Software as a Service (SaaS) stocks are having a difficult year with the Bessemer Cloud Computing Index down 14.75% year-to-date, versus the S&P 500 up 15.75%. Driving weakness in the shares has been a deceleration in growth rates. The median annual growth rate for companies in the Bessemer index is currently 19% compared to 22% a year ago and 31% two years ago. Similarly, according to cloud software management provider Productiv’s recently published State of SaaS report, the expansion of the number of software tools employed by enterprise slowed from 41% growth in 2022 to 14% in 2023. Nevertheless, the average enterprise firm according to the report employs more than 70 separate software applications. Further, software revenue growth continues to outpace the market, considering revenue growth for the technology sector as a whole is forecasted at 10% this year and for the S&P 500 index at just 5%.
Source: Productiv, June 2024