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The “SaaS is dead” narrative keeps spreading because it feels true. Capital is flowing to rockets, drones, AI labs, defense systems, quantum, and space infrastructure. Against that backdrop, incremental SaaS looks boring.
But the data tells a more precise story.
Public SaaS is still a multi-trillion-dollar category. Across the major cloud software indices, the average public SaaS company is still growing revenue at roughly 18–20%, with gross margins in the mid-70s, and free cash flow margins approaching 20%. These are not broken businesses. They are still compounding.
What has changed is how the market values “good.”
The median public SaaS multiple today sits around 4–5x forward revenue. That’s down materially from the 2020–2021 era, but it’s stable relative to fundamentals. Meanwhile, the top handful of companies trade closer to 18–22x, and in some cases far higher.
That spread matters more than the average.
This isn’t a broad SaaS collapse. It’s a violent stratification.
When you break software companies down by growth rates, the market’s logic becomes obvious:
Companies growing above ~22% command low-teens revenue multiples
Companies growing 15–22% trade around 7–8x
Companies growing below 15% often sit near 3x
So yes, many Fortune 490 companies outside of big tech are still solid. Profitable. Durable. Well-run.
But in a world where capital can chase faster-compounding, narrative-rich outcomes, solid is no longer enough.
The market isn’t asking “is this a good business?”
It’s asking “is this the best place for incremental capital right now?”
This is a relative game, not an absolute one
The pain in software today is less about deterioration and more about comparison.
Every investment decision is implicitly relative. A 12% growing SaaS business with strong margins is no longer compared to its historical peers. It’s compared to AI companies compounding faster, defense platforms with geopolitical tailwinds, or infrastructure bets that feel like new industrial primitives.
Even within software itself, you see this divergence clearly.
Private software companies still trade at meaningfully higher multiples than public ones. And within private markets, AI-native software consistently commands a premium over non-AI peers. The market is telling you exactly what it values: speed, leverage, and perceived inevitability.
This is why so many public software companies feel “stuck.” Their fundamentals didn’t break. The benchmark moved.
The real fear underneath “SaaS is dead”
The deeper anxiety isn’t multiples. It’s displacement.
As AI agents begin to operate across systems, there’s a growing concern that traditional software becomes invisible infrastructure. If agents interact with databases directly, orchestrate workflows autonomously, and abstract away the UI, where does value accrue?
The fear is that many SaaS products become interchangeable layers beneath a new control plane.
That’s why the market is willing to pay extraordinary premiums for a small group of companies that look like platforms, not tools. Businesses positioned as data planes, security perimeters, developer backbones, or orchestration layers are being valued differently. They aren’t priced as SaaS. They’re priced as infrastructure.
And that distinction explains almost everything.
What’s actually happening
SaaS didn’t die.
It lost narrative dominance.
The market is splitting software into two camps:
Software as infrastructure
These are platforms that sit at choke points: data, security, workflow, orchestration, or developer control. They benefit from AI rather than being threatened by it. They get premium multiples, patience, and forgiveness.
Software as a feature
Useful, well-built products with steady retention and improving margins, but no path to becoming the control layer. These businesses can still be great companies. They just don’t get celebrated. They get valued.
That’s why the Fortune 490 feels pressure today. Not because their businesses stopped working—but because the bar for attention moved.
In an environment driven as much by narrative velocity as by cash flow, being good is no longer sufficient. You either look like the future—or you look like maintenance.
And that’s the real story behind “SaaS is dead.”
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