monetization, and volatility in enterprise IT budgets.

• SNOW

  Individual company case of CAC improvement

  Strengths

  Product revenue growth is accelerating, while Cortex Code and AI coding tools are improving data-platform migration efficiency.

  Weaknesses

  The consumption-based revenue model may create volatility in revenue visibility.

  Comparison

  CAC declined 0.2x sequentially and 0.5x year over year.

  Risks

  Customer-usage volatility, data-platform competition, and uncertainty over the pace of AI-tool adoption.

Key data

• Number of sample companies39 companiesUsed for the 1Q26 software benchmark analysis.
• Median CAC2.08xHigher sequentially in 1Q26 than 2.05x in 4Q25, but the second-lowest level since 2Q24.
• Median ARR growth+22.4% YoYAbove +19.7% in 4Q25 and exceeding 20% for the first time since 2Q25.
• Net new ARR growthApproximately +56% YoYApplicable to companies with four years of comparable data; above 20% year-over-year growth for four consecutive quarters.
• CY26 revenue estimate revisionsAverage +1.3%All five tracked subsectors saw positive revisions, led by Infra / DevOps and Vertical Software.
• Revenue beat+2.0%In 1Q26, median software-company revenue was 2.0% above FactSet expectations, slightly below 2.2% in 4Q25.
• EPS beat+11.1%Below 15.0% in 1Q25 and below the three-year average of 18.6% for six consecutive quarters.
• Median EBIT margin22.2%Below 22.8% in 4Q25 sequentially, but expanded by approximately 400 basis points year over year.
• Median SBC as a percentage of revenue13.7%Below 15.3% in 4Q25 and the five-year average of 16.2%.
• Median LTV4.71xFlat versus 4Q25 and slightly below 4.73x in 1Q25.
• Median LTV:CAC2.32xAbove 2.26x in 4Q25 and 1.99x in 1Q25.

Impact & implications

For investors, the report signals that software-sector growth is reaccelerating, but the recovery in operating efficiency remains unstable. Infra / DevOps and certain AI beneficiaries may have stronger fundamental support because their demand acceleration has not been accompanied by a comparable increase in sales investment. High-CAC subsectors such as Security and Front Office Software face greater efficiency pressure. From a valuation perspective, software multiples remain below historical averages, but the market may require clearer evidence of sustained ARR improvement, AI monetization, and resilient margins.

Risks

• CAC remains above its historical level of more than seven years, and growth efficiency has not fully recovered.
• Some of the 1Q26 ARR improvement reflects a lower base, M&A contributions, and foreign-exchange factors; sustainability requires validation.
• Sales and marketing expense growth is outpacing ARR improvement and may continue to pressure unit economics.
• Renewed investment in growth by software companies may cause EPS beats to continue narrowing.
• The long-term impact of AI on the value of software remains contested, and some companies may face AI substitution or intensifying competition.
• Unit economics vary significantly by subsector, with high-CAC subsectors such as Security and Front Office Software more exposed to demand volatility.

What to watch

• Whether ARR growth continues to improve sequentially over the coming quarters and drives CAC lower.
• Whether AI-related revenue, customer adoption, workload intensity, and margins produce verifiable data points.
• Whether CY26 and CY27 revenue estimates continue to be revised higher, particularly for Infra / DevOps and Vertical Software.
• Whether sales and marketing expense growth slows and EBIT margins resume expansion.
• Whether LTV:CAC continues to improve and whether high-CAC subsectors show signs of recovery.
• Changes in AI demand and unit economics at representative companies such as PLTR, DDOG, DOCN, MDB, and SNOW.