Something we saw with Salesforce when they released numbers last month.
From PitchBook, June 17:
As enterprises feel pressured to buy into the AI revolution, they’re cutting back spending on other software tools—a shift that is crimping growth at SaaS leaders and startups alike.
Revenue growth at newly public US VC-backed SaaS companies fell sharply in 2022 and has remained low, according to PitchBook data. The best of these companies were growing sales at more than 73% year-over-year in Q1 2022, a rate that declined to 32% in Q1 of this year. The median growth rate for the cohort is now 19%, down from 35% in Q1 2022.
This cohort is a bellwether for the broader late-stage software startup market and an indication that the higher growth rates that were common pre-2022 remain elusive.
It’s not just companies that recently went public: SaaS leaders are also being taken through the wringer. The stock of cloud software giant Salesforce plummeted nearly 20% in one day following weaker-than-expected Q1 revenue numbers and slowing growth.
Enterprise software CEOs have been touting the transformative potential of generative AI for the past 18 months, but the technology has yet to drive significant revenue gains for most companies. Instead, revenue figures indicate that AI experimentation may be diverting corporate dollars away from SaaS.
Meanwhile, AI startups operating foundational models are capturing a bigger chunk of corporate spend. OpenAI CEO Sam Altman recently told staff that the company’s annualized revenue had hit $3.4 billion, The Information reported last week.
Cloud software company Oracle is the exception that proves the rule...
....Maybe not so much SaaS. When Salesforce (CRM) reported on May 30 the stock went into free fall, dropping from ~$271 to ~$218. A couple of the headlines:I think that knocked them from the #1 perch and allowed ADBE to move up the rankings.Salesforce expects lowest quarterly growth in two decades
Salesforce Earnings: Slowing Growth and Risk of More Disappointment Ahead
