The Magnificent 7 used to really feel just like the market’s cheat code. These days, it appears like a crowded door. Costs rose, expectations ballooned, and now buyers need proof, not guarantees. When everybody owns the identical handful of U.S. giants, even a small crack within the story can hit quick. So, ought to Canadians begin trying elsewhere?
What occurred
During the last 12 months, the Magnificent 7 wrestled with a difficult mixture of success and scrutiny. It nonetheless delivered massive income and robust earnings progress, however the tempo has began to chill as comparisons get harder. Analysts anticipated the Magnificent 7 to develop This fall earnings about 21.5%, but that marks the slowest tempo since 2023, at the same time as absolutely the greenback haul stays big.
The market additionally began to deal with what it prices to remain on high. The largest names preserve pouring cash into synthetic intelligence (AI) information centres, chips, and power-hungry infrastructure, and buyers are actually asking when that spending will flip into cleaner margins. The latest slide was linked to mega-cap tech and fears that heavy AI spending won’t pay again rapidly sufficient, resulting in sharp drops in market worth throughout names like Microsoft and Amazon.
Then comes the coverage noise. European regulators have stored stress on the most important platforms, and the Digital Markets Act has already produced formal findings in opposition to Apple and Meta. Add U.S. election-year rhetoric and antitrust chatter, and also you get one other layer of uncertainty that may spook a crowded commerce.
Think about CSU
If I needed a substitute for chasing the Magnificent 7, I’d look north to Constellation Software program (TSX: CSU). It might not promote telephones, adverts, or cloud subscriptions to the lots. As an alternative, it buys small, sticky software program companies that run quietly within the background, usually in slim industries the place clients hate switching. That technique matches a uneven market as a result of it doesn’t depend on one blockbuster product cycle.
Constellation additionally retains creating its personal catalysts. It retains shopping for, integrating, and enhancing vertical market software program, and it funds that machine with money stream slightly than hype. In its third-quarter 2025 replace, it stated it accomplished acquisitions with $281 million in money consideration, plus deferred funds that carry whole consideration to about $415 million.
The earnings numbers again up the story. Constellation grew income 16% 12 months over 12 months to US$3 billion in Q3 2025. It grew internet revenue attributable to frequent shareholders 28% to US$210 million, or US$9.89 per diluted share. Money flows from operations rose 33% to US$685 million, and free money stream (FCF) accessible to shareholders rose 46% to US$529 million. These figures let you know it might preserve investing whereas it nonetheless sends a reimbursement to shareholders by way of its quarterly dividend.
Trying forward, the enterprise case stays easy. Firms nonetheless want software program that handles billing, scheduling, compliance, and operations, even when budgets tighten. Constellation may profit when founders of area of interest software program companies need an exit and consumers with self-discipline present up. The primary danger sits in valuation and execution. The market not often offers this inventory an affordable value, and better rates of interest can elevate the hurdle for acquisitions. It additionally carries significant debt, which makes money stream high quality matter much more.
Backside line
So, may Constellation change the Magnificent 7 for different buyers? It could actually, if you’d like compounding pushed by acquisition self-discipline and unglamorous software program demand. It may not in the event you crave splashy AI upside otherwise you want a discount a number of at this time. The Magnificent 7 can nonetheless win, however now asks buyers to belief huge spending and fixed regulation danger. Constellation asks you to belief a repeatable playbook, and in 2026, that will look smarter.