The so-called SaaSpocalypse — a widespread 2026 market fear that AI players would destroy software-as-a-service business models — has failed to materialize in the way many predicted.
The term had gained significant traction among investors who believed companies like Anthropic (ANTH.PVT) and OpenAI (OPAI.PVT) would systematically dismantle the revenue foundations of legacy SaaS businesses.
Instead, the opposite has unfolded, with the broader software group staging a sharp and sustained recovery that has caught many bearish investors off guard.
JPMorgan strategist Samik Chatterjee highlighted that the broader software group and the IGV index have rallied 21% since the end of June, compared to just 4% for the broader S&P 500 during the same period.
Top performers in the rally include Paycom, DocuSign, Workday, Salesforce, Cloudflare, Twilio (NYSE: TWLO), and Microsoft (NASDAQ: MSFT), all of which have seen meaningful share price appreciation in recent months.
Chatterjee noted that the broader rally has been supported in part by a valuation multiple rerating across both infrastructure and application software companies.
Heading into third quarter earnings season, Chatterjee sees further upside ahead, particularly for infrastructure software companies riding AI-driven tailwinds.
“Heading into C3Q earnings, we expect the broader share price momentum for the group to continue with infrastructure software companies leading the way on account of the AI-led tailwinds driving robust beats on both top-line and earnings, albeit potentially only in line on gross margins,” Chatterjee said.
Application software companies are also expected to participate in the rally, supported by raised full-year guidance and growing momentum in AI monetization strategies.
Chatterjee added, “We expect application software companies to also participate in the positive share price momentum for the sector into the year-end on account of raises to full-year guides, aided by building momentum in AI monetization, which is steadily building as incremental revenue on top of the core businesses, which range from modestly decelerating to stable growth across our coverage companies.”
The AI monetization trend is proving to be an additive revenue layer rather than a replacement cycle, challenging the core assumption that underpinned the SaaSpocalypse thesis throughout much of the year.
Investors who rotated out of software on fears of AI disruption may now be reassessing their positioning ahead of what is shaping up to be a constructive earnings season for the sector.
