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John Zito, co-president of Apollo Global Management, told UBS clients on March 16 that private equity firms are effectively misstating the valuations of their software holdings. The core argument: private marks haven’t caught up with a public market that has been falling off a cliff.
The S&P North American Technology Software Index has dropped roughly 35% from its September 2025 peak. Private equity portfolios stuffed with software companies, meanwhile, have been suspiciously slow to adjust their numbers downward.
Apollo has been betting against software for over a year
This isn’t a sudden pivot for Apollo. The firm has maintained an underweight position in the software sector for approximately 18 months, well before the current selloff turned ugly. The reasoning has been consistent: the boom-era metrics that justified massive software buyouts, think sky-high growth rates and near-perfect retention figures, were unsustainable.
At a Toronto investor event in fall 2025, he posed a question that probably made a few portfolio managers choke on their coffee: “Is software dead?”
“Is software dead?”
When private equity firms were scooping up software companies during the boom, they were typically paying EBITDA multiples in the range of 15 to 20x, with leverage hovering around 6x. Those numbers made some sense when the companies in question were growing at 30% or 40% annually with net retention rates above 120%. They make considerably less sense when growth is decelerating and the competitive landscape is being reshaped by AI.
The AI disruption problem
Zito’s particular concern centers on mid-tier and smaller software companies. They’re the ones most vulnerable to displacement by AI, and they’re also the ones most likely to be sitting in private equity portfolios at marks that haven’t been updated to reflect new competitive realities. These smaller or generic software businesses are also the kind that rely on private credit financing, which becomes harder to service when revenue starts heading in the wrong direction.
What this means for investors
With public software valuations down 35% from their highs, private equity firms face an uncomfortable choice. They can mark down their software holdings to match public comparables, which means telling limited partners their returns are worse than previously reported. Or they can hold their marks and hope for a recovery.
For anyone with exposure to private equity funds that loaded up on software during 2021 through early 2025, Zito’s warning is worth taking seriously. Apollo is one of the largest alternative asset managers in the world, and when a firm of that scale starts publicly calling out valuation practices in its own industry, the signal is hard to ignore.
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