The SaaS apocalypse started in October
There's been talk of a SaaS apocalypse for most of this year: the idea that AI is going to kill off subscription software. People mostly judge that by stock prices, and going by those it came and went. The average software stock fell 27% between January and April and had won almost all of it back by late September.
That only tells you how investors feel about big public companies, though. Stripe's benchmarking data shows real revenue across about 181,000 subscription businesses. It doesn't say much about the very biggest companies, but it's a broad cross-section of everyone else.
February, while the stocks were falling, was the best month for growth in that data. The apocalypse shows up in October: across the 48 peer groups over $100k ARR, revenue at the median company grew 0.20% in September, then shrank 0.41% the month after.
October is the lowest point in the data
The median company had dipped below zero in December and again in July, and both times it was back up a month later. In October it went lower, and the fastest growers slowed too: the top quartile dropped from 5.94% a month to 3.18%, well below its previous low of 4.50%.
Most peer groups flipped in a month
Only 4 of the 48 groups were shrinking in September, when 39 were growing. In October that went up to 29, which left 14 still growing. The rest were flat.
People aren't cancelling more
Customer churn fell in October, from 7.45% to 7.24%. Net revenue churn rose by only a third of a point. Lifetime value is up in 41 of 48 groups over the year, by 9.8% at the median, which I'd guess is down to price rises. So existing customers look fine, and I think the slowdown is mostly fewer people signing up.
Only companies over $5M ARR are still growing
Every size band fell in October, and only the biggest one Stripe shows, over $5M ARR, is still above zero. I've left out under $100k because its median is exactly zero every month.
Consumer swings hardest
Companies selling to consumers (B2C) dipped in December and bounced back in January. They fell again in October, and they're now the lowest of the three.
Find your peer group
Why October?
Stripe's data shows when this started but not why, and I don't know why it all landed in one month. Most of the ideas below would play out slowly, which doesn't really fit a drop this sudden.
AI has made software cheap to build, so every niche is probably more crowded. Each company gets a smaller share of new customers, while the ones it already has stay put.
If peer groups keep gaining companies while their growth falls, this is probably the main cause. I'd need to save a snapshot of the data each month to see that.
Maybe the next thing people pay for is ChatGPT or Claude instead of another niche tool. I can't separate this from the crowding above.
If so, AI companies' revenue should be rising while everyone else's falls, but Stripe doesn't split them out.
If people ask an AI what to buy instead of searching, cheap products that people buy without talking to sales should suffer most. That only half fits: cheap self-serve products slowed more at the median, but the top quartile fell by a similar share at every price.
You can watch this yourself by comparing cheap and expensive peer groups above over the next few months.
If companies were paying for fewer staff logins, software sold to businesses (B2B) would get hit first. Consumer software fell further, so I doubt this is it.
December fell just as sharply and bounced straight back. Stripe's November figure also overlaps almost entirely with October, so all of this is close to one reading. ProfitWell sees a two-week dip in new sales every October, and Stripe only shows one October, so I can't tell if this is the same thing. A change in how Stripe measures could look like this too.
Stripe's next reading should tell us. If it bounces the way January did, I'm wrong about October.
What I think
The investors who sold off earlier this year look right to me, about eight months early. I can't prove why, but I'd wager it's because anyone can now build software, so there are more products going after the same buyers and new customers are harder to win.
This only covers subscriptions on Stripe Billing, so AI products that bill by usage may be missing. Headline figures average 48 of Stripe's 85 peer groups, the ones over $100k ARR, weighted by company count. Download the data