S&P Global Ratings upgraded Constellation Software’s outlook to positive from stable on Friday, citing sustained deleveraging and robust free operating cash flow despite continued acquisitions. The issuer credit rating was affirmed at BBB.
The agency noted Constellation’s adjusted net leverage fell to 1.0x in 2025 from 1.7x in 2023, with projections holding near 1.0x through 2026. Free operating cash flow rose to approximately $2.5 billion in 2025, up from $1.6 billion in 2023, and is forecast to reach $2.8 billion in 2026. Acquisition spending is projected at $2.6 billion in 2026, roughly matching expected cash flow, which S&P said should keep leverage stable.
Constellation, a Toronto-based provider of vertical market software, has completed four acquisitions exceeding $100 million each through the second quarter of 2026. The company operates in over 100 verticals with no single customer accounting for more than 2% of revenue. Maintenance and recurring revenue now represent nearly 75% of consolidated revenue, up from 70% two years ago.
Customer retention exceeds 90%, and maintenance revenues are expected to grow at an average of 5% annually due to price increases and new add-on products. S&P indicated the rating could be raised over the next 12 to 24 months if leverage remains at or below 1.5x following debt-financed deals or if EBITDA margins improve significantly. The outlook could revert to stable if leverage climbs above 1.5x because of more aggressive acquisitions or weaker operational performance.
