Infrastructure software: our top-rated actors compared

2026-06-22 · By Lubin Danilo, founder of Lubin Investment

Infrastructure software excels in our screener because it combines three rare characteristics: recurring subscription revenues, minimal capex, and very high FCF margins. GoDaddy (7.6x), Qualys (18.2x), Nutanix (35.8x), and VeriSign (23.3x) illustrate the valuation diversity within this quality segment.

Why software infrastructure dominates our screener

Infrastructure software — hosting, cybersecurity, virtualization, internet registries — shares exceptional structural characteristics. Customers sign multi-year contracts or automatically renewed subscriptions. The marginal cost of serving an additional customer is near zero. Physical capital investment is minimal relative to revenues generated. The result: FCF margins that regularly exceed 20%, sometimes 40%, with revenue visibility that cyclical sectors simply cannot match.

GoDaddy (GDDY): 7.6x, the lowest valuation in the group

GoDaddy is the global leader in web hosting and domain names for SMBs. With more than 20 million active customers and a subscription model, GoDaddy generates predictable and growing FCF. Its 7.6x valuation is the lowest in the group, making it the most accessible player for an investor seeking infrastructure software exposure with a high safety margin. The platform is expanding with online presence and e-commerce tools for small businesses, increasing per-customer value over time.

Qualys (QLYS) and Nutanix (NTNX): cybersecurity and virtualization

Qualys operates in cloud cybersecurity: vulnerability management, regulatory compliance, endpoint security. At 18.2x, its valuation reflects the premium given to cybersecurity, a sector with strong structural growth. Nutanix specializes in hybrid cloud infrastructure: its software allows companies to manage workloads between public and private cloud. At 35.8x, Nutanix commands a higher price, but its SaaS transition has transformed revenue visibility and justifies a growth premium.

VeriSign (VRSN): the regulated .com domain monopoly

VeriSign manages .com and .net registries under an ICANN contract, renewable without competitive tender. With 170 million domains under management and mechanically increasing per-domain pricing each year, VeriSign is one of the rare regulated monopolies in the digital sector. Rated 9/10 in our screener (one debt criterion slightly less favorable), it trades at 23.3x — a valuation reflecting near-total revenue predictability.

FAQ

What is the difference between application software and infrastructure software?

Application software (CRM, ERP, HR) is used by end users for business tasks. Infrastructure software (hosting, security, networking, registries) is the technical layer on which applications run. Infrastructure has higher barriers to entry and greater switching costs.

Why are FCF margins so high in this sector?

Infrastructure software has near-zero marginal cost: serving one million customers does not cost a hundred times more than serving ten thousand. Once the infrastructure is built, each additional dollar of revenue largely converts to FCF. That is the fundamental economic engine of the sector.

GDDY is cheaper than QLYS or NTNX. Why?

GoDaddy targets SMBs, a slower-growing market than cybersecurity or hybrid cloud. Its valuation reflects a more modest growth profile, not lower quality. For an investor seeking quality at a reasonable price, GDDY may be more interesting than high-growth, highly valued peers.

Can VeriSign lose its ICANN contract?

Theoretically possible, but in practice ICANN has always renewed VeriSign's contract. A transition to another operator would be technically complex and risky for Internet stability. The risk exists but remains very low according to most sector analysts.

Has Nutanix successfully completed its SaaS transition?

Yes. Nutanix migrated from perpetual licenses to a subscription model, which temporarily compressed reported revenues but improved FCF visibility and quality. Our screener values this transformation positively, hence the maximum score despite a higher valuation.

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About the author

Written by Lubin Danilo, founder of Lubin Investment. A self-taught individual investor, I have analyzed stocks through their fundamentals for several years and invest my own money with this method. I codified it into a tool that judges a company's quality and its price separately, using criteria drawn from the financial literature (Warren Buffett, Michael Mauboussin, Aswath Damodaran).