The stock market spent the past week glued to Amazon, Meta Platforms and Microsoft, especially their spending plans. In the same week, Apple became a $5trn company by holding on to its cash.
Quieter, but arguably more useful, was Roper Technologies (NASDAQ: ROP). The stock is up more than 20% since its second-quarter results a week ago and for a software business, that’s huge news.
Adobe’s warning shot
The rise of artificial intelligence (AI) has been bad for software stocks. One of the best illustrations of this is Adobe (NASDAQ:ADBE).
In its last two updates, the firm has reported revenue and profits both ahead of expectations. Despite this, the shares have fallen both times, leaving the stock down 26% this year.
There hasn’t been much wrong with the company’s results. Growth has been solid and management is saying the right things.
The issue, however, is that investors just don’t seem to believe it. They’re worried that the barriers to entry for competitors have fallen and that’s going to weigh on pricing power in future.
Why Roper is different
Roper is a different animal. It focuses on niche, vertical-market software (hospital billing, freight matching, lab systems) where competition is limited.
That’s one of the big attractions of the stock – which I’ve owned since roughly the start of 2026. And – like Adobe – the firm has been posting strong results.
Q2 revenue rose 9% to $2.11bn, with 5% organic growth and free cash flow up 11% to $447m. In terms of AI, management cited features moving “from experimentation to commercial rollout” across the portfolio.
Unlike Adobe, the stock market reacted positively to Roper’s results. The difference is guidance – while Roper lifted full-year targets for revenue growth and earnings per share, Adobe didn’t.
As a result, one is being treated as durable growth with an AI boost. The other looks more like growth pulled forward from a shrinking future.
Capital allocation
Roper has changed its capital allocation priorities recently. It’s shifted from focusing on acquisitions to share buybacks as a way of driving growth.
This makes a lot of sense while the stock is down. And the result is the outstanding share count is 8% lower than it was nine months ago.
A rising share price, however, makes the economics of share buybacks less attractive. And rising valuations across the software industry could make acquisitions challenging.
That’s the risk investors need to focus on. If things get better in terms of the share price going up, the opportunities available to Roper get less attractive.
