SaaS companies have begun reporting Q3 earnings. So far we have been able to review the earnings releases and calls of 18 companies we follow. We will continue to update this post as we get through more earnings reports.
Below we share the key themes we found so far. Afterwards we share the CEO quotes we’ve found most informative on AI’s impact on SaaS.
SaaS continues to perform. ServiceNow had revenue of $2.797B (+22% YoY), beating consensus of $2.743B. Adjusted earnings per share were $3.72 vs. an estimate of $3.46. AppFolio delivered another strong quarter with revenue of $295.7M, up 19% year over year, continuing its consistent double-digit growth streak. Margins expanded and the company raised its FY2026 revenue guidance to $1.122B–$1.127B. RingCentral raised full-year FCF guidance to $620M–$630M. Dynatrace saw seven-figure deal ACV up 53% YoY, suggesting strong enterprise momentum, and full-year FY2027 guidance was raised. Twillio revenue beat estimates at $1.56bln, up 20% YOY. Dollar-Based Net Expansion Rate accelerated to 114% from 109% and revenue guidance was raised. SPS Commerce had nice margin expansion with EPS of $1.39, up from $1.13 from a year ago. Q2 Holdings revenue growth and EPS beat consensus. Blackbaud reaffirmed full year guidance. Palantir revenue surged 62.8% to $1.18B, with EPS of $0.21 beating consensus by $0.04. Revenue at Alkami grew 19.4% to $134.9M (although slightly below the $136.2M estimate). Shopify’s revenue was $3.74B, up 32% YoY, in line with the $3.75B consensus. Freshworks had revenue of $245.4M, up 14% YoY, landing right at the top of guidance and operating margin was 29.8%, up from 21% a year ago. Datadog’s revenue came in at $1.20B, up 35% YoY, well ahead of the $1.14–$1.15B guidance midpoint, and EPS beat consensus; full year guidance was raised. Waystar had solid guidance. Appian reported revenue of $234.6 million, up 25% year-over-year, and raised full year guidance. Klaviyo reported revenue of $387.2 million, up 25% year-over-year and ahead of the $380 million consensus; full year guidance was raised. Paycom exceeded expectations on every major metric in Q3, and full year guidance was raised. Fastly turned in Q3 revenue of $190.2 million, up 20% year-over-year, continuing the edge cloud network’s recovery after several years of choppy growth and leadership transitions. Hubspot’s revenue growth was ahead of consensus. DigitalOcean delivered a blockbuster Q3, with revenue of $321.2 million, up 40% year-over-year. The headline number is AI Customer ARR of $376 million, up 288% year-over-year. Cloudflare’s revenue growth was 39% YOY, the fastest in 4 years. Unity had 32% YOYG with a 41% margin. Appian had 120% NDR and raised full year guidance. Blend Labs had “the best sales quarter in more than three years.” Paylocity raised full year guidance.
AI product is showing up as an ARPU expander (existing customers buying more), and a retention improver (stickier because AI features are embedded in workflows). At RingCentral, ARR from customers using a native paid AI product is now ~15% of total ARR, roughly double year over year. Alkami says 10% of revenue is now from AI product. At Palatnir, the entire story is driven by AI. At Shopify, merchant tools (AI-generated product descriptions, Sidekick assistant, AI-powered checkout optimization) were cited as driving GMV growth and merchant retention. At Appfolio, AI workflow tools for property managers were cited as a driver of ARPU expansion and customer retention. At Q2 Holdings, digital banking AI features (fraud detection, personalized financial guidance, smart alerts) were framed as differentiators driving bank and credit union wins against legacy core vendors. At Blackbaud, AI-assisted fundraising tools and grant discovery features drove upsell into existing nonprofit customers. Klaviyo’s AI Composer is seeing accelerating adoption. At Klaviyo, AI is expanding average contract values as customers lean on the platform for more sophisticated personalization and campaign orchestration. Digital Ocean had AI Customer ARR of $376 million, up 288% year-over-year. Atlassian has one AI product growing customers 7x YoY. The Five9 CEO described AI revenue growth as having “stepped up significantly”.
SMB is being de-emphasized. At Freshworks, their upmarket pivot is working; $100K+ ARR customers were up 25% while $5K+ ARR customers grew only 5%. At Sprout Social, the $50K+ ARR customer cohort grew 11%, outpacing the $30K+ cohort at 6%, confirming the enterprise concentration is working even if it can’t offset the SMB drag; they’ve actually stopped reporting on SMB’s. Klaviyo is successfully expanding beyond its SMB e-commerce roots as the larger-customer segment is growing faster. At Hubspot, deals above $120K ARR grew 38% year over year, way ahead of SMB growth.
AI is expanding the market for SaaS companies. At Datadog, AI infrastructure monitoring is pulling in a new class of customer building LLM and GPU workloads. At ServiceNow, AI features are increasing the stickiness and scope of existing workflow deployments, pulling more of the enterprise onto the platform. At Twilio, AI-powered communications (personalized messaging, intelligent routing, real-time customer data activation) is what justifies Twilio as a platform rather than just a commoditized API.
SaaS companies continue to benefit from AI internally. Freshworks cited AI-assisted customer support deflection reducing their own support costs, and AI-generated code accelerating their engineering output. ServiceNow is seeing expanding margins thanks to using their own AI product internally. At Palantir, their AI Forward Deployed Engineer tool lets one human FDE do the work of several by automating the scaffolding and repetitive implementation work. At Shopify, internal AI tooling is reducing merchant support loads. At Alkami, AI is reducing implementation time for new bank/credit union onboarding.
AI trust is a theme. Workiva cited their growth as coming from to “AI-driven demand for accuracy and trust in regulated work.” Palantir, ServiceNow, and others all talked about the future in open weight models given they’re closed loop.
Some are absolutely struggling. Ziff Davis, Dropbox, Health Catalyst, are most definitely on the struggle bus.
Quotes
Platforms over AI point solutions: “While operators outside our platform can buy isolated AI features, a point solution cannot provide the connected foundation, governance, and economic alignment that allows performance to compound month after month, creating an engine for competitive advantage.”
-Appfolio’s Shane Trigg on Q3 earnings call.
AI revenue and ARPU. “RingCentral AI, which we define as customers using at least 1 native paid AI product, now represents approximately 15% of total ARR or over $400 million. Doubling year over year. This cohort of customers also has meaningfully higher ARPU and net retention. These trends demonstrate how AI is expanding wallet share, strengthening retention, and creating a more durable foundation for profitable growth.”
-RingCentral’s Vladimir Shmunis on Q3 earnings call.
Charging for usage and moving to open weight. “Our gross margins on AI products are generally holding in line with the corporate average. On the pricing front, we are being very deliberate — the idea is to charge customers for the value and the usage that they receive. And customers are willing to pay because they are getting tangible ROI benefits both from a revenue standpoint as well as a cost avoidance standpoint. In terms of costs, we are optimizing against model selection, inference efficiency, and infrastructure. Over time, we will benefit from the use of open source models.”
-Ring Central Q3 earnings call, Vaibhav Agarwal
The customer wants a human in the loop. “The big thing for our AI, whether it is AIR, AIR Pro, any of our products, we think about human in the loop. Handle as much as possible by AI. But also make sure that for judgment, sentiment, or more complex questions, those are handed off to a human being. And they work together, preserving that context, which our customers are telling us is very important.”
-Ring Central Q3 earnings call, Kira Makagon
AI needs software governance. “94% of enterprises report gaps in AI visibility. 88% can’t even distinguish personal AI accounts from corporate instances. ServiceNow’s Control Tower discovers and inventories the entire AI estate. As stories of rogue agents persist, ServiceNow controls what agents can do. That’s why we introduced AI Passport to issue every agent an official attested record based on context in our platform. Who owns the agent? What’s it allowed to do? What data can it access? How much risk exposure is it allowed to take? This enables the most capable kill switch available in the enterprise today. When our Control Tower revokes a passport, NVIDIA Century stops honoring it and the agent stops at the infrastructure layer.”
-ServiceNow CEO Bill McDermott on Q3 earnings call.
Incumbent software companies are showing fantastic AI revenue growth. “We began the year with a $1 billion AI target by year-end. We raised that target to $1.5 billion at Financial Analyst Day in May. Today, we are raising that target again this time to $1.7 billion plus by year-end. AI net new ACV was 65% year-over-year growth in Q3. The number of $1 million-plus AI deals grew 4.5x year-over-year. Year-to-date, agentic AI consumption in production is up 13x year-over-year. If you look at the consumption of Action Fabric assists alone, that number is up 500% month-over-month.”
-ServiceNow CEO Bill McDermott on Q3 earnings call.
Traditional SaaS pricing is very much alive, and now supplemented with AI. “The customer likes the predictability of the seat-based pricing model for their budgeting purposes. And also, we’re driving consumption. The idea is simple: get the customer live fast. And once they’re live, the token economics take off, whereby we have a chance to improve our revenue per user by a factor of 5x. And that’s only because the customer derives substantially more value than that.”
-ServiceNow CEO Bill McDermott on Q3 earnings call.
No more AI proof of concepts. “We’re past the proof-of-concept phase. We’re past the experimentation phase. We’re past point solution or vibe coding or do-it-yourself phase. We’re now in serious enterprise phase where it’s all about get the job done, deliver real value. And this platform is one of a few that will do extraordinarily well now and in the future.”
-ServiceNow CEO Bill McDermott on Q3 earnings call.
AI is creating real upsell opportunities for SaaS. “Many of the customers typically start with one or two use cases — incident management or triaging or resolution planning. And once they see that go live, we’ve seen that go up to 3x, 4x usage, but also new use cases emerge because now they’re seeing it in the production environment. We have customers like Nestle, for example — they went live in six weeks with marketing optimization, agentic workflow. And now they’re unleashing that in 90 different countries.”
-ServiceNow CEO Bill McDermott on Q3 earnings call.
Open weight models on domain specific data is the future. “Our research shows that 85% of social impact professionals use AI in their daily work, yet only about 10% of organizations are seeing returns. General purpose models learn from the Internet. Lantern learns from philanthropy. Developed through a strategic collaboration with Databricks, Lantern combines leading open weight models with more than 40 years of Blackbaud’s fundraising experience. It is post trained on synthetic scenarios modeled on our social impact signal graph. It understands giving behavior rather than buying behavior — including retention, upgrade paths, and lifetime relationships — which are central to fundraising but not native to general purpose AI.”
-Blackbaud CEO Mike Gianoni on Q3 earnings call.
The core of AI is software, and must be invested in. “Our AI investment is in addition to, not instead of, our investments in the core products our customers depend on every day. Those core products are the systems of record, the workflows, and the trust that make our AI valuable. And we continue to invest in them aggressively. Every improvement to a core product — such as cleaner data, tighter integrations, and faster workflows — makes the intelligence layer more accurate and more useful. And every agent and model we ship is embedded in a solution customers already trust, which reduces the data gaps and security risks created by bolt-on tools.”
-Blackbaud CEO Mike Gianoni on Q3 earnings call.
No industry can use AI better internally than SaaS can. “Our use of AI in engineering has expanded our capacity and increased our velocity such that we are announcing more new solutions than we ever have. The Raiser’s Edge NXT enhancements were planned for customer use in 2027 but were accelerated and pulled forward by more than a year.”
-Blackbaud CEO Mike Gianoni on Q3 earnings call.
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Incumbent SaaS is well positioned to deliver trusted AI. “Trust is critical to new and existing organizations allowing intelligent systems to act on their behalf. Our customers’ trust in us as their partner, in the solutions they are used to, in the data, and in our security are two advantages for both our customers and for Blackbaud. The gap between AI adoption and effective use is exactly what we are working to close — by delivering trusted AI inside the tools our customers already use.”
-Blackbaud CEO Mike Gianoni on Q3 earnings call.
A hybrid including traditional SaaS pricing will prevail. “It is not going to be uniform across products and even potentially across customer types. What seems to be resonating with customers is some form of hybrid model — some base platform fee that protects us and them against overusage, then some variable lever around value. In the case of fraud, the number of businesses or consumers we’re protecting. In the case of Assistant, the number of use cases we’re solving. Pricing has not been a major hurdle for us so far.”
-Q2 Holdings CEO Jonathan Price on Q3 earnings call.
SaaS companies are using AI to accelerate onboarding and implementation. “In Q3, this accelerated onboarding capability was a deciding factor in securing multiple new customer wins. We are prepared to move as quickly as our customers need us to, and delivering faster time to value. To date, we have completed many complex ERP integration and onboarding projects in less than 30 days, and we expect to shorten these cycles even further as we advance our agentic capabilities.”
-SPS Commerce CEO Chad Collins on Q3 earnings call.
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