Why SaaS Are Still Not Growing?Salesforce, Inc.BATS:CRMStrong_HoldersWhy SaaS Heavily Depend on Fed Rates SaaS companies generally heavily depend on low interest rates because this is a growth-oriented sector: high rates increase borrowing costs, reduce valuations by multipliers, and force a focus on profitability instead of growth. Tailwinds usually arise when the Fed cuts rates, which stimulates investments, M&A, and valuations. Based on current forecasts for 2026, here are the key takeaways. Current Context and Impact of Rates In 2025, the Fed held rates around 4.5% for most of the year, creating challenges for SaaS: a focus on efficiency, slowed growth, and conservative valuations. Only toward the end of 2025 did rates drop to 3.5-3.75%. Rate cuts make financing easier (cheaper to borrow for expansion), increase multipliers (e.g., EV/EBITDA), and shift the focus back to growth at any cost. This is especially important for SaaS, as many companies are now ready for aggressive investments in AI and R&D. At What Rate to Expect Explosive Growth? Analysts believe SaaS will start feeling significant tailwinds when the Fed rate is below 4%, ideally around 3% or lower. This is based on forecasts where further 1-2 cuts of 25 basis points in 2026 will bring rates to 3% by year-end, stimulating the economy, AI investments, and SaaS growth. It’s worth noting that the first cut is expected in June-July, and the second only toward the end of the year in October. Time to Buy? It’s worth buying on the news and selling on the facts, especially considering that for 2027, no further rate cuts are currently being factored in, which is a restraining factor given current inflation/Fed chair/unemployment and other factors we’re seeing in the economy now. It’s reasonable to assume that a change in Fed chair won’t affect policy, as all contenders generally present themselves as leaders with dovish policies. Initial jobless claims are hitting lows not seen since the last crisis, hinting at a strong economy. The question of inflation remains, which visually appears under control and hasn’t followed a scenario of another explosive price surge. The Fed forecasts PCE inflation at 2.4% in 2026, with further decline to 2.1-2% in 2027. However, analysts (including Morningstar and Goldman Sachs) warn of possible growth to 2.7% due to tariffs and fiscal policy, which could have a negative impact. So overall, the picture looks like it’s already time to buy SaaS, especially considering where prices are for many SaaS companies right now. Momentum But we don’t see momentum; no one is rushing headlong to buy back SaaS stocks. A lot will depend on this earnings season—if companies’ guidances show growth, it could set a precedent for the start of growth, and then this story will come to life. But right now, every day we see SaaS continuing to be sold off, falling to new lows. If everything is so good, why do SaaS keep falling so hard? The main thesis is the disruptive power of AI, which could lead to many services ceasing to exist or suffering greatly if they don’t implement AI right now and make it their main weapon. The market is scared by the idea that new AI agents (e.g., Anthropic’s CoWork or similar agentic AI) could replace traditional SaaS tools. This has led to sell-offs in companies like Monday, Atlassian, Salesforce—investors fear that AI will “kill” them. Therefore, the main debate in every SaaS is whether the company will become stronger or disappear from AI development? For example, Agentforce in Salesforce is growing 330% YoY, not destroying the product. But in any case, now SaaS must prove with real numbers that AI makes them stronger. How long will this take? What will we learn from this earnings season? Too many questions. #SaaS #FedRates #InterestRates #AI Disruption #TechStocks #Investing #StockMarket #EconomicForecast #AIInvestments #GrowthStocks #Valuations #MergersAndAcquisitions #EarningsSeason #Inflation #Unemployment #DovishPolicy #AgenticAI #Salesforce #Atlassian #MondayCom #TechTrends