Everyone Declared Software Dead in April. This ETF Is Up 41% Since Then.
Software stocks went from apocalypse to market leaders in six months, but the speed of that reversal raises a harder question than most investors are asking before the next earnings season.
On October 12, CNBC anchor Morgan Brennan said on air that software stocks are up over 50% in six months. In April, the same group traded under the “SaaS apocalypse” label, and now leads the market.
The iShares Expanded Tech-Software Sector ETF (BATS:IGV) shows the swing. It rose 41.46% from April 13 through October 12, 2026, and closed at $111.31.
That beat the 20.84% gain in the Invesco QQQ Trust (NASDAQ:QQQ) and the 13.41% gain in the SPDR S&P 500 ETF Trust (NYSEARCA:SPY) over the same period.
Investors who sold near the April low missed that rebound, and anyone looking at the fund now faces a harder decision. The open question is the balance. How much of this reflects a lasting re-rating of software, and how much reflects a crowded momentum trade that has already done most of its work.
IGV’s Six-Month Surge Hides a Losing Year
Over longer time frames, the picture is weaker: over one year, IGV is down 0.68%, and year-to-date it is up only 5.34%. A fund can lead the market for six months and still trade below where it stood a year ago, which makes the April rally a recovery of earlier losses.
The past month added 9.64%. But the fund fell 1.21% in the October 12 session. So the advance has had pauses along the way, and anyone who bought a year ago has spent twelve months getting back to roughly even.
The spring selloff traced back to the seat-based model, because subscription software revenue depends largely on how many people hold a license. A customer needs fewer seats. If an AI agent does the work of several employees, that holds even as the product improves, and it undermines the pricing model, which helps explain why quality vendors fell alongside weak ones. By September, one television panelist was pointing to “better days ahead from the SaaS apocalypse that we saw even a few months ago.”
Incumbents Are Selling AI Into Contracts They Already Hold
Companies are likely to buy AI inside the applications they already run, because their data, permissions, and audit history live in those systems of record, and an incumbent with distribution can attach AI to an existing contract while a challenger has to win the contract first.
That explains the rebound, but its speed points to multiple expansion. A 41.46% gain in six months most likely reflects investors paying more for similar forward earnings, because software profits rarely speed up that quickly. Multiple expansion can unwind in one weak guidance cycle, while earnings growth tends to remain.
Takeover interest may offer some support, because low valuations tend to draw private equity and strategic buyers, but a sector that rallies on who might be acquired likely carries real business risk.
Three Signals Will Show Whether the Bears Were Early
If seat compression comes later than bears expected, this rally is a bounce inside a structurally impaired group. Watch net revenue retention, which shows whether existing customers spend more each year, along with any reported seat counts. Also watch whether pricing shifts from per-user to consumption-based, which would let vendors charge for work agents do.
IGV is a concentrated sector fund, so a single holding gives you both the winners and the losers of the same disruption. It charges 0.38% a year, as listed in its summary prospectus, and software companies pay little in dividends, so you collect almost nothing while you wait.
What IGV Investors Need to Weigh Before the Next Guidance Season
I remain cautious on IGV. At $111.31, IGV has won back a year of losses without the earnings evidence that would make its higher multiple safe. One weak guidance season could erase much of the April rally, and the seat data that would settle the debate is still thin.
QQQ offers broader exposure for comparison. It rose 20.84% over the same six months and holds software alongside chip and platform companies that gain from agentic AI, whichever pricing model wins.
That broader mix captures the AI recovery without concentrating exposure in per-seat software. The case for IGV would strengthen if net revenue retention steadies and consumption pricing starts to show up in reported revenue.
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Omor Ibne Ehsan is a writer at 24/7 Wall St. He is a self-taught investor with a focus on growth, cyclical, and dividend equities that have strong fundamentals, value, and long-term potential. He also has an interest in high-risk, high-reward investments such as penny stocks.
