Software stocks have lost more than 20% of their value in 2026 — wiping out $1 trillion in market value while the S&P 500 has remained unchanged, according to AInvest. How so? The iShares Expanded Tech-Software Sector ETF is down about 21%, the outlet noted.

This decline has particularly damaged software-as-a-service companies like Salesforce, which has fallen 26% — prompting Jefferies equity trader Jeffrey Favuzza to call this market meltdown a “SaaSpocalypse,” according to Bloomberg.

Although SaaSpocalypse is creating winners — hedge funds have earned $24 billion shorting software stocks — “Trading is very much ‘get me out’ style selling,” Favuzza added.

This raises many questions.

SaaS stock prices are lowering because industry revenue growth is slowing and falling short of expectations. Companies are cutting the number of software suppliers and using AI coding tools to do the same work in less time.

Ultimately, substitution of SaaS for AI coding is forcing SaaS suppliers to change their pricing models from consumption — or per-seat licenses — to outcome and value-based models.

How much is revenue growth slowing down? In the first quarter of 2025, annual recurring revenue for publicly traded SaaS companies fell 29% to $1.65 billion, while growth guidance for 2025 dropped to 10.5% from 14% actual growth in 2024. By the final quarter of 2025, SaaS revenue growth had declined to 12.2%.

One reason for........

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