Many ‘AI First’ Companies Still Make Money the Old-Fashioned Way—Here’s How

Don’t believe the myth about the death of SaaS. Instead, remember the 95-percent rule.

Illustration: Getty Images

A brutal market reset last month colloquially dubbed “Black Tuesday for Software” wiped out nearly $1 trillion in market value. Wall Street remains panicked, gripped by a sudden, terrifying narrative: that autonomous AI agents are decimating the traditional “per-seat” software licensing model that has fueled the SaaS industry for two decades.

The SaaS giants began deploying an aggressive “AI-first” marketing campaign in 2024, when the focus shifted from generative AI to “agentic” AI. But if you look past that and crack open their latest financial statements, a massive disconnect emerges. It’s the secret 95-percent rule: despite all the “agentic” rebranding, traditional, seat-based subscriptions still account for over 95 percent of their actual revenue.

Last September, Salesforce CEO Marc Benioff boldly declared that the “agentic enterprise has arrived,” heavily promoting their AI-driven Agentforce platform. Yet, while their AI and data initiatives generate massive headlines, the reality of Salesforce’s balance sheet is far more traditional. The company’s total Q4 revenue was $11.2 billion, but $10.7 billion of that still comes directly from their core subscription and support seats. The newly monetized AI features account for just a tiny fraction of their overall revenue pie.

ServiceNow offers an even starker example of this narrative gap. Following the market sell-off, CEO Bill McDermott famously declared to the press, “We don’t live in the SaaS neighborhood.” But even as the company rebrands around its AI capabilities, its highly publicized AI product suite accounts for only a small percentage of its actual revenue. In Q4, ServiceNow reported $3.47 billion in subscription revenue; stripping away the hype, flagship AI offerings make up a small fraction of their quarterly subscription base.

How Canva Became the Power Player in the AI Design Wars

The dirty little secret of double-digit growth

If AI is only driving a fraction of actual revenue, what is really fueling the giants’ double-digit growth? The answer: it’s classic, aggressive SaaS mechanics.

Atlassian recently celebrated a massive milestone, posting its first-ever $1 billion cloud revenue quarter. While they heavily market their new AI capabilities, a major driver of their growth is a masterful forced migration: the company announced the “end-of-life” for its legacy data center offerings, effectively compelling its massive on-premise customer base to move over to more lucrative cloud subscriptions.

Meanwhile, Salesforce is squeezing more revenue out of its existing enterprise base through sheer bundling force. In recently announced Q4 results, all of the company’s top 10 wins included a massive six-product bundle. Rather than selling standalone AI products, they are using AI as a wedge to lock Fortune 500 companies into massive, multi-product ecosystems that boast higher spend and lower attrition rates.

© Inc.com