Clouded Judgement: SaaS Valuation Compression and the Terminal Value Crisis

SaaS software valuations have compressed to 10-year lows (4.1x NTM revenue median) as investor confidence in the SaaS business model's core assumptions—stable retention rates and positive terminal value—has been undermined by AI disruption concerns and collapsing marginal costs for software creation. The author argues the market needs evidence of stable retention metrics despite AI competition to restore valuation confidence, but notes that terminal value assumptions themselves may be permanently damaged.