SaaSCron: SaaS Business

The SaaS industry: how it is structured, how big it is and what is changing it

2026-10-31T12:00:00-04:00

You need a picture of the SaaS industry for a pitch deck, a job move or the market section of a plan, and most of what you find mixes forecasts, rankings and opinions with no dates attached. What helps is a structure you can reuse and a few figures that carry their source and date. If SaaS itself is new to you, start with What is SaaS?.

The SaaS industry is the set of companies that sell software as a hosted subscription, plus the platforms they build on and the marketplaces they sell through. Its parts earn money in different ways, so an average across all of them says little about any one company. For what makes a single company a SaaS company, see B2B SaaS companies.

The industry in plain terms

Think of a shopping mall. Department stores sell a bit of everything to everyone, specialist shops sell to one kind of customer, the landlord supplies power and floor space, and the directory at the entrance sends visitors to shops. All of it is retail, but each earns money in a different way.

The SaaS industry has the same four parts:

Part	What it sells	Typical buyer	Usual way of charging
Horizontal SaaS	One business function for every industry: CRM, email, HR, accounting	Any company	Subscriptions, often per seat
Vertical SaaS	Software for one industry, such as dental clinics or builders	Businesses in that industry	Subscriptions, often plus payments or other services
Infrastructure and platforms	What SaaS products run on: cloud computing, databases, delivery networks	Software builders	Usage
Marketplaces	App stores and listings inside larger platforms	Vendors who sell through them	A share of each sale or a listing fee

The table is a map, not a ranking. One company can sit in more than one row, as when a CRM vendor runs an app marketplace. For how the first two rows differ in revenue, see Vertical SaaS vs horizontal SaaS.

Dated figures: size and valuation

The figures below change with each new edition of their source. Each one carries its source and date, so you can replace it when a newer edition appears.

Figure	Value	Source and date
Worldwide end-user spending on SaaS, 2024	$250,804 million, up 18.1%	Gartner forecast, November 19, 2024
Worldwide end-user spending on SaaS, 2025	$299,071 million, up 19.2%	Gartner forecast, November 19, 2024
Worldwide public cloud spending, all services, 2025	$723,421 million	Gartner forecast, November 19, 2024
SaaS spending in Australia, 2026	Almost A$16.4 billion, up 13.8%	Gartner forecast, May 11, 2026
Median EV/TTM revenue multiple, SEG SaaS Index	5.7x in 2Q25, 3.2x in 2Q26	Software Equity Group, 2Q26 report

Gartner calls SaaS “cloud application services” in its tables. The 2025 values are forecasts made in late 2024, not measured results.

Example: reading the Gartner table and the SEG multiple.

SaaS share of all public cloud spending in 2025: $299,071M / $723,421M = 41.3%.
Growth from 2024 to 2025 in dollars: $299,071M - $250,804M = $48,267M.
Growth as a rate: $48,267M / $250,804M = 19.2%, which matches Gartner’s growth column.
Now a hypothetical company with $50 million in trailing revenue, valued at the index median. At 5.7x it is worth 50 x 5.7 = $285 million. At 3.2x it is worth 50 x 3.2 = $160 million.
Change in value: ($285M - $160M) / $285M = 43.9% lower, with no change in the company’s own revenue.

Step 5 is the reason to keep market data in a dated box. A valuation built on last year’s multiple can be wrong by almost half without the business changing at all. For how multiples are calculated, see SaaS valuation multiples.

How the industry measures itself

Many public and private SaaS companies report the same handful of numbers, which makes them comparable:

ARR (annual recurring revenue): the yearly value of subscriptions in force.
Net revenue retention: this year’s revenue from last year’s customers, as a share of last year’s revenue from them.
Gross margin: the share of revenue left after the cost of running the service.
Growth plus margin: some investors add the revenue growth rate to the profit margin and compare the sum with 40%, a convention often called the Rule of 40.

The numbers matter more than the labels. Two companies with the same ARR can be worth very different amounts if one keeps 120% of last year’s revenue and the other keeps 90%.

The forces changing the industry

Buyers counting seats. Gartner’s May 2026 forecast for Australia says SaaS growth there is slowing “with organizations prioritizing license optimization, slower seat growth and tighter application portfolio scrutiny.” Fewer new seats per customer means growth has to come from price, new products or new customers.

Usage meters next to seats. Infrastructure has long charged by use. Application vendors are adding usage meters too, often for AI features, alongside per-seat plans. Salesforce sells Agentforce actions through Flex Credits, and GitLab’s Premium plan includes $12 of GitLab Credits per user each month for AI features.

Platforms and marketplaces. Large vendors open their products to other companies’ apps and take a share of what sells through them. A small vendor can reach customers through a marketplace, at the price of the platform’s fee and rules.

AI agents and the per-seat model

The debate in 2026 is whether AI agents reduce the number of seats customers need. Gartner said on July 1, 2026 that up to $234 billion of enterprise application spending is exposed to “agentic arbitrage” by 2030, roughly 20% of enterprise application SaaS spending. The same release says “SaaS will not be destroyed; it will emerge in a different form.” Treat both lines as one firm’s forecast, dated, and check the next filings of the vendors you care about.

Common mistakes

Quoting a forecast as a fact. Gartner’s 2025 figure was published in November 2024 as a forecast. Why it happens: the number looks precise. Instead: write “forecast” and the publication date next to it.
Mixing figures from different editions. Research firms can revise categories between releases, so a 2024 table and a 2026 table may not measure the same thing. Why it happens: search results show both. Instead: compare years only within one release.
Averaging the whole industry. A vertical SaaS company with payments revenue and an infrastructure vendor billing by usage do not share one “typical” margin or multiple. Why it happens: one industry figure is easier to cite. Instead: compare a company with peers in its own row of the map.
Valuing a company on an old multiple. In the example, the same revenue was worth $285 million at one median and $160 million at the next. Why it happens: the last number you saw sticks. Instead: use the latest index edition and state its quarter.

Sources

Gartner, Gartner Forecasts Worldwide Public Cloud End-User Spending to Total $723 Billion in 2025, November 19, 2024, checked October 2026.
Gartner, Gartner Forecasts Australian Organizations Will Spend More Than A$33 Billion on Public Cloud in 2026, May 11, 2026, checked October 2026.
Gartner, Gartner Says $234 Billion in Enterprise Application Software Spend Is at Risk from Agentic AI, July 1, 2026, checked October 2026.
Software Equity Group, Quarterly SaaS report, 2Q26, checked October 2026.
Salesforce, Agentforce pricing, and GitLab, Pricing, checked October 2026.

In three sentences

The SaaS industry has four parts, horizontal, vertical, infrastructure and marketplaces, and each earns money differently, so compare companies within their own part. Gartner’s November 2024 forecast put SaaS at $299,071 million of 2025 spending, 41.3% of public cloud, while SEG’s median revenue multiple fell from 5.7x to 3.2x between mid-2025 and mid-2026. Keep every market figure in a dated box with its source, because the same revenue can be valued 43.9% lower one year later.

B2C vs B2B SaaS: business models, pricing and growth compared

2026-10-25T12:00:00-04:00

You are deciding whether your product should sell to consumers or to companies, or you are comparing your churn with a benchmark and the numbers make no sense. Both problems have the same cause: B2C and B2B SaaS run on different economics. B2C (business to consumer) SaaS sells subscriptions to individuals and households. B2B (business to business) SaaS sells them to organizations.

The split decides your price, how you acquire customers, how fast they leave and what support you owe them. This guide compares the two side by side, works the unit economics through for each, looks at public companies that report both kinds of customer, and explains B2B2C. For the basics of the delivery model itself, see What is SaaS?.

B2C and B2B SaaS in plain terms

Think of a coffee cart and an office caterer. The cart sells thousands of cheap cups to people walking by. Each sale is small, takes seconds, and the customer may never come back. The caterer signs a contract with a company to feed 200 staff every day. Winning that contract takes weeks of meetings, but it pays every month and is hard to walk away from.

B2C SaaS is the coffee cart: low prices, many buyers, fast decisions, high turnover. B2B SaaS is the caterer: higher prices, fewer buyers, slow decisions, longer relationships.

Microsoft’s Azure Architecture Center states the split plainly: “SaaS products are sold either to businesses in a business-to-business (B2B) model or directly to consumers in a business-to-consumer (B2C) model.” Its tenancy guidance shows the split reaches the architecture too. In B2B, one customer organization is usually one tenant with many users. In B2C, a tenant may be one person or a family, and personal data and data-sovereignty laws weigh more.

Side by side

The table below sets out the usual pattern. Individual products break these rules, so treat each row as a question to ask about your own business, not a law.

Dimension	B2C SaaS	B2B SaaS
Who pays	One person or household, with their own card	An organization, through a budget owner
Who decides	The same person, often in minutes	Several people: user, manager, IT, security, finance
Price point	Low monthly prices	Higher prices, often per seat or per account
Billing	Card, monthly or annual, self-serve	Card for small teams; invoices and contracts for larger ones
Acquisition	App stores, search, content, word of mouth, free tiers	Sales teams, partners, self-serve for small teams
Churn	High monthly churn is common	Lower churn, often tied to annual contracts
Expansion	Upgrades to a higher plan, family plans	More seats, more teams, higher tiers
Support	Help center and email, at low cost per user	Account managers, onboarding, uptime commitments
What the tenant is	A person or a family	A company and its employees

The economics, worked side by side

The two models can be equally healthy with very different numbers. The arithmetic shows why benchmarks from one side mislead the other.

Example: two hypothetical products, both at an 80% gross margin.

Input or result	B2C product	B2B product
Price	$12 per month	$600 per month per account
Monthly churn	6%	1.5%
Acquisition cost (CAC)	$40 per subscriber	$9,000 per account
Monthly gross profit	$12 x 80% = $9.60	$600 x 80% = $480
Lifetime value (LTV)	$9.60 / 0.06 = $160	$480 / 0.015 = $32,000
LTV:CAC	$160 / $40 = 4.0	$32,000 / $9,000 = 3.6
CAC payback	$40 / $9.60 = 4.2 months	$9,000 / $480 = 18.8 months

Both ratios look healthy. The difference is in volume and speed. To reach $1,000,000 in annual recurring revenue:

B2C: $1,000,000 / ($12 x 12) = 6,944 subscribers.
B2B: $1,000,000 / ($600 x 12) = 139 accounts.

Now count the customers you lose each month at that size. The B2C product loses 6,944 x 6% = 417 subscribers a month, so it must win 417 new ones just to stand still. The B2B product loses 139 x 1.5% = 2.1 accounts a month.

A 6% monthly churn rate would sink the B2B product. In the B2C product it is survivable, because each subscriber costs $40 to win and repays it in about four months. For the formulas behind these rows, see LTV in SaaS.

Companies that report both kinds of customer

Public filings show how a company that serves both splits the numbers.

Zoom separates customers by how they buy, not by who they are. In its fourth-quarter fiscal 2026 results (published February 25, 2026), “Enterprise” customers are business units engaged by Zoom’s direct sales team, resellers or strategic partners. “Online” customers are all other customers that subscribe directly through its website. The two groups behave differently:

Enterprise revenue was $757.3 million of $1,247.0 million total in the quarter, or $757.3 / $1,247.0 = 60.7%.
Online average monthly churn was 2.9% in the quarter.
Enterprise customers had a trailing 12-month net dollar expansion rate of 98%.

Zoom reports churn for the self-serve side and expansion for the sales-led side. Each side gets the metric that explains it.

Duolingo is a consumer subscription business. Its second-quarter 2026 shareholder letter reports 12.7 million paid subscribers at June 30, 2026 and 140.6 million monthly active users in the quarter. That is 12.7 / 140.6 = 9.0% of monthly users paying, a ratio Duolingo does not state itself. Subscription revenue was $258.0 million in the quarter. The free tier carries the acquisition work that a sales team does in B2B.

For how self-serve sign-up and free tiers replace sales in software, see product-led growth. For public B2B examples, see B2B SaaS companies.

B2B2C: selling to a business that serves consumers

B2B2C (business to business to consumer) sits between the two. You sell to a business, and that business offers your product to its own consumers.

Example: a hypothetical appointment-booking product sold to dental clinics. Each clinic pays $300 a month and is the tenant. Its patients use the booking page and never pay you.

50 clinics x $300 = $15,000 a month.
If each clinic has 1,500 patients who book online, the product serves 50 x 1,500 = 75,000 consumer users.

Your contract, invoice and churn sit with 50 businesses. Your support volume, privacy duties and app ratings sit with 75,000 people. Plan for both: sell like B2B, design and support like B2C.

Common mistakes

Comparing your churn with the other model’s benchmark. A 3% monthly churn rate can be strong for a consumer app and alarming for an enterprise product. Why it happens: published churn figures rarely say which model they describe. Instead: compare only with figures from the same model, and label the period.
Pricing a B2C product like B2B. A consumer will not wait for a quote or a demo. Why it happens: founders copy the pricing pages of the B2B tools they use at work. Instead: show the price, take a card and let people start without talking to anyone.
Selling to companies with only a self-serve funnel. Larger buyers need security reviews, invoices and contracts. Why it happens: self-serve works for small teams, so it seems enough. Instead: add an invoice option and a path to a human when deal size justifies it.
Treating B2B2C users as someone else’s problem. Consumers judge the product directly, and their complaints reach your customer. Why it happens: the business pays, so it feels like the only customer. Instead: measure consumer experience and support load per tenant.

Sources

Microsoft Learn, SaaS and multitenant solution architecture (December 16, 2025) and Tenancy models for a multitenant solution, checked October 2026.
Zoom Communications, fourth quarter and fiscal year 2026 results, Form 8-K exhibit 99.1, February 25, 2026.
Duolingo, Q2 2026 shareholder letter, Form 8-K exhibit, 2026.

In three sentences

B2C SaaS sells cheap subscriptions to many individuals who decide fast and leave fast, while B2B SaaS sells larger contracts to organizations that decide slowly and stay longer. Two products with similar LTV:CAC ratios can need 6,944 subscribers or 139 accounts to reach $1 million in annual revenue, so benchmarks from one model mislead the other. Companies that serve both, such as Zoom, report each side with its own metrics, and B2B2C products must sell like B2B while supporting consumers like B2C.

Enterprise SaaS: what changes when you sell to large companies

2026-10-21T17:00:00-04:00

A company with thousands of employees wants your product, and its first email is not about features. It asks for a SOC 2 report, single sign-on, automatic user provisioning, a data processing agreement and a long security questionnaire. You have to decide whether your SaaS is ready for that buyer, and what it will cost you to get there.

Enterprise SaaS is software sold as a service to large organizations, on their terms: identity managed by their systems, security proven by independent audits, contracts negotiated by lawyers and invoices paid through procurement. The product can be the same one small teams use. What changes is everything around it. If SaaS itself is new to you, start with What is SaaS?.

Enterprise SaaS in plain terms

Think of a sandwich shop. Selling a sandwich to someone walking past takes a menu and a card reader. Catering for a hospital takes the same sandwiches plus allergen sheets, a health inspection certificate, a supplier contract, insurance papers and invoices sent to accounts payable on 60-day terms. The food did not change. The proof did.

Enterprise buyers ask for proof in five areas. Identity: their staff log in with the company account. Security evidence: an outside auditor has checked your controls. Data: they know where it is stored. Contracts: liability, privacy and termination are written down. Procurement: you can be paid by purchase order.

What enterprise buyers ask for

The table maps each common request to what it means and what evidence closes it. It is assembled from the standards and vendor documentation cited in each row.

Request	What it means	Evidence the buyer accepts
Single sign-on (SAML or OpenID Connect)	Staff sign in through the company identity provider, and access ends when HR closes the account	A working connection tested with their identity provider
User provisioning (SCIM)	Accounts are created, updated and removed automatically from the company directory	Support for SCIM, the protocol published as RFC 7644 in September 2015 (RFC 7644)
SOC 2 Type 2 report	An independent CPA firm tested your controls over a period of time	The report itself, plus bridge letters for months after the period
Audit logs	A record of who did what, and when, inside the product	Log export or an API to their security tools
Data residency	Customer data stays in a chosen region	Documented regions and replication rules
Contract and privacy terms	Master agreement, data processing agreement, liability limits	Signed documents after legal review
Procurement	Supplier registration, purchase orders, invoice terms	Your company set up as a vendor in their system

Single sign-on is often the first gate. Some vendors place it only on their top plan. GitHub, for example, lists SAML single sign-on on its Enterprise plan card and not on Team (GitHub pricing, as of October 2026). For you as a buyer, that pattern means a security requirement can move the whole company to a higher tier. For you as a seller, it is a deliberate line between small-team and enterprise pricing, as described in SaaS pricing models.

How a SOC 2 Type 2 report works

SOC 2 is an attestation framework from the American Institute of Certified Public Accountants (AICPA). Microsoft’s compliance documentation explains the two types clearly (Microsoft Learn, SOC 2 Type 2). A Type 2 report evaluates whether controls were designed appropriately and “were operating effectively over a specified time period”. Type 1 audits, the same page says, “don’t look back over a period of performance”. A buyer who wants evidence over time asks for Type 2.

The categories covered are Security, Availability, Processing Integrity, Confidentiality and Privacy. Microsoft’s own Office 365 audit runs on a 12-month period from October 1 to September 30. Reports usually arrive a few months after the period ends, and Microsoft issues quarterly bridge letters, which are its own statements rather than audits, to cover the gap.

Example: the timing a buyer sees, using that October-to-September period.

A buyer reviews you on August 15, 2026.
Your latest Type 2 report covers October 1, 2024 to September 30, 2025.
Time between the end of that period and the review: 10.5 months.
Bridge letters for the quarters ending December, March and June cover the months since.

A buyer sees nearly a year that no auditor has tested yet. Expect the question, and have the bridge letters ready. Microsoft’s page also points buyers to the “User Entity Responsibilities” at the end of its reports. These are the controls the customer must run for the system to meet the standard. Look for the same section in every vendor report you receive. For a related standard with cloud-specific controls, see ISO/IEC 27017 explained.

Data residency follows the same logic of documented commitments. Microsoft’s page states that most Office 365 services let customers choose the region where data is stored, and that Microsoft will not replicate customer data outside the chosen geographic area.

The revenue math of one large customer

Example: a labeled hypothetical. You sell a $15 per seat per month product to 50 small companies with 20 seats each. Then one enterprise signs for 2,000 seats at a negotiated $12.

Small-company ARR: 50 x 20 x $15 x 12 = $180,000.
Enterprise ARR: 2,000 x $12 x 12 = $288,000.
Total ARR: $180,000 + $288,000 = $468,000.
Enterprise share of ARR: $288,000 / $468,000 = 61.5%.
If that one customer leaves at renewal, ARR falls back to $180,000, a drop of 61.5%.

One contract more than doubled the company’s recurring revenue. It also made the company depend on one renewal decision. That is the trade of enterprise SaaS. Bigger contracts bring longer sales cycles, security reviews, custom terms and concentration risk. For how public SaaS companies report revenue at scale, see What is a SaaS company?.

How the sale changes

Selling to a small team often ends with a credit card on a pricing page. An enterprise sale has more people in the room, and each can stop it:

The champion: the team lead who wants your product.
The economic buyer: the executive who owns the budget.
Security: reviews your SOC 2 report, questionnaire answers and architecture.
Legal: negotiates the master agreement and data processing terms.
Procurement: compares vendors, registers you as a supplier and issues the purchase order.

Each step takes time, and the steps rarely run in parallel unless you push for it. Send the security package with the first proposal, not after the champion says yes.

Common mistakes

Treating single sign-on as a later feature. Without it, many large buyers cannot even start a trial under their own rules. Why it happens: small customers never ask for it. Instead: support SAML or OpenID Connect and SCIM before you chase large accounts.
Starting the SOC 2 audit when a buyer asks for it. A Type 2 report needs a period of operation before it exists, so it cannot be produced in a week. Why it happens: the request arrives with a deadline. Instead: start the observation period early, and offer a Type 1 report and bridge letters while it runs.
Signing the enterprise’s paper without reading the liability clause. Uncapped liability or unlimited data breach costs can exceed the contract value many times. Why it happens: the deal feels close and the template looks standard. Instead: have counsel review limits of liability, indemnities and termination rights.
Letting one customer become most of the business. In the example, one contract is 61.5% of ARR. Why it happens: the large deal is easier to celebrate than to plan around. Instead: keep selling to smaller customers and negotiate multi-year terms with the large one.

Sources

Microsoft Learn, SOC 2 Type 2, checked October 2026.
IETF, RFC 7644: System for Cross-domain Identity Management: Protocol, September 2015.
GitHub, Pricing, checked October 2026.

In three sentences

Enterprise SaaS is the same product sold with proof: single sign-on and SCIM provisioning, a SOC 2 Type 2 report, documented data residency, negotiated contracts and procurement-friendly billing. In the example, one 2,000-seat contract at $12 a month adds $288,000 of ARR and becomes 61.5% of the company’s revenue, with matching concentration risk. Build identity and audit evidence before you chase large accounts, send the security package early and keep every contract within limits you can survive.

B2B SaaS companies: examples by segment and what they have in common

2026-10-19T07:00:00-04:00

You are sizing up the B2B SaaS market, for a job search, an investment idea or your own product, and the lists you find mix startups, rumors and private valuations. You want a short list you can check yourself. A B2B SaaS company sells software it hosts and runs to other businesses, usually by subscription or by usage. The most useful way to group these companies is by who buys: every industry, one industry, or engineering teams.

This guide sorts six public companies into those three segments, with revenue from their own filings, and shows what the numbers say about how each one makes money. It uses public companies because their figures are audited and dated; a private company’s revenue claim cannot be checked the same way. For the basics, see What is SaaS?. For the test of what makes a company SaaS in the first place, see What is a SaaS company?.

The three segments in plain terms

Think of the suppliers to a restaurant. One sells pens, payroll services and office chairs to every business on the street. One sells only to restaurants: ovens, menu boards and the till. One sells the electricity and water that everyone else plugs into.

B2B SaaS splits the same way:

Horizontal SaaS sells the same software to every industry: sales, HR, finance.
Vertical SaaS sells to one industry, often with that industry’s payments, rules or workflows built in. For the economics of the two, see Vertical SaaS vs horizontal SaaS.
Infrastructure SaaS sells to engineering and data teams the tools they build and run their own software on, such as monitoring and data platforms. It is often priced by usage.

Six public examples

Figures are from each company’s latest full fiscal year in its results release or annual report, in millions of dollars, checked October 17, 2026. The “recurring line” is the revenue line each company reports that best matches recurring software revenue; the names differ.

Segment	Company	Fiscal year ended	Total revenue	Recurring line, as reported	Share of total
Horizontal	Salesforce	January 31, 2026	$41,525	Subscription and support, $39,388	94.9%
Horizontal	Workday	January 31, 2026	$9,552	Subscription services, $8,833	92.5%
Vertical	Veeva Systems	January 31, 2026	$3,195.3	Subscription, $2,684.2	84.0%
Vertical	Toast	December 31, 2025	$6,153	Subscription services, $936	15.2%
Infrastructure	Snowflake	January 31, 2026	$4,683.9	Product revenue (usage), $4,472.3	95.5%
Infrastructure	Datadog	December 31, 2025	$3,427.2	Not split in the results release	n/a

How four of them describe themselves in their own releases:

Veeva: a provider of “industry cloud solutions for the global life sciences industry”.
Toast: a platform “purpose-built for the entire restaurant community”.
Datadog: “the AI-powered observability and security platform for cloud applications”.
Snowflake: “the AI Data Cloud company”.

Example: the share column is recurring revenue divided by total revenue.

Salesforce: 39,388 / 41,525 = 0.949, or 94.9%.
Workday: 8,833 / 9,552 = 0.925, or 92.5%.
Veeva: 2,684.2 / 3,195.3 = 0.840, or 84.0%.
Toast: 936 / 6,153 = 0.152, or 15.2%.
Snowflake: 4,472.3 / 4,683.9 = 0.955, or 95.5%.

What they have in common, and where they differ

Most of the money recurs. Four of the five companies with a split earn 84% or more of revenue from subscriptions or, in Snowflake’s case, product usage. The remainder sits in each company’s other revenue lines.

A vertical company can earn mostly from financial services. Toast is the outlier. In 2025 it reported financial technology solutions revenue of $5,037 million. That is 5,037 / 6,153 = 81.9% of the total, against 15.2% from subscriptions. The remaining $6,153 - $5,037 - $936 = $180 million comes from its other revenue lines. Software is the way in; financial technology, reported as its own line, is most of the revenue.

Infrastructure is often priced by use. Snowflake says its product revenue is “primarily derived from the consumption of compute, storage, and data transfer resources”, and the company reports a net revenue retention rate of 125% as of January 31, 2026. Datadog counts customers by annual recurring revenue (ARR): 603 customers with ARR of $1 million or more and about 4,310 with $100,000 or more, as of December 31, 2025.

Scale varies widely inside one segment. Salesforce’s revenue is 41,525 / 9,552 = 4.3 times Workday’s, and both are horizontal. Segment says who buys, not how big a company gets.

Fiscal years do not line up. Four of the six close on January 31 and two on December 31, so the periods overlap by only eleven months. Compare growth within one company, not across companies on one date.

Checklist: reading a B2B SaaS company’s numbers

Find the fiscal year end and write it next to every figure.
Find revenue by type in the results release or annual report.
Divide the recurring line by total revenue.
Check whether the recurring line is a subscription or usage that can shrink.
Look for a retention metric and read how the company defines it.
Note any large non-software line, such as financial technology or hardware.

Common mistakes

Ranking companies from “fastest growing” lists. Such lists often mix audited figures with private estimates. Why it happens: they are the first search results. Instead: use audited revenue from a filing or results release, with the fiscal year named.
Assuming every B2B SaaS company earns mostly subscriptions. Toast earns 15.2% of revenue from subscriptions and 81.9% from financial technology. Why it happens: “SaaS” sounds like subscriptions only. Instead: read the revenue lines before you call a business model.
Treating usage revenue like a fixed subscription. Revenue that follows consumption can fall when customers use less, even if nobody cancels. Why it happens: both are called recurring. Instead: check whether the company prices by seat, by contract or by use.
Comparing figures across different fiscal years. A year ending in January and a year ending in December overlap by only eleven months. Why it happens: news stories put the “latest” numbers side by side. Instead: name the period next to every figure, as the table does.

Sources

Salesforce, Inc., fourth quarter fiscal 2026 results, February 25, 2026.
Workday, Inc., Form 10-K for fiscal 2026.
Veeva Systems Inc., fourth quarter and fiscal 2026 results, March 4, 2026.
Toast, Inc., fourth quarter and full year 2025 results, February 12, 2026.
Snowflake Inc., fourth quarter and full year fiscal 2026 results, February 25, 2026.
Datadog, Inc., fourth quarter and fiscal year 2025 results, February 10, 2026.

In three sentences

B2B SaaS companies fall into three segments by buyer: horizontal tools for every industry, vertical software for one industry, and infrastructure for engineering teams. Salesforce, Workday, Veeva and Snowflake earn 84.0% to 95.5% of revenue from their main software line, while Toast, a vertical company, earns 81.9% from financial technology and 15.2% from subscriptions. Read each company’s revenue lines, fiscal year and retention definition before you compare it with another one.

What is a SaaS company? How they work, make money and the biggest examples

2026-10-17T07:00:00-04:00

You keep reading that a company “is a SaaS company”, and the phrase seems to explain its valuation, its hiring and its quarterly results. You want to know what actually qualifies a business for the label. A SaaS company sells access to software that it hosts and runs itself, and it earns most of its revenue from subscriptions that renew.

The label is useful because it predicts how the business behaves: revenue arrives month after month, most costs come before the revenue, and keeping customers matters as much as winning them. This guide shows how to recognize one from its own numbers, with five large public examples. For what SaaS is from the user’s side, see What is SaaS?.

A SaaS company in plain terms

Think of three ways to make money from fitness. A sporting goods store sells you a treadmill once. A personal trainer bills you for each session. A gym charges a monthly membership and keeps the equipment running for you.

Software companies have the same three options:

License company: sells a copy of the software, often with a yearly maintenance fee, and you run it on your own computers. The treadmill.
Services company: sells people’s time to build, configure or run software for you, billed by the hour or project. The trainer.
SaaS company: runs the software on its own infrastructure and charges a subscription for access. The gym.

Many large companies mix all three. What makes a company a SaaS company is the mix: subscriptions are most of the revenue, and the software runs on the company’s side, not yours.

How the money works

A subscription changes the timing of everything. A license company books a large sale on the day you buy. A SaaS company earns the same customer’s money in small pieces over years, as long as the customer stays.

That timing creates the three habits you see in SaaS companies:

They spend before they earn. Sales, marketing and onboarding costs arrive in month one; the subscription pays them back over many months.
They watch retention closely. A customer who leaves after three months may never repay the cost of winning them.
They report recurring revenue. Many publish annual recurring revenue (ARR) next to revenue, because ARR shows the run rate of subscriptions at a point in time.

For the month-by-month arithmetic of recurring revenue, churn and acquisition cost, see the SaaS business model. For how SaaS companies set the price itself, see SaaS pricing models.

Five large public SaaS companies, from their annual reports

The table lists five large companies whose annual reports separate subscription revenue from the rest. The selection criterion is that split, not a ranking; figures are from each company’s latest annual report available in October 2026, in billions of dollars.

Company	Fiscal year ended	Total revenue	Subscription revenue	Subscription share
Salesforce	January 31, 2026	$41.53	$39.39	94.9%
Adobe	November 28, 2025	$23.77	$22.90	96.4%
ServiceNow	December 31, 2025	$13.28	$12.88	97.0%
Workday	January 31, 2026	$9.55	$8.83	92.5%
Atlassian	June 30, 2026	$6.57	$6.26	95.3%

Salesforce reports the line as “subscription and support”. Every one of the five earns more than 92% of its revenue from subscriptions. The remainder is mostly professional services: setup, training and consulting.

Note that the fiscal years do not line up. Salesforce and Workday close in January, Adobe in November, Atlassian in June. Compare growth within one company, not across them on one date.

Example: the subscription share for Salesforce, from its fiscal 2026 Form 10-K, in millions:

Subscription and support revenue: $39,388.
Total revenue: $41,525.
Share: 39,388 / 41,525 = 0.949, or 94.9%.
The remainder, $41,525 - $39,388 = $2,137 million, is professional services and other revenue.

The other rows use the same arithmetic: ServiceNow 12,883 / 13,278 = 97.0%; Workday 8,833 / 9,552 = 92.5%; Atlassian 6,262 / 6,572 = 95.3%; Adobe 22,904 / 23,770 = 96.4%, using the $23.77 billion total the company reported.

You can run this check on any company that says it is SaaS. Open the annual report, find revenue by type, and divide subscription by total. If subscriptions are a minority, the company may sell SaaS products without being a SaaS company in the financial sense.

Subscription is not always SaaS

The table holds one trap. Adobe’s subscriptions include Creative Cloud apps that you install on your own computer, with cloud services attached. That is subscription software, but not all of it is software hosted and run by the vendor. Atlassian, too, still sells some products that customers run themselves, alongside its cloud products.

So the subscription share is an upper bound for how “SaaS” a company is. For a stricter reading, look for a cloud line in the filing. Atlassian, for example, reported cloud revenue of $1,213 million in the fourth quarter of fiscal 2026 alone (results release), which shows how much of its subscription business runs on its own infrastructure.

Common mistakes

Calling any company with a website a SaaS company. An online store sells goods; a booking site sells services. Why it happens: both are on the internet and both have accounts. Instead: ask what the customer pays for and whether it is recurring access to software.
Treating subscription revenue and SaaS revenue as the same. Installed software sold by subscription is not hosted by the vendor. Why it happens: annual reports group them together. Instead: look for a separate cloud line, as in Atlassian’s case.
Comparing companies on one calendar date. Fiscal years end in different months. Why it happens: news stories rank companies by “latest revenue”. Instead: name the fiscal year next to every figure, as the table does.
Using ARR as if it were revenue. Atlassian reported subscription ARR of $6.6 billion and fiscal 2026 revenue of $6.57 billion, and the two measure different things. Why it happens: the numbers are close. Instead: treat ARR as a run rate at one moment and revenue as what was earned over the year.

Sources

Salesforce, Inc., Form 10-K for fiscal 2026.
Adobe Inc., Form 10-K for fiscal 2025.
ServiceNow, Inc., Form 10-K for 2025.
Workday, Inc., Form 10-K for fiscal 2026.
Atlassian Corporation, Form 10-K for fiscal 2026 and fourth quarter fiscal 2026 results, August 6, 2026.

In three sentences

A SaaS company hosts and runs its software and earns most of its revenue from subscriptions that renew. You can test the label by dividing subscription revenue by total revenue in the annual report: Salesforce, Adobe, ServiceNow, Workday and Atlassian all land between 92.5% and 97.0%. Subscription share is an upper bound, because some subscriptions cover installed software, so look for a separate cloud line when the distinction matters.

Vertical SaaS vs horizontal SaaS: definitions, examples and economics

2026-10-17T07:00:00-04:00

You are weighing a SaaS idea, a job offer or an investment, and someone calls the company “vertical SaaS” as if that settled the question. It tells you one thing: who the customer is. Vertical SaaS is built for one industry and tries to run most of that industry’s workflow. Horizontal SaaS does one job, such as email or accounting, for companies in every industry.

The label changes how a company finds customers, how big it can get and, often, where its money comes from. If you need the basic definition of SaaS first, read What is SaaS?. This guide assumes you know it and compares the two shapes, with numbers from two companies’ annual reports.

Vertical and horizontal in plain terms

Think of a general hardware store and a restaurant supply store. The hardware store sells hammers to plumbers, gardeners and office managers. The restaurant supply store sells only to kitchens, but it sells them almost everything: ovens, aprons, ticket printers, and sometimes the card terminal at the counter.

Horizontal SaaS is the hardware store. It solves one function across industries: a CRM, a chat tool, a spreadsheet. Its buyer can be any company with that function.
Vertical SaaS is the restaurant supply store. It solves many functions for one industry: a restaurant point of sale with menus, staff scheduling, online ordering and payments; or a construction tool with bids, drawings and site reports.

Neither is better. They are different bets on where to go deep.

How the economics differ

The table below compares the two models on the questions that decide how the business works. It is a generalization; individual companies cross the lines.

Question	Horizontal SaaS	Vertical SaaS
Who buys	One department in any industry	The owner or operator in one industry
Market size	Very large, many competitors	Smaller, fewer direct competitors
How customers are found	Broad marketing, self-serve sign-up, partners	Trade shows, industry networks, referrals, field sales
Product depth	One job, done for everyone	Many jobs, done the way one industry works
Money beyond subscriptions	Usually small (services, add-ons)	Often large (payments, hardware, financing)

The last row is the one that surprises people. A vertical product sits where the customer’s money moves: the restaurant’s card terminal, the clinic’s billing, the gym’s membership payments. Processing those payments can earn more than the software subscription itself.

Worked example: two revenue mixes from annual reports

Toast sells software and payments to restaurants, a vertical model. Salesforce sells CRM and related cloud software to companies in every industry, a horizontal model. Both publish their revenue by type.

Example: Toast’s revenue for the year ended December 31, 2025, from its Form 10-K, in millions of dollars:

Revenue line	Amount	Share of total
Subscription services	$936	936 / 6,153 = 15.2%
Financial technology solutions (mostly payments)	$5,037	5,037 / 6,153 = 81.9%
Hardware and professional services	$180	180 / 6,153 = 2.9%
Total	$6,153	100%

The three lines add up: 936 + 5,037 + 180 = 6,153. Only about one dollar in seven of Toast’s revenue is the software subscription.

Now the horizontal company. Salesforce reported total revenue of $41,525 million for fiscal 2026 (ended January 31, 2026), of which $39,388 million was subscription and support (Form 10-K). That is 39,388 / 41,525 = 94.9% subscription.

The two mixes are almost mirror images: 15% subscription at the vertical company, 95% at the horizontal one.

Why the revenue mix matters

Payments revenue is large but thin, because much of each card fee goes straight out again to card networks and processors. Toast’s results release for 2025 reported about $1.8 billion of GAAP gross profit from subscription services and financial technology solutions combined (Toast results release). Against $5,973 million of revenue from those two lines (936 + 5,037), that is a gross margin of roughly 1,800 / 5,973 = 30%.

A software subscription typically keeps a much larger share of each dollar, because the main cost is hosting and support, not money passed to a card network. So when you compare a vertical company with a horizontal one, compare gross profit, not revenue. A vertical company with $6 billion of revenue and a horizontal one with $2 billion can earn similar gross profit.

The other side of the trade is depth. Toast reported about 164,000 restaurant locations at the end of 2025 in the same release. Each one runs its orders and its payments through the product every day. That is why vertical companies often see customers stay for years: replacing the system means replacing the till, the menu and the payment terminal at once.

For how recurring revenue, gross margin and churn fit together in any SaaS business, see the SaaS business model.

Which one fits your situation

If you are building: vertical is often easier to start, because you can name your first 100 customers and where they meet. The ceiling is the size of the industry, so check it before you commit. Horizontal starts harder, against many competitors, but the market has no single-industry ceiling.
If you are buying: a vertical tool may replace three or four horizontal tools, with less integration work. You also depend on one vendor for more of your operations, and the pricing model may include a payments fee you must compare with your current processor.
If you are investing or joining: read the revenue lines. “SaaS” on the label does not tell you whether most of the money comes from software or from payments.

For a list of familiar horizontal products grouped by function, see SaaS examples.

Common mistakes

Comparing revenue across the two models. Payments revenue carries a low margin, so a vertical company’s revenue overstates its software business. Why it happens: headlines quote revenue. Instead: compare gross profit and the subscription line, as in the example above.
Calling any niche product “vertical”. A tool for one job in one industry, such as a dental appointment reminder, is a point solution. Why it happens: the industry is narrow, so the product feels vertical. Instead: ask whether it runs several of the industry’s core workflows.
Dismissing vertical markets as too small. Toast’s restaurant-only model produced $6,153 million of revenue in 2025. Why it happens: one industry sounds like a niche. Instead: size the market by the money that flows through it, not only by the number of software seats.
Assuming horizontal tools cannot serve an industry well. Many horizontal products sell industry templates and partner add-ons. Why it happens: the vertical vendor’s pitch says so. Instead: compare the specific workflows you need, side by side, on a trial.

Sources

Toast, Inc., Form 10-K for the year ended December 31, 2025, consolidated statements of operations.
Toast, Inc., Fourth quarter and full year 2025 results, February 12, 2026.
Salesforce, Inc., Form 10-K for fiscal 2026, year ended January 31, 2026.

In three sentences

Vertical SaaS runs many workflows for one industry, while horizontal SaaS runs one workflow for every industry. Vertical companies often earn most of their revenue from payments rather than subscriptions: in 2025, Toast’s subscription line was 15.2% of revenue, against 94.9% at Salesforce. Compare the two models on gross profit and the subscription line, because payments revenue is large but keeps a much smaller share of each dollar.

The SaaS business model: how subscription software makes money

2026-10-16T11:00:00-04:00

Investors and advisors keep talking about retention, payback and net revenue, and all you can see is a column of monthly invoices. The gap is real: a SaaS business is judged on numbers that do not appear on any single invoice, because the model makes money slowly, from the same customers, month after month. This guide builds those numbers from scratch with one small example you can redo in a spreadsheet.

If “SaaS” itself needs a definition first, read What is SaaS?. The pricing choices that set the monthly number are compared in SaaS pricing models.

Recurring revenue in plain terms

Think of a bucket with a tap above it and a small hole in the bottom. The tap is new customers. The hole is churn, the customers who cancel. The water level is your monthly recurring revenue (MRR): the sum of what every active customer pays per month. Every month the tap adds some water and the hole lets some out. The business grows only when the tap runs faster than the hole leaks, and the hole gets bigger as the bucket fills, because churn is a percentage of what you have.

That is the whole model. Four numbers describe it:

MRR (monthly recurring revenue): active customers times the average price per month. Multiply by 12 for ARR (annual recurring revenue). Neither is “revenue” in the accounting sense; a signed annual contract is a booking until each month of service is delivered.
Churn: customers lost in a period as a share of customers at the start. Say which kind: logo churn counts customers, revenue churn counts dollars. This guide uses monthly logo churn.
CAC (customer acquisition cost): sales and marketing spend divided by new customers won in the same period.
Gross margin: revenue minus the cost of delivering the service (hosting, support, third-party fees), as a share of revenue. Software is cheap to deliver once built, so SaaS gross margins are high. Salesforce reported gross profit of $32,255 million on revenues of $41,525 million for fiscal 2026 (ended January 31, 2026), per its annual report on Form 10-K. That works out to a gross margin of 77.7%. The same filing says subscription and support made up approximately 95% of total revenues.

Why do investors care about retention more than about this month’s sales? Because a customer who stays pays every month without a new sales cost. Growth bought with the tap is expensive; growth kept by plugging the hole is nearly free.

Twelve months of one small SaaS company

Example: a company starts the year with 100 customers paying $50 a month each. Every month it loses 3% of the customers it started the month with (rounded to whole customers) and wins 10 new ones. Each new customer costs $600 to acquire, so acquisition spend is 10 x $600 = $6,000 a month. Gross margin is 80%, so each dollar of MRR leaves $0.80 after hosting and support. Round numbers, fictional company.

The arithmetic for month 1: churned customers = 3% of 100 = 3; customers at month end = 100 - 3 + 10 = 107; MRR = 107 x $50 = $5,350; gross profit = 80% of $5,350 = $4,280; minus $6,000 of acquisition spend leaves -$1,720. Repeat for 12 months.

Month	Customers at end	MRR	Gross profit (80%)	Cumulative gross profit minus acquisition spend
1	107	$5,350	$4,280	-$1,720
2	114	$5,700	$4,560	-$3,160
3	121	$6,050	$4,840	-$4,320
4	127	$6,350	$5,080	-$5,240
5	133	$6,650	$5,320	-$5,920
6	139	$6,950	$5,560	-$6,360
7	145	$7,250	$5,800	-$6,560
8	151	$7,550	$6,040	-$6,520
9	156	$7,800	$6,240	-$6,280
10	161	$8,050	$6,440	-$5,840
11	166	$8,300	$6,640	-$5,200
12	171	$8,550	$6,840	-$4,360

Four things the table shows that the invoices never would:

MRR grew 60% and the company still lost money for the year. Cumulative gross profit was $67,640; acquisition spend was $72,000. Growth is paid for up front and recovered later. This is normal, and it is why SaaS companies raise money.
The turning point is month 8, when monthly gross profit ($6,040) first exceeds monthly acquisition spend ($6,000). From there the hole in the cumulative line starts closing.
Churn is eating more every month. Three customers left in month 1 and five left in month 12, at the same 3% rate, because the base is bigger. Churned MRR went from $150 to $250 a month. New customers must first replace those before adding anything.
CAC payback is 15 months. Each customer contributes $50 x 80% = $40 of gross profit a month, so a $600 CAC is repaid after $600 / $40 = 15 months. A customer who churns in month 10 never paid back what it cost.

Two more numbers fall out of the same inputs. At 3% monthly churn the average customer stays about 1 / 0.03 = 33 months, so lifetime gross profit per customer (LTV, customer lifetime value) is 33 x $40 = about $1,333, and LTV divided by CAC is 2.2. Cut churn to 2% and the lifetime becomes 50 months, LTV $2,000 and the ratio 3.3, with no change to price or sales spend. That single lever is why “retention” is the word you keep hearing.

Subscription, license and services, side by side

The subscription model is easier to see next to the two models it replaced. This is the shape, not a verdict; plenty of good businesses run on the other two columns.

	Subscription (SaaS)	Perpetual license	Services
When the money arrives	A little every month, for as long as the customer stays	Mostly up front, plus optional maintenance	As hours are worked
Cost to deliver one more customer	Low: hosting and support, so gross margin of 70% to 80% or more	Low once built, but the vendor does not run the software	High: people’s time, so gross margin of 30% to 50% is common
What makes it grow	Retention and expansion of existing customers	New sales every period, because the old ones are paid	More people billing more hours
Biggest risk	Churn and the cash gap before CAC is paid back	Replacement cycles and upgrades that customers skip	Idle staff, and key people leaving
How it is valued	A multiple of recurring revenue	A multiple of profit	A multiple of profit, usually lower

The gross margin ranges are the shape of the two models, not figures from a filing; the one sourced data point above is Salesforce’s 77.7%. The valuation row explains the obsession with ARR: a subscription business is priced on revenue it is expected to keep, so the quality of that revenue, meaning churn and expansion, moves the price more than this quarter’s sales do.

Common mistakes

Counting bookings as revenue. A signed $12,000 annual contract is $1,000 of revenue a month for 12 months, not $12,000 today, even if the cash arrived up front. Why it happens: the cash is in the bank. Instead: keep three lines, bookings, revenue and cash, and never let one stand in for another.
Ignoring churn in the first-year projection. A forecast that adds 10 customers a month and never subtracts any ends the year at 220 customers instead of 171. Why it happens: a new company has no churn data yet. Instead: assume a rate (2% to 3% monthly is a common starting assumption for small-business products), and replace it with your own number as soon as you have six months of data.
Comparing a SaaS margin with a services margin. A consultancy with 40% gross margin and a SaaS product with 75% are not in the same business, and bundling them in one plan hides which one is working. Why it happens: many SaaS companies start as agencies. Instead: report the two margins separately, and keep implementation hours out of the subscription line.
Spending on acquisition before the payback math works. With a 15-month payback and 3% churn, every dollar of acquisition takes over a year to come back. Doubling the sales budget doubles the cash hole before it doubles anything else. Why it happens: growth looks like progress. Instead: compute payback and LTV to CAC from your own numbers first, then decide how fast to open the tap.

Sources

Salesforce, Inc., Annual Report on Form 10-K for the fiscal year ended January 31, 2026, filed with the SEC: total revenues $41,525 million, subscription and support revenues $39,388 million, cost of revenues $9,270 million, gross profit $32,255 million; subscription and support approximately 95% of total revenues in fiscal 2026. The 77.7% gross margin is SaaSCron’s arithmetic from those lines.
Metric definitions follow the SaaSCron style guide glossary (MRR, ARR, churn, CAC, gross margin, LTV).

In three sentences

A SaaS business earns a little from each customer every month, keeps most of it because software is cheap to deliver, and grows only when new customers outrun the ones who cancel. In the example, a company that grew MRR by 60% in a year still ended it $4,360 behind, because each customer costs $600 to win and takes 15 months to pay that back. Churn is the lever that changes everything: cutting it from 3% to 2% a month raises lifetime value per customer from about $1,333 to $2,000 without touching price or sales spend.