The 40 Rule: The Investor's Compass in the Turbulent Sea of Software

In the world of investing in (SaaS) companies,
there's always a question professionals ask:

Do we prefer a company that grows at lightning speed even if it's losing money,
or a stable company that makes profits with slow growth?

This is where the "40 Rule" (Rule of 40) comes in to give us the answer.
Simply put, it's an equation that combines (revenue growth rate + profit margin).

If the result is 40% or more, the company is considered healthy and balances expansion with value creation skillfully.
If it exceeds 50% or 60%, we're looking at financial monsters dominating the sector.

In our latest observation following the "earthquake" in software companies in 2026,
the true power map emerges based on this standard:

First: "Unicorn" category (above 60%)

At this top tier, we find ‎$PLTR (Palantir).
Today, it competes with no one but itself, surpassing expectations by far,
achieving operational efficiency and exceptional growth that make it the winning horse in this phase.

Second: "Elite" category (between 50-59%)
These companies are the safety valve of smart portfolios,
maintaining an astonishing balance despite market pressures, including:
‎$NOW (ServiceNow),
‎$CRWD (CrowdStrike),
‎$PANW (Palo Alto Networks),
‎$ADBE (Adobe),
‎$SNOW (Snowflake),
‎$ZS (Zscaler).
These names have proven that digital agility is the key to survival.

Third: "Great" companies (between 40-49%)
Companies still achieving the success standard with excellence, including:
‎$TEAM (Atlassian),
‎$DDOG (Datadog),
‎$MNDY (Monday),
‎$CRM (Salesforce),
‎$SHOP (Shopify),
‎$NET (Cloudflare),
‎$GTLB (GitLab).
Despite challenges, these companies remain capable of delivering above-average market performance.

Fourth: "Good" companies (between 30-39%)
These are companies in the self-assertion or restructuring phase to reach the forty club, including:
‎$RBRK (Rubrik),
‎$FIG (Figma),
‎$HUBS (HubSpot),
‎$MDB (MongoDB),
‎$IOT (Samsara),
‎$PATH (UiPath).

In summary:
Numbers don't lie,
and the 40 Rule is not just a mathematical formula,
but a test of management intelligence and the strength of the business model.

In the era of "easy money," everyone was growing,
but today, efficiency is the only recognized currency.

Dear investor,
do you base your growth company evaluations on emotional attachment to the brand,
or do you make the "40 Rule" your final judgment?

I look forward to hearing your opinions in the comments,
and for more of these analyses, you can follow me

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