SS&C Technologies

SS&C Technologies reported second-quarter 2026 organic constant-currency revenue growth of 7.6%, up from 5.0% in the first quarter and above its midpoint guidance of 5.6%. SS&C made slight tweaks to its full-year outlook and continues to ramp up share repurchases.

Why it matters: Shares traded 4% higher after hours, and while SS&C reported a strong quarter, we believe the absence of a meaningful full-year guidance raise will likely limit the positive market reaction. While license revenue, which can be lumpy, appears to be elevated, SS&C has often proved conservative with its full-year outlooks. GlobeOp (28% of revenue) grew 9.0% organically in the quarter, suggesting the first-quarter deceleration to 6.7% was a blip. SS&C continues to benefit from strong asset levels and limited hedge fund redemptions. GIDS and related businesses (26% of revenue) also continues to do well with 8.9% organic growth. Even excluding Insignia, organic growth was above 5%. SS&C began recognizing Insignia revenue in the third quarter of 2025, so we expect a step-down here next quarter.

The bottom line: We will maintain our $90 fair value estimate on no-moat-rated SS&C and continue to view shares as undervalued. Adjusted EBITDA margins in the quarter were 39.5%, up from 39.0% last year but flat sequentially despite a $49 million sequential increase in revenue. SS&C strikes us as pretty lean, and thus we see limited opportunities for margin expansion. We continue to model adjusted EBITDA margins settling in the 40%-41% range during our five-year forecast period. SS&C repurchased 6.4 million shares (or about 2.7% of shares outstanding) in the quarter at an average price of about $68. With shares undervalued, we believe this is a prudent use of capital. We continue to view SS&C’s capital allocation as exemplary.

From a guidance perspective, SS&C made some minor tweaks. It increased its 2026 full-year revenue outlook by $8 million at the midpoint to $6.752 billion and now expects organic revenue growth of 5.5%, up from 5.3% previously. Adjusted net income is now expected to be $5 million, or 0.3% higher. Primarily due to a 2% lower share count than prior expectations, it now expects adjusted EPS of $6.93-$7.25 compared with a previous range of $6.74-$7.06.

We are maintaining our $90 fair value estimate on SS&C's shares. Our discounted cash flow-derived fair value estimate equates to a price/earnings multiple of approximately 13.5 times our 2026 adjusted earnings per share estimate. SS&C’s adjusted EPS excludes stock-based compensation, a common practice but one we disagree with. We also think SS&C is somewhat unusual with its exclusion of organic amortization of capitalized software. We estimate that, including these charges, SS&C trades at roughly 16.1 times our 2026 EPS estimate.

After roughly 4.5% organic growth in 2026, we expect about 3% annual organic revenue growth in 2027 and beyond as market tailwinds moderate. We expect the firm's alternatives business to grow faster while the legacy software business and healthcare businesses lag. We also view recent Intralinks underperformance as a risk factor. While SS&C has been an active acquirer, given the uncertain timing and size of acquisitions, we only model for organic growth. We forecast adjusted EBITDA margins to expand modestly, driven by revenue growth and organic margin expansion. We model 2030 EBITDA margins of roughly 40.5% versus our 2026 estimate of 39.9% and the 2025 actual margin of 39.2%. Based on our updating methodology, we peg SS&C’s weighted average cost of capital at 8.1% with a cost of equity of 9.1%.

While SS&C’s business has attractive characteristics such as revenue retention in the 95%-97% range, we do not believe that SS&C has an economic moat as the rise of generative AI may impact the firm’s software business. In addition, we note that over the last five years, ROICs averaged 8% including goodwill and 18% excluding goodwill by our calculations. The former is in line with the firm’s cost of capital which we peg at 8%.

SS&C’s wealth and investment software business runs the gamut of wealth managers, traditional asset managers, and alternative asset managers. The wealth business includes Black Diamond, a portfolio accounting solution geared toward registered investment advisors or RIAs. The firm’s traditional and alternative asset management businesses center on portfolio accounting solutions. Over the years, SS&C has acquired a variety of software products, including Advent APX, Advent Geneva, Advent AXYS, HiPortfolio (from DST), PORTIA (from Thomson Reuters), and others. Key competitors include Sungard (FIS Global), Envestnet (Wealth), Charles River (State Street), SimCorp (Deutsche Börse), Clearwater Analytics, and others. However, the rise of AI may make it easier to switch between products, as one use case is faster implementation. In addition, AI substantially reduces the cost of producing software, thus opening the gate for more competitors and in-house solutions.

SS&C Intralinks provides a virtual data room, secure collaboration, and deal management software for banks and corporations during the M&A process. In addition, Intralinks is used as a secure communication channel between GPs and LPs for alternative investment managers. Our bigger concern here is competitors such as Donnelley Financial’s Venue product and privately held DataSite, which are generally growing faster. SS&C Intelligent Automation includes Blue Prism, which we view as a no-moat business, as AI could disrupt the rigidity of robotic process automation.

The fund administration (GlobeOp) business (about 28% of revenue) is arguably more moaty. Contracts for fund administration outsourcing are three to five years, and it takes several months to onboard with a new provider (which can take a year to select). Though net flow movements to hedge funds can be uncertain, we believe the hedge fund client segment is still attractive, as the high fees make them less sensitive to the basis points paid for fund administration. In addition, in some cases, these fees are passed through to investors. That said, generative AI could make onboarding easier, and clients could become more discerning about costs. Fund administration largely involves calculating net asset value, and we view it as similar to auditing. We note that the Financial Times reported that KPMG negotiated lower fees for its own auditor, Grant Thornton, on the basis of AI cost savings.

SS&C’s Global Investor & Distribution Solutions business largely stems from the firm’s 2018 acquisition of DST Systems. This business largely provides transfer agency services to mutual fund companies. In addition to competitors such as BNY, this segment competes with in-house solutions. This limits pricing somewhat as companies would not outsource if they can do something materially cheaper in-house. In addition, undifferentiated but required tasks such as recordkeeping and compliance may be susceptible to automation.

Shares of SS&C trade well below the market overall and appear cheap.

SS&C’s fund administration and software solutions tend to be sticky, as evidenced by their high retention rates.

SS&C's management has a strong record on capital allocation. The firm is willing to get outbid on deals to ensure it does not overpay for acquisitions.

SS&C’s acquisition strategy relies on a favorable financing environment and reasonable prices for acquisition targets. Elevated multiples for potential targets makes it harder for SS&C to find attractive acquisition opportunities.

Inflation and other factors may lead to choppy operating margin trends.

As AI causes the cost of software to plummet, it will face a greater competitor environment.