‘SaaSpocalypse’ debate intensifies as software stocks swing wildly

The “SaaSpocalypse” was raging this week. Then it got a reprieve.

The pennies-on-the-dollar acquisition of one-time highflyer Airtable, followed by plunges in HubSpot, Datadog and Figma on earnings reports, all served to underscore investor concerns that artificial intelligence models are eating away at the value of costly software products.

“I do think that companies are going to continue to use these coding agents to build functionality to maybe act as a little bit of pressure on renewals,” said Matt Hedberg, a software analyst at RBC Capital Markets.

But by the end of the week, Wall Street was reminded that there’s still juice left in an industry that, not long ago, was viewed as driving innovation and was trading at hefty market multiples.

Twilio, a provider of cloud-based communications software, and Atlassian, which sells collaboration tools, each saw pops of well over 20% on Friday after reporting quarterly results. Cloudflare, which helps protect websites from cyber attacks, gained 5.6%.

Box CEO Aaron Levie, who’s been evangelizing cloud software since he started his file-sharing company more than two decades ago, was particularly impressed with Atlassian, which reported its most profitable quarter since 2021.

“Huge Atlassian quarterly beat,” Levie wrote on X. “There was a misplaced thesis over the past 6 months that somehow agents would be bad for certain software categories. There’s definitely truth in this in some areas, but many were parsing this poorly.”

Levie’s reaction reflects a level of nuance that’s not always apparent in the sell-it-all trade. Salesforce CEO Marc Benioff has spent months trying to convince investors that his company’s longstanding software for sales, marketing and customer service won’t be vibe-coded away. Salesforce has lost more than 40% of its value since the end of 2024 despite accelerating revenue growth and consistent margins.

Salesforce and its software peers have been under pressure, less because of their current growth rates and more because of the increasingly popular view that tools like OpenAI’s Codex and Anthropic’s Claude Code will slowly — and then rapidly — hollow out their economics.

The iShares Expanded Tech-Software Sector ETF plummeted 24% in the first quarter, its worst performance since 2008. However, it’s since rebounded sharply and is now down just 3% for the year, while the Nasdaq is up 15%.