SaaS Cashes In on Its Own Apocalypse

AI technology has been expected to shrink the software industry by reducing the number of employees required to operate a SaaS company, as well as the number of customers willing to pay for one when they can build the tool themselves. However, three of the largest enterprise software companies – Atlassian, Datadog, and ServiceNow – are using AI to improve their own businesses and create new, high-growth product lines that customers pay for directly.

Atlassian reported a 23% increase in subscription annual recurring revenue (ARR) to $6.6 billion in its fiscal fourth quarter, with remaining performance obligations climbing 44% to $4.8 billion. Atlassian's AI product, Rovo, is used by over 80% of the Fortune 500 and has helped customers save millions of hours monthly. Customers who adopt Rovo grow their ARR at more than twice the rate of those who don't.

Datadog reported revenue of $1.12 billion, a 36% increase year over year, with the use of AI agents through the Model Context Protocol accelerating sharply. Datadog launched Bits AI, an autonomous agent that detects, investigates, and remediates technical incidents on its own, which has already attracted more than 1,000 paying customers. ServiceNow also reported using AI to generate over $1 billion in annual contract value, with agentic AI deployments in production increasing ninefold in just nine months.

The common thread across all three companies is the use of AI in two ways: improving internal efficiency and creating new, revenue-generating products that customers pay for separately. This is a departure from early predictions that AI would primarily replace software rather than strengthen the businesses selling it. A PYMNTS Intelligence report found that SaaS firms show the strongest appetite for AI experimentation, with half of SaaS executives likely to fund experimental AI projects.