So the past quarter we've seen a lot of SaaS names start accelerating revenue, despite fears on seat compression or AI replacement.
I think the market is currently experiencing a seismic shift towards **contextual** SaaS. More specifically - SaaS companies that grant contextual agency to the user, such that they can do more. SaaS companies that permeate through all of customer's data, such that they have more knowledge.
The only thing that separates AI Slop from Effective AI is context and knowledge. The more specialised knowledge an LLM has, the more ability it has to give accurate solutions, reduce token usage and reduce hallucinations.
Figma is a great example of this, their revenue accelerated to 46% YoY growth. Atlassian cloud revenue accelerated to 29%. Datadog increased to 32%.
I think in the coming months we're going to see a significant rotation back into select SaaS names - specifically with this type of proprietary enterprise context. It will serve as an indefensible moat. I think the gains from AI consumption pricing will far outweigh any potential seat compression (if any).
This also explains why Bill Ackman rotated into Microsoft earlier today too, and was part of his thesis.