The SaaS Landscape Has Changed

The SaaS market has undergone a dramatic shift since the post-pandemic growth boom. Revenue growth rates have slowed sharply, net retention rates have declined, and AI-native competitors are beginning to challenge established software categories. To better understand how these changes are impacting the SaaS market, we updated our prior analysis (2024) of 50 publicly traded Horizontal and Vertical SaaS companies with latest data (2025).

Key Findings

Our updated research reveals a meaningful shift in relative performance. While Horizontal SaaS companies continue to benefit from higher growth rates due to larger total addressable markets (TAMs), higher gross margins, and lower Customer Acquisition Costs (CAC), Vertical SaaS companies now outperform on seven of twelve key performance metrics. These advantages include  Net Retention Rates (NRR), R&D Productivity, Sales & Marketing Efficiency, Average Contract Value (ACV), and adjusted EBITDA Margin. 

One example of this shift is R&D Productivity. In our original analysis, Horizontal SaaS outperformed due to its ability to spread R&D investments across larger markets and multiple use cases. Our updated analysis found that Vertical SaaS now leads on this metric as revenue growth slightly rebounded while R&D intensity declined. Horizontal SaaS, however, continued to maintain elevated R&D investment levels despite dramatically slowing growth.

The AI Imperative

AI-native companies are already disrupting legacy SaaS providers by moving beyond workflow automation toward agentic, context-aware systems that proactively execute tasks, adapt to changing conditions, and optimize outcomes in real time. Vertical SaaS companies possess advantages through in-depth industry expertise and proprietary data, but success will increasingly depend on how effectively companies transform their products and integrate AI into operations.

Resilience Through Market Uncertainty

The findings reinforce a trend first identified in our original study that Vertical SaaS companies demonstrate greater resilience during periods of market disruption. Their deep integration into customer workflows creates higher switching costs, stronger retention, and more efficient expansion opportunities, helping them better withstand slowing software spending and economic uncertainty. 

Strategic Implications

For SaaS executives, these insights offer a roadmap to benchmark performance and identify areas for improvement, such as optimizing R&D costs or enhancing sales efficiency and net retention rates. For venture capital and private equity firms, the findings emphasize the importance of recalibrating investment strategies to account for SaaS resilience in volatile markets and for responding to disruption from native-AI companies. To dive deeper into the performance breakdown and discover actionable strategies for SaaS success, explore the full analysis. 

Read the complete study to uncover key benchmarks and insights that could redefine your approach to SaaS investment and strategy.