So if you haven’t noticed, public SaaS stocks have taken a big tumble recently as the market has gotten nervous about expensive SaaS and Cloud stocks. Cloud companies that saw slowing growth saw the biggest drop, but even leaders with top-tier growth and no deceleration in growth have still taken a hit.
The root cause actually isn’t clear. Is it worries about the end of the “Covid Boost”? Is it inflation? Is it Cloud saturation?
Let’s take a look at the state of the “pandemic boom” and SaaS, and we’ll see things … are varied.
Let’s look at 3 Cloud leaders that may be back to more pre-Covid growth patterns:
- Shopify — Back to Pre-Covid Normal?: As ecommerce exploded post-Covid, Shopify grew a stunning 110% a year ago at $4B in ARR! More on that here. But last quarter, growth returned to super impressive, but more “normal”, of 46% year-over-year. Black Friday saw 20% growth year-over-year for Shopify, which is super impressive, but perhaps back to the pre-Covid growth patterns.
- Zoom — Back to Pre-Covid Normal?: We all live not just on Zoom now, but in Zoom :). And again, Zoom had a breathtaking run as Covid hit. Growth at $4B+ ARR is now back to 35%. Still incredibly impressive, but not the crazy 369% (!) growth of 2020.
- DocuSign — Back to Pre-Covid Normal? It looks like it here as well.
Total global @Shopify merchant Black Friday Cyber Monday GMV over the years:
2018 – $1.8B
2019 – $2.9B
2020 – $5.1B
2021 – $6.3B
The future of commerce is independent businesses. And they’re powered by @shopify.
— Harley Finkelstein (@harleyf) November 30, 2021
But … perhaps that’s to be expected, with hindsight. Those were apps literally every business needed instantly once Covid hit.
Much of SaaS is seeing no slowdown:
- MongoDB is accelerating at almost $1B in ARR, to 50% growth now from 44% last year. So the Covid boost to infrastructure seems enduring.
- Okta has accelerated to 61% growth at $1.4B in ARR, up from 39% last quarter. It does include the Auth0 acquisition, but even without, growth is up slightly.
- Snowflake is growing at 110% at $1.3B in ARR, same as at IPO. Pretty incredible.
- Atlassian grew 34% last quarter at $2.4B in ARR, up from 30% the prior quarter. So no slowdown there.
- Box accelerated to 14% growth at almost $1B in ARR, after years of slower growth. Not bad!
So we’ll see. In general, the “enterprise boost” from Covid seems to have years to play out. CIOs immediately had to buy certain products in March 2020 (Cloud contact center, Zoom, esignatures), but other changes take years to play out. Some budget immediately went the Cloud, but other budgets are in a 2-5 year transition process that has been accelerated by Covid, just not overnight.
Aaron Levie, the CEO of Box, said at 2021 SaaStr Annual (below) he thought the enterprise acceleration from Covid would last at least 3 years, given enterprise replacement and buying cycles.