By coinnews 
00:00 Speaker A
I think when a lot of investors think about the software sector, they think, okay, this is a more, you know, relatively tariff resistant sectors to it, but there are still risks. Walk us through what those are.
00:16 Speaker B
Hi Josh, thanks for having me on. You know, that software companies in the US, um, you know, most of the mid-cap and large cap companies have significant exposure to large enterprises that can make some pretty big purchase decisions. And when you have policy uncertainty like we’ve had, those decisions can get deferred. They can get pushed out. You know, companies are reluctant to make big commitments. Uh, you know, in the, um, you know, as far as smaller customers are concerned, um, they tend to be, they’re they’re buying habits, you know, it’s smaller number of software seats, etc. They tend to be more linear with the economy. So if the economy degrades and we start to see, you know, recession or slowdown, uh, the purchasing by the smaller companies also gets affected. So, so those are basically the macro risks. Um, and you’re probably going to want to ask me more about it, but I don’t think we’re going to see those risks come home to roost in a big way in Q1. I think there’s a lot of momentum there and I think most of the major software names in the US have left pretty ample room in their guidance to either raise their guide or not not cut their guide. Um, so that that’s kind of the big picture outlook we have here and valuations have certainly come in quite a bit and you know, are looking pretty attractive on a lot a lot of names.
03:36 Speaker A
So that’s interesting. See, so even with that sort of caution, that unknown in terms of of the outlook, you think there’s a good amount of negativity that’s already priced into most of these?
04:17 Speaker B
I think that is true, Julie. Um, but I also think there’s a there’s a certain buying dynamic that, you know, even a lot of investors may not fully appreciate, even institutional investors, which is, um, software companies have a lot of mechanisms to maintain their momentum in the short term, even in the face of deteriorating conditions. That’s that’s always been true, even in the 20 years that I’ve been on the cell side covering software. Um, you know, a lot of these sale cycles are very long and the sales get, you know, pretty close to being concluded and the projects are green lit and they they may actually the decision may have been made in calendar Q4, but the software gets turned on, you know, the cloud software gets turned on in Q1 and and bookings registers in Q1 and that revenue starts flowing. And sometimes it can start flowing, you know, well after the decisions are made. So, so that means there’s there’s kind of a lag time, if you will, in a lot of this how this decision making affects revenue. Uh, and I and I think what we already saw from ServiceNow and SAP were some pretty good Q1 reports, um, that uh that set the tone for the space and I think a lot of other software companies are going to be hesitant to start, you know, sounding economic alarms, you know, and and a lot of them have room to um, if not to raise their guidance, to not cut their guidance. So I think Q1 will be fine. The question mark is going to be more Q2, Q3.