I think old man Padley is just trying to keep up with us cool kids @Bear77.

I've just coined SaaSy-Pop! It's when the share prices of all your SaaS businesses burst at the same time because some prick on the internet says SaaSpocalypse.

Ha! @Slomo SaaSy-Pop, that could really take off.

Really nails the Saas zeitgeist.

An interesting take from MPC Markets - the Saas selloff caused by a "Hallucination Loop" : "The DeepSeek moment was the opening chapter. The SaaS selloff of February 2026 is the sequel — and it follows an almost identical script: an AI product release triggers a social media firestorm, sentiment algorithms flag extreme bearishness, algorithmic trading systems respond to those signals, selling begets selling, and the price move is then reported as news, which is ingested as fresh signal, starting the cycle again."

https://mosaic.mpcmarkets.com.au/content/saas-sell-off-triggered-by-ai-lying-to-itself-and-you?utm_content=400386500&utm_medium=social&utm_source=twitter&hss_channel=tw-1652810232358408193

I remember being rejected for an interview at Atlassian once. They had a set of technical screening questions I needed to answer with stuff about SQL, programming etc...

Not sure what went wrong with my answers though. But I guess their screening aren't doing favours too!

And surely they would not give me a question sheet if my CV was not the right fit?

Interesting take on the tech stock rout from Ron Shamgar, “The Ozempic moment for SaaS”

"We believe AI will only increase demand for SaaS and make these companies MORE profitable!

Just like the liberation day scare - ALL the experts were wrong on Tariffs"

https://tamim.com.au/stock-insight/the-ozempic-moment-for-saas/

I'm replying to myself here. Atlassian just issued their quarterly results and their fundamentals remain very healthy, I'm glad to say, yet shares are down 6% today and 47% in the past six months.

I thought it might be useful to post the strong rebuttal of the 'soffware is dead' meme from the Atlassian CEO in the shareholder letter:

We had a fantastic Q2. We’re building a bloody great business.

I’m convinced AI is great for Atlassian. Others think software is dead.

In this environment, it seems that noise swamps signal, nuance gets lost.

So this quarter I’m going to give you straight signal. The Q2 facts that make me bullish. And let our customers do the talking.

1. Revenue grew 23% YoY to $1.6 billion. Cloud revenue grew 26% YoY to $1.1 billion - our first ever $1 billion+ cloud quarter.

2. RPO up 44% YoY to $3.8 billion, continuing to accelerate - reflecting enterprise adoption and long-term customer commitments to us as a strategic platform

3. Rovo sailed past 5 million MAU. Teamwork Graph now well past 100 billion+ objects & connections - our transformation continues to deliver for our customers’ workflows, with record agent & token use

4. Record number of $1 million+ ACV deals, up nearly 2x YoY. 600+ customers with >$1 million of ARR, up almost 40% YoY - our enterprise transformation is delivering, with us becoming an ever-more strategic partner to customers

5. Cloud net revenue retention rate (NRR) is 120%+, ticking up for the third consecutive quarter - customers are expanding use of our enterprise AI platform with more users, apps, and upgrades

6. Over 350,000 customers, including 80% of the Fortune 500 and 60% of the Forbes AI 50 - with 50% of our users in finance, HR, marketing, ops, and other non-technical teams

7. Teamwork Collection, our primary AI monetization, passed 1 million seats and 1,000 customers - exceeding expectations, consolidating tools, and expanding seat counts by 10%+ over their standalone app footprint

8. Service Collection launched Customer Service Management and passed 65,000 customers, including half of the Fortune 500 - while our enterprise business grew 60% YoY in Q2. 

9. Software Collection launched, DX joined the team, and had a record Q2 - customers are choosing us for their AI-native software development lifecycle

10. Accelerating our pace of buybacks, plans for H2 up ~2-3X vs H1 - we believe our shares are significantly undervalued. We’re using our strong free cash flow to opportunistically repurchase our stock.

One thread to the sell down has been that the AI assistants will reduce the number of seats so therefore SaaS seat based revenue will reduce.

Let's assume that that the number of 'human seats' will reduce. But perhaps that doesn't mean the revenue will reduce.

I haven't seen any talk of the amount of work reducing - just what/who is doing it. We are moving from human at the keyboard to human in the loop.

I saw a WTC slide that illustrated this.

A key point here is that WTC are providing the AI assistants. The customer can reduce their workforce for the same amount of output. It makes sense that WTC can justify growing revenue because the customers human resource cost has reduced. WTC seem to be front-runners here because they recently changed their pricing model to transaction based pricing instead of seat based.

Perhaps then the SaaS companies that continue to do well will have strong moats (eg high switching costs, strong network) and transaction pricing rather than seat pricing. Maybe a good test of their moats is the ability to switch pricing models. Better still if they provide the AI Assistants rather than allowing the customer to explore with with other companies like OpenAI, Anthropic or Google exposing them to loss of control. There is certainly credible evidence that smaller, task specific AI models/agents produce better outcomes that the LLMs. This means the SaaS companies can provide the AI agents that work best with their products.

Just yesterday ANZ Bank announced their use of Salesforce Agentic AI platform (https://www.itnews.com.au/news/anz-deploys-agentforce-to-supercharge-new-crm-system-623404. "Agentforce will elevate what staff can do with the CRM system, from “simply accessing information” to automating tasks and streamlining workflows. "

On the P/E valuation front. I agree with the many comments here of the silly (and some cases still high) P/Es. After the dust settles where will investors want to put their money? If the growth persists in the strong, 'moaty' SaaS providers, will investors return or look elsewhere?

"Perhaps then the SaaS companies that continue to do well will have strong moats (eg high switching costs, strong network) and transaction pricing rather than seat pricing. Maybe a good test of their moats is the ability to switch pricing models."

@Scott I strongly agree with this, and that's why monitoring the following for $WTC is key:

• Churn % trend
• Evidence that LGFFs, coming up for renewal, are confirmed to have switched to the new commercial model
• Evidence of new signings of major customers, and minor ones, for that matter
• Ongoing coverage in the trade press - although, recognise the inevitable short term noise as a result of changing the model

For a while at least, revenue growth is not the key indicator. One reason is that, if the switch in commercial model has "juiced" the revenue, then a short benefit here could be a false positive.

I think it is also important to scan wider than what $WTC are telling us. The message will be managed. There is no question in my mind. Of course, I will forensically parse every word and statement from management. I say this despite the fact that I believe they have been very clear and candid in what they are doing with AI, the kinds of benefits to customers (use cases) they expect, and why it drives the new commercial model, so that $WTC can better share in the significant labour cost reductions that their customers will very likely enjoy. (Declining seats, so need to decouple.)

So What?

The "AI-kills-Software" thesis will, in my strong view, have an enduring negative impact on the valuation multiples of $WTC and other SaaS companies. On its own for $WTC, that has wiped out about 3% of my ASX portfolio value. And yet, even now, $WTC is on a Fwd FY26 P/E multiple of 47x. That's still a highly valued stock, by any reasonable ASX or global comparison.

I think this point has been well made by the likes of @Solvetheriddle , @Wini and @Strawman and several others.

As an investor, there is absolutely no point in looking back to when the multiple was 100x or more, other than to check that I understood the risk I was taking by holding such a highly rated stock. (I did)

All that matters is the future. What do I think will happen? What are the likely scenarios, given that the future is defintely now more explicitly uncertain. What do I believe? And what risk am I prepared to take?

My Beliefs (Which Might be Wrong)

I do believe that the SaaS firms that integrate AI capabilities well and can deliver outstanding value to their customers with an acceptable commercial model will succeed over the long term. Others here have articulated the arguments for this, so I need not repeat.

Therefore, notwithstanding my material paper losses (when judged over the last 12 months) I am happy to continue hold a basket of what I consider are the top quality SaaS firms. Of course, despite these material losses, $WTC remains one of the strongest wealth generators for me over the last 6-7 years.

I have not yet decided what weighting I am prepared to hold, because I have not yet assessed how this will play out in the medium term.

For example, does $WTC eventually end up on a P/E of 25 (still decent!), in which case there is another c. 50% to fall. Or, does the strength of its AI adoption and ability to deliver value to customers see it thrive, and the P/E return to 50, 55 or 60 over time? The market's view - or rather views - of this might swing wildly over the coming years, or equally there might be a reasonably steady evolution to the "new reality".

Both of those outcomes are, in my view, entirely plausible even though they have very different implications for my future returns.

I don't know how this is all going to play out, and I am not sure that anybody does. But one thing is for sure, while I will try to learn lessons from any previous decisions I have taken, I am going to be sure to spend all my time thinking about how things evolve from here, and will work hard to put out of my mind any anchoring on historical prices and mulitples.

As others here have said, the losses are material, but they are only on paper relative to equally paper-based profits! And mine are, I imagine, as high as any. But yesterday I followed the advice of @Solvetheriddle. No, I didn't sink into a nice red wine or several beers (although I finished the evening with a nice Japanese single malt). Instead, I packed the family off for a day on North Stradbroke Island. I spent hours walking in native bush, seeing dolphins, sea turtles, kangaroos and all manner of strange insects. I sat under a beach shade and read a good book and enjoyed some of the most stunning coastal views in the world. And for a day, I took an almost complete break from the markets and my portfolio.

Happy weekend all!

Some conversing with the 'AI'

Noted Cathie managers - ARKB 'etf' ( bitcoin etf ) July 2025 traded at $40 Febuary 2026 trtades at $22

Feb 7, 2026

In this special video, ARK Invest CEO/CIO Cathie Wood addresses the recent volatility shaking global markets and the narratives driving investor anxiety. From growing fears of an AI bubble and accelerating “SaaSpocalypse” reshaping traditional software models, to renewed questions around Bitcoin volatility and concerns about a broader stock market crash, Cathie breaks down what’s signal versus noise.

Key Points:

00:00:00 Intro + what’s driving markets right now

00:02:45 AI stack & winners: hyperscalers, capex, chips

00:14:41 Is AI a bubble? Capex cycles + valuation context

00:21:55 Crypto reset: Bitcoin vs gold + institutional angle

00:33:40 Macro & liquidity: Fed/Treasury signals, rates, gold

00:40:00 Deflation + labor/productivity outlook, closing thoughts

https://youtu.be/DqAstqD7Pzc?si=x3RJtLxDtgq5oLKH

@Solvetheriddle I've been thinking about this too. And I'm speculating like everyone else, but here goes.

Your question partly led to me to the view that multiples won't or can't recover quickly. This isn't a 6-12 month cyclical rotation. But is it secular?

On the Bull Case, let's say that we see 2 or 3 years time pass by, during which there is no evidence of disruption to SaaS revenue growth or margins. In that case, I think P/Es evolve back gradually to the "pre-disturbed state" ... gradually, as "moats" and "offensive plays" are manifestly shown to "work", company by company.

Bear case ... the world has changed and multiples reflect it.

The point is that I think the market now has to "see the money" and only then does it make up its mind on terminal P/Es, (or continuing value in DCFs). The "AI Disrupts Software" narrative is so strong, that I think you need evidence and not senitment to move it. The Market is "shooting first and asking questions later", whereas up until recently, it bought the narrative of moats, margin expansion, sticky customers/stable churn, value of data, yada yada - that was an act of prediction too, but it lasted so long maybe we all started to believe it.

We are already seeing this in the increasing cost of capital for software (bond and debt pricing).

But it won't be a one-size-fits-all. It will be case-by-case, vertical by vertical, business by business. So, for example, if there is a SaaS firm that quarter-by-quarter sustains revenue growth and maybe even manages to expand margins, then presumably it gets rewarded because ... well it's worth it.

Conversely, a firm that has slowing revenue growth and/or contracting margins will remain crushed. And in this case, I think that will be judged on an immediate and continuing basis. Confirmation bias, if you like.

It will come down to performance (as it should, perhaps). So I think the stakes have never been higher for CEO's to deliver. There will be limited appetite for stories like "... we forecast H2 will be stronger than H1" unless there is a verifiable basis.

Maybe the AI-disruption susceptibility chart you posted earlier today, wont be a forward looking prediction. Perhaps in 2027, it might be populated with real numbers and real rankings on what's actually happening. Short term performance will be viewed throught the lens of AI-impact, and multiples adjusted accordingly.

... just thinking out loud.

@mikebrisy yes i think you are right, we have to adjust to the new paradigm and not be mesmerised by old SP highs etc. They may be irrelevant. What counts is the ability to adjust and grow. We can take our positions now, but we should be aware that your initial views may prove incorrect, and we will have to change them. Something I have a poor record of personally, so this is a note to self. i do feel the shoot everyone is going too far, but pinpointing the winners, well thats a different game at this stage.

@Solvetheriddle brilliant point, I've been mulling over this software carnage for a while now, like most people wondering if there are opportunities here.

But I've come to a view similar to yours, this reaction is far less the market questioning the operational survivability of these software businesses, but a savage re-pricing of the massive premium they received to industrial peers based on the significant duration premium they received with the belief of very sticky revenues.

I've remarked a few times how tech/growth investors have been like the proverbial frog in the boiling pot of water when it comes to valuations. The main reason for this is tech/growth valuations slowly moved up the P&L statement over the last decade or so. From a well earned premium on statutory earnings, to adjusted EBITDA which was inflated to remove share based compensation and capitalised R&D to finally revenue multiples which completely ignored cost bases and the underlying economics of a business altogether.

As that happened investors overlooked how inflated valuations were getting back at the basic statutory earnings level. I ventured out of my microcap cave the other day to look at TNE for the first time in a long time and the inflation of it's P/E is remarkable. In the years up to Covid it traded in a tight range from 35-40x earnings. Ignoring FY20 with Covid impacts the P/E multiple has expanded to 38x, 48x, 66x, 91x in each year. Yes, the business has pivoted well to cloud distribution in that time and there is good evidence of UK traction, but still that sort of P/E inflation is crazy.

With so much value being put in the long term cashflows of these businesses, this reaction to AI threats feels perfectly rational to me. The size and speed of the move is swept up with sentiment and momentum which I think will fool people into thinking it will mean revert like most short term swings do, but if AI can drastically reduce competitive moats and pricing power, why should the average tech company earn anything more than the premium they used to get over industrial peers from ~10 years ago?

To stay on my high horse for a moment longer, the AI threat may also be forcing investors to stop using lazy revenue multiples and actually take a look at the operating businesses under the "tech" label. And a lot of them are ugly. Growth and valuation momentum have covered a lot of sins but a lot of these businesses are structurally unprofitable if you can't confidently model out strong growth moving forward.

"The main reason for this is tech/growth valuations slowly moved up the P&L statement over the last decade or so." That is phrased brilliantly@Wini.

Side note - Is that what people mean when they talk about being a bottom up investor? Start at the bottom line, if that's no good just keep moving up.

@Lewis "torture the data until it confesses" core competency in finance. lol

A year is a long time in investing!

In my view not really, if you think in the long term and have patience for your great company to keep building on it's moats...

This chart from today was a great reminder of how quickly sentiment can change. I'm paraphrasing...but a year ago lots of folks thought Google was in deep trouble and the share price was falling towards $140. Search was going to die as AI replaced it. Their ad business was going to die as AI took over. They spent too much. They'd lost their edge. Tesla was going to beat Waymo. Etc, etc, etc.

Go forward a year and now Google is an innovator and the share price isn't far off it's all time high . They've designed their own really good chips, TPU's, that are driving a great, fast and free new search experience for the customer. Advertisers would be crazy not to still be on Google. Waymo might beat Tesla self driving now. Other companies will want to use Google cloud even more, because it's lower cost. Etc, etc, etc.

I don't own Google so no bias here. Just a gentle reminder of how the "experts" get it wrong even in a short space of time, on something so well known and closely followed as Google.

Maybe it's different this time with AI. Or maybe as @mikebrisy's funny from today on the carwash question highlights, good software companies and people will still have a role to play...

Yes I think we're close to a bottom/reversal, with what looked like capitulation selling yesterday in the big techs. Some wise words from a software engineer on 'X' :

Great perspective. I wonder if a way the problem can be framed is “what companies would be untouchable even if competitors had unlimited unpaid engineers”. That seems to be basically what AI offers. The barrier to entry needs to be something other than a technical one. For example access to data or a 2 sided marketplace