Reports of the demise of SaaS may be greatly exaggerated.
Shares of software-as-a-service companies Atlassian, Twilio and FiveNine soared in after-hours trading after reporting strong financial results on Thursday.
Each company cited AI as a reason for accelerating profits, the very same technology that sent stock prices plummeting this year amid concerns that companies would use AI to build the software they sell.
Atlassian’s stock rose as much as 25% in premarket trading Friday morning, Twilio rose as much as 20% and Five9’s rose 16%. All three companies pared back their gains slightly as market open approached.
Atlassian, which provides project collaboration software, saw its revenue rise 32% year over year. Twilio, which provides cloud-based communication tools, reported a 20% year-over-year increase in revenue, and contact center company Five9 saw a 9% increase in revenue.
Kate Lehman, chief market analyst at Avatrade, told Business Insider that while the results were strong, the so-called “SaaSpocalypse” is far from over.
“Last night’s results from Atlassian, Twilio, and Five9 don’t completely kill the SaaSpocalypse story, but they certainly put a significant dent in it,” Lehman said.
The company’s performance and soaring share price “are not the actions of a sector that is structurally in decline,” he added.
Twilio CEO Khozema Shipchandler told Business Insider’s Rosalie Chan that Twilio is more of an infrastructure company and sees AI as a business catalyst because people can’t code much of what Twilio does.
It’s a similar message from leaders of other software companies whose stock prices have plummeted due to concerns about SaaSpocalypse.
Dan Rogers, CEO of work management company Asana, previously told Business Insider that his company’s software will help companies manage AI agents, increasing demand for its software. Asana stock is down 51% since the beginning of the year.
“The losers are still out there.”
Investors in Atlassian, Twilio, and Five9 appear to have bought into the pro-AI argument.
“All three cited AI adoption as a reason why enterprise customers are entering into larger, longer-term contracts,” Lehman said.
“Atlassian’s AI-powered services products have generated more than $1 billion in annual revenue. Twilio’s existing customers are spending more, not less. This is a meaningful shift from the hopeless assumption that AI will cannibalize SaaS spending,” he added.
These three companies have ignored some of SaaSpocalypse’s concerns for now, but they represent only a small portion of the software market.
Investors are watching Salesforce and other software companies, whose shares have fallen about 30% since the beginning of the year, to report earnings later this month or next.
“The fear of SaaSpocalypse wasn’t really about the entire sector disappearing, but about a brutal division between winners and losers,” Lehman said.
“Last night showed us some of the winners, but there are still losers.”