S&P Global Ratings raised its outlook on Constellation Software Inc. to positive from stable on Friday, citing the company’s improved leverage profile and sustained free operating cash flow generation. The credit rating agency reaffirmed the Canadian software provider’s BBB rating while noting that adjusted net leverage stood at 1.1x based on the 12 months ended June 30, 2026.
Constellation’s leverage has declined sharply from 1.7x in 2023 to 1.0x in 2025, driven by free operating cash flow of approximately US$2.5 billion last year. The company projects free cash flow will reach US$2.8 billion in 2026, while acquisition spending is forecast at US$2.6 billion, maintaining leverage near current levels. S&P indicated that a potential rating upgrade could occur within the next 12 to 24 months if adjusted leverage remains at or below 1.5x following debt-funded acquisitions and if financial policies align with rating criteria.
The outlook revision follows Constellation’s completion of four acquisitions exceeding US$100 million each in the first half of 2026, part of a broader strategy to expand across more than 100 vertical markets. The company’s recurring and maintenance revenue now accounts for nearly 75% of consolidated revenue, up from 70% two years prior, with customer retention rates exceeding 90%. S&P highlighted Constellation’s disciplined approach to acquisitions and its ability to fund growth primarily through internal cash generation rather than increased leverage.
Constellation Software’s equity stakes in Assecco (24.8%) and Sabre (12.7%) were also noted, though these holdings were not a primary driver of the outlook change. The company’s free cash flow has consistently outpaced acquisition spending since 2024, a trend S&P expects to continue through 2026.
