The SaaS industry: how it is structured, how big it is and what is changing it
The four parts of the SaaS industry, Gartner's spending figures and SEG's valuation data in a dated box, how to read them, and the forces changing how SaaS earns.
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.
