Databricks CEO says SaaS isn’t dead, but AI will soon make it irrelevant

Databricks has announced an impressive revenue run-rate of $5.4 billion, reflecting a remarkable 65% growth year-over-year, with over $1.4 billion attributed to its AI-driven products. CEO Ali Ghodsi emphasized the importance of these figures amidst ongoing discussions about AI's potential to disrupt the Software as a Service (SaaS) industry. He remarked to TechCrunch, "Everyone is asking what AI means for these companies. For us, it’s enhancing usage." Despite the overwhelming focus on AI, Ghodsi aims to distance Databricks from being strictly labeled as a SaaS provider, especially as the private market values the company as an AI entity. The company recently concluded a significant $5 billion funding round, leading to a staggering $134 billion valuation, along with securing a $2 billion loan facility. Databricks continues to be recognized primarily as a cloud data warehouse provider, a crucial component for enterprises to store and analyze vast amounts of data for valuable business insights. One standout AI product driving growth is Genie, an innovative large language model (LLM) user interface. Ghodsi highlighted how Genie allows users to pose questions about data warehouse usage and revenue trends without needing intricate query languages, demonstrating how AI can simplify interactions with data systems. The narrative that AI will lead companies to abandon their existing SaaS systems is misguided, according to Ghodsi. He noted that core systems of record, which manage critical business data across sectors like sales and finance, are challenging to replace. Instead, the goal is to enhance these systems' user interfaces with natural language capabilities, making them more accessible. Ghodsi warned that the real impact of AI on the SaaS industry might be the diminishing necessity for experts who specialize in specific software products, as interfaces become more intuitive. "When the interface is just language, the products become invisible, like plumbing," he explained. While SaaS companies that adapt to the new LLM framework may thrive, there is also the risk of AI-native competitors emerging with superior solutions. To address this, Databricks has developed Lakebase, a database tailored for AI agents, which has already shown promising revenue growth compared to its traditional data warehouse. As for future plans, Ghodsi clarified that Databricks is not currently seeking another funding round or preparing for an IPO, citing the market's current climate. "Now is not a good time to go public. We wanted to ensure we are well-capitalized to weather any market downturns," he stated, emphasizing the importance of financial stability for long-term growth.