As we navigate this bear market, I’m keeping my eye on broader market data points. A broad software buyer index would be the best metric to understand how buyer preferences are changing across the market. Fortunately, it exists.
Large SaaS and IaaS vendors are precisely that: indexes of software buyers. Amazon Web Services and Azure, the business units inside Amazon and Microsoft serve and sell to small, medium, and large companies in every major geography. So do Salesforce. ServiceNow. Adobe. Palo Alto Networks.
Google Cloud Platform
Amazon Web Services
Here are the revenue growth rates for these businesses broken out by software and infrastructure. Q-4 CAGR means the compound annual revenue growth rate for four quarters ago. Most companies’ haven’t yet reported current quarter CAGRs, called Q0 in this chart.
However, Salesforce announced yesterday that the company exceeded revenue expectations and maintained its annual growth rate. That should bode well for SaaS startups.
In addition, their outlook, the prediction of how revenue will grow over the rest of the year improved.
The rest of the group will report over the next 4-6 weeks. Their revenue performance and revenue guidance will reveal how software and infrastructure buyers’ behaviors are evolving with the economy.
Keeping an eye on company-level canaries is important too. Slowing sales cycles, decreases in NDR (net dollar retention), and declines in funnel yield are things to monitor.
I’ll be tracking these public companys’ metrics as a software buyer health index. If everything continues as usual, then the correction we’re living through should remain contained to multiples – not expand to harming revenue growth.
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