TL;DR: The massive correction in SaaS stocks (Figma -78%, Duolingo -72%) is not a temporary market fluctuation. It is a fundamental repricing of reality. In the age of Agentic AI, the traditional SaaS moat—User Interface and Workflow—has become a liability. When an AI Agent can interact directly with raw data, SaaS degrades from a "Value Creator" to a mere "System of Record" (Database). The premium is gone.
James here, CEO of Mercury Technology Solutions.
For a decade, we valued SaaS companies based on insane CAGR (Compound Annual Growth Rate) projections. The market priced in infinite growth. But in the last 12 months, we have seen a bloodbath.
- Figma: -78%
- Duolingo: -72%
- HubSpot: -63%
- Salesforce: -36%
- Datadog: -40%
Why? The market is finally admitting a terrifying truth: In an Agentic AI world, most SaaS software is overpriced.
Here is the breakdown of the three forces destroying SaaS valuations.
1. The "UI Moat" Has Evaporated
The strongest moat for companies like Salesforce or HubSpot used to be "Organizational Inertia." Employees were trained on the interface. The UI was sticky. Switching costs were high because of human habit.
The Shift: AI Agents do not need a User Interface. They do not need to "log in" and click buttons. They interact directly with the database via API.
- Old World: You pay for the complex workflow and the UI.
- New World: The AI Agent handles the workflow. The SaaS platform is demoted to a simple System of Record (a place to store data).
If Salesforce is just a database that an Agent talks to, it is not worth 10x revenue. It is a utility.
2. Total Value Replacement (The "Summoning" Era)
Adobe is the prime example (-35%). Previously, the value was the tool set (Photoshop, Illustrator) that allowed a human to create. Future value is Outcome. If I can tell an AI, "Summon an image of a cybernetic cat," and it appears instantly, the need for complex editing tools vanishes. The probability of Adobe's core utility hitting zero is non-trivial.
Duolingo faces a similar existential crisis (-72%). We are seeing the rise of AI Pins, Glasses, and Earbuds that offer seamless, real-time translation. If technology solves the "Communication Problem" instantly, language learning devolves from a "Necessity" to a "Hobby." The TAM (Total Addressable Market) collapses.
3. The "Cost Center" Trap (Datadog & Observability)
Why is Datadog down 40%? Aren't they an "AI Data" play? No. Observability is a Cost Center. In an AI world, data volume explodes. Clients naturally want to compress costs, not expand them. Furthermore, Native Cloud Providers (AWS/Azure/GCP) are integrating AI-driven observability directly. It will become a free or low-cost utility bundled with the cloud. Third-party dashboards lose their leverage.
4. The "Vibe Coding" Pivot (Figma)
Figma (-78%) is an interesting case. It was grossly overvalued at IPO. However, it has a slim chance of survival if it pivots to "Contextual Coding." In a world of "Vibe Coding" (where you code by feeling/prompting), we still need a visual interface to verify the AI's output. Figma could become the visual layer for AI code generation. But the market is currently betting against it.
The New Reality: SaaS as a "Calculator"
The market is saying one thing clearly: SaaS based on UI, Workflow, and Reporting lacks "Value Density" in 2026.
AI Agents strip away the need for:
- Document Tools
- Project Management UI
- Analytics Dashboards (The Agent just tells you the answer)
The Prediction: We are moving toward a future where enterprises don't buy rigid SaaS subscriptions. They will generate Bespoke Enterprise Software on the fly. Using AI Agents, companies will build custom, highly automated, and flexible internal tools that interact directly with their data. These tools will be cheaper, faster, and perfectly fit for purpose—killing the "One Size Fits All" SaaS model.
SaaS tools will survive, just like the electronic calculator survived the computer. But they will no longer command the valuation of a growth god. They are just utilities.
Mercury Technology Solutions: Accelerate Digitality.
