Is the stock market starting to realise its big mistake?

Is the stock market starting to realise its big mistake?

Stephen Wright
Sun, 2 August 2026 at 12:16 pm GMT+5:30
3 min read

The stock market spent the past week glued to Amazon, MetaPlatforms 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

<strong>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.