Clouded Judgement: Q4 '22 Net New ARR Slowdown & Cloud Optimization Headwinds

Cloud software companies experienced a significant ~20% decline in net new ARR in Q4 '22 compared to Q4 '21, with many companies facing negative ARR growth. Cloud infrastructure optimization efforts are expected to extend through 2H 2023, creating a digestion period that delays enterprise spending recovery but positions for greater cloud penetration post-optimization. SaaS valuations remain compressed with median EV/NTM revenue multiple of 5.9x, though higher-growth companies command 8.4x multiples.