AI Won’t Kill SaaS, But It Will Make It Irrelevant: Databricks CEO
▼ Summary
– Databricks announced a $5.4 billion revenue run-rate, growing 65% year-over-year, with over $1.4 billion coming from its AI products.
– The company’s CEO argues that AI is increasing product usage for them, not killing the SaaS business, and that the real threat to SaaS is AI making specialized user interfaces obsolete.
– Databricks’ AI product Genie, a natural language interface, is cited as a key driver for growth by making data analysis accessible without specialized query skills.
– The company has closed a $5 billion funding round at a $134 billion valuation and secured a loan, stating it is well-capitalized and not planning an immediate IPO or further raise.
– Databricks is also developing AI-native products like its Lakebase database for AI agents, which is seeing early market traction.
Databricks has reported a significant revenue milestone, reaching a $5.4 billion annual run-rate with impressive 65% year-over-year growth. A substantial portion, over $1.4 billion, is directly attributed to its artificial intelligence offerings. CEO Ali Ghodsi emphasizes these figures to counter a pervasive narrative in the tech industry. Contrary to predictions that AI will destroy the SaaS business model, Ghodsi argues it is instead fueling increased platform usage and engagement for companies that adapt.
The company, which recently finalized a massive $5 billion funding round at a $134 billion valuation, is strategically positioning itself beyond the traditional SaaS label. While still renowned as a leading cloud data warehouse provider—a critical system for enterprise data analysis—Databricks is leveraging AI to enhance its core services. A key driver is its large language model interface called Genie, which allows users to query complex data using simple natural language.
This shift exemplifies the real transformation AI brings to software. Previously, extracting insights like understanding daily spikes in warehouse usage required specialized query skills or custom reports. Now, interfaces like Genie democratize access, enabling anyone to ask questions directly. This ease of use is a primary factor behind Databricks’ growth. The existential threat to SaaS, therefore, isn’t about replacing foundational “systems of record” like Salesforce or SAP, which house vital sales and financial data. Migrating these complex systems remains a formidable challenge.
The true disruption lies in the user interface layer. As products adopt natural language interfaces, the specialized expertise required to master specific software platforms becomes obsolete. For decades, a major defensive moat for SaaS companies was the global workforce trained on their particular interfaces. When the interface becomes as intuitive as conversation, the software itself fades into the background, much like infrastructure plumbing.
This evolution presents both an opportunity and a threat. Established companies that successfully integrate LLM interfaces can accelerate growth, as Databricks demonstrates. However, it also lowers barriers for new, AI-native competitors to emerge with alternatives optimized for AI agents and automated workflows. Recognizing this, Databricks developed Lakebase, a database engineered specifically for AI agents, which has seen remarkable early adoption, generating twice the revenue in its first eight months compared to the early days of its data warehouse product.
With its recent capital infusion, including a $2 billion loan facility, Databricks is focused on long-term stability rather than an immediate IPO. Ghodsi notes that the current public market conditions are not ideal and that the substantial war chest provides crucial protection and runway, ensuring the company can navigate potential economic downturns and continue investing in its AI-driven future.
(Source: TechCrunch)
