Clouded Judgement: Are Software Companies Bad Businesses?

The article challenges the claim that software companies don't generate free cash flow, presenting data showing a median 5% FCF margin across 80 tracked companies and arguing that negative FCF in growth mode is a necessary investment, not a business model flaw. It distinguishes between growth mode and maturity mode for software companies, establishes that terminal FCF margins of ~30% are achievable at ~10% growth, and contends that many overvalued software companies trading above 2x revenue will never reach these margins and face severe re-rating risk.