In this piece, we will take a look at the ten most profitable SaaS companies for 2023. For more companies, head on over to 5 Most Profitable SaaS Companies for 2023.
The growth in computing power over the past couple of decades has revolutionized the matter in which both companies and individuals live their lives and run their businesses. While computers of the past were limited to large facilities where researchers or others had to physically relocate themselves, nowadays, vast amounts of computing power are available right in the palm of a hand.
As an example, the Apple A15 Bionic chip that is used in the latest iPhone models has a whopping 15 billion transistors on a die area of 107 mm², while one of the first processors, Intel Corporation (NASDAQ:INTC)’s Intel 4004 had a mere 2,300 transistors with a die size of 12 mm². In terms of computing power, this has increased beyond comprehension, since while the 4004 was able to compute a respectable 92,000 instructions per second, the A15’s Neural Engine goes as high as being able to crunch 15.8 trillion operations per second.
This growth in computing has created new industries of its own, one of which is the Software as a Service (SaaS) sector. Broadly speaking, SaaS covers all firms that host software on their own hardware and then provide a subscription based service to customers willing to use the products. This has a variety of benefits for the customer, as it saves the costs of setting up expensive hardware and generates flexibility in usage since anyone with an Internet connection can use the service. Yet, this flexibility also comes with some drawbacks such as the lack of control over how the service operates and privacy concerns as data is stored in an external server.
These compelling benefits have also led to sterling valuations for the SaaS sector. For instance, a research report from Industry Research released in November 2022, believes that the industry was worth $96 billion in 2022 and will grow at a compounded annual growth rate (CAGR) of 15.9% and be worth an estimated $235 billion by the end of 2028. While this might sound a bit less when comes to the technology industry, it is important to keep in mind that the SaaS industry is primarily a software arena that does not have any major and expensive hardware products to drive up its value. The research firm segments the market along several different areas such as public, private, and hybrid clouds alongside pureplay SaaS products. It also lists the major applications that SaaS covers, with some of these being customer relationship management (CRM), supply chain management (SCM), and enterprise resource planning (ERP).
Another report, this time from SkyQuest Technology Consulting, has even stronger hopes for the sector. It outlines that the SaaS industry was worth $147 billion in 2021 and will grow at a CAGR of 25.8% between 2022 and 2028 to be worth a whopping $720 billion by the end of the forecast period. The firm believes that the onset of the coronavirus pandemic stimulated the industry as it made firms increase the rate at which they digitized their operations and shares that globally, the growth in the use of computers, cell phones, and other technology products is driving the industry’s growth.
Focusing on the current state of the industry, one SaaS platform that you should have come across by now is ChatGPT. The conversation chatbox that took the Internet by storm has several characteristics which make it the perfect SaaS application. ChatGPT is hosted on a central server and users create an account to access it and use its services over the Internet – in an atypical definition of how SaaS works. In fact, the amalgamation of artificial intelligence into SaaS is a hot topic these days in the industry, particularly due to the lucrative nature of the industry itself. The standalone AI industry, according to Grand View Market Research, can be worth as much as $1.8 trillion by 2030, and some of the ways in which it is making its way into the SaaS sector are improving customer experience through personalization, speeding up processes, improving threat detection, and generating new insights through identifying trends.
These factors, combined with the fact that global cloud spending slowed down to 30% for the first time in history last year due to high inflation merits a look at the SaaS industry to sift out which companies are actually making shareholders money in terms of earnings per share. Some of the top performers are Adobe Inc. (NASDAQ:ADBE), Intuit Inc. (NASDAQ:INTU), and Box, Inc. (NYSE:BOX).
Copyright: ralwel / 123RF Stock Photo
We took a broad look at the technology industry to sift out which companies provide SaaS products and services to their customers and earn most of their revenue from it. Then, their net income was determined and the companies were ranked from the highest to the lowest.
10 Profitable SaaS Companies for 2023
10. F5, Inc. (NASDAQ:FFIV)
Trailing Twelve Months Net Income: $301 million
Number of Hedge Fund Holders In Q3 2022: 36
F5, Inc. (NASDAQ:FFIV) is an American company headquartered in Seattle. The firm provides cloud security services and allows its customers to deploy and operate their software applications on the cloud and on site or on premises.
F5, Inc. (NASDAQ:FFIV) expanded its cloud business in January 2023, when it announced that it had bought another cloud computing firm to revamp its application delivery portfolio. Insider Monkey took a look at 920 hedge fund portfolios for last year’s third quarter to find out that 36 had held a stake in the company.
Out of these, Jim Simons’ Renaissance Technologies is F5, Inc. (NASDAQ:FFIV)’s largest investor. It owns 1.2 million shares that are worth $183 million.
Adobe Inc. (NASDAQ:ADBE), Intuit Inc. (NASDAQ:INTU), F5, Inc. (NASDAQ:FFIV), and Box, Inc. (NYSE:BOX) are some of the most profitable SaaS companies for 2023.
9. ServiceNow, Inc. (NYSE:NOW)
Trailing Twelve Months Net Income: $325 million
Number of Hedge Fund Holders In Q3 2022: 103
ServiceNow, Inc. (NYSE:NOW) is an enterprise computing software provider that is based in Santa Clara, California. Its software platform provides a wide variety of services to businesses, allowing them to automate their workflow, utilize machine learning, run benchmarks, manage procurement, and offer customer support among others.
ServiceNow, Inc. (NYSE:NOW) is another technology company in the midst of a lay off cycle, but even though the decision was announced in January 2023, some workers found out about it a month later. 103 of the 920 hedge funds part of Insider Monkey’s Q3 2022 survey had held a stake in the company.
ServiceNow, Inc. (NYSE:NOW)’s largest investor is Chase Coleman and Feroze Dewan’s Tiger Global Management LLC which owns 1.6 million shares that are worth $639 million.
8. Dropbox, Inc. (NASDAQ:DBX)
Trailing Twelve Months Net Income: $349 million
Number of Hedge Fund Holders In Q3 2022: 32
Dropbox, Inc. (NASDAQ:DBX) is one of the more well known SaaS companies due to its consumer facing arm. It was one of the first companies to provide users with an online service that enabled them to access virtual storage solutions to collaborate over the internet. The company is based in San Francisco, California.
Dropbox, Inc. (NASDAQ:DBX) expanded its global footprint in January 2023 when it announced that it has signed an agreement with TjDeeD – a Middle Eastern company – to allow consumers in the MENA region to access its services. By the end of 2022’s third quarter, 32 of the 920 hedge funds surveyed by Insider Monkey had invested in the firm.
Jim Simons’ Renaissance Technologies is Dropbox, Inc. (NASDAQ:DBX)’s largest investor. It owns 8.4 million shares that are worth $175 million.
7. Veeva Systems Inc. (NYSE:VEEV)
Trailing Twelve Months Net Income: $396 million
Number of Hedge Fund Holders In Q3 2022: 42
Veeva Systems Inc. (NYSE:VEEV) is a cloud computing company that focuses its attention on providing services to the healthcare industry. Its products enable pharmaceuticals, biotechnology firms, and others to manage customer relationships, navigate the regulatory environment, and more. Veeva Systems Inc. (NYSE:VEEV) is headquartered in Pleasanton, California.
Veeva Systems Inc. (NYSE:VEEV) joined the FTC’s fight against non compete agreements in January 2023, when it announced that the proposed rules to ban the agreements are fair and that it has implemented similar practices. Insider Monkey’s September quarter of 2022 survey revealed that 42 had invested in the firm.
Veeva Systems Inc. (NYSE:VEEV)’s largest investor is Greg Poole’s Echo Street Capital Management which owns 899,875 shares that are worth $148 million.
6. Akamai Technologies, Inc. (NASDAQ:AKAM)
Trailing Twelve Months Net Income: $507 million
Number of Hedge Fund Holders In Q3 2022:
Akamai Technologies, Inc. (NASDAQ:AKAM) is a web services cloud provider that enables customers to maintain their online assets and run threat detection programs. It is based in Cambridge, Massachusetts.
Akamai Technologies, Inc. (NASDAQ:AKAM) scored a big win in February 2023 when Gartner included it in its list of top companies in the web deployment and security industry. By the end of last year’s third quarter, 42 of the 920 hedge funds surveyed by Insider Monkey had owned a stake in the company.
Peter Rathjens, Bruce Clarke, and John Campbell’s Arrowstreet Capital is Akamai Technologies, Inc. (NASDAQ:AKAM)’s largest investor with a $57 million stake that comes via 711,024 shares.
Along with Box, Inc. (NYSE:BOX), Adobe Inc. (NASDAQ:ADBE), and Intuit Inc. (NASDAQ:INTU) Akamai Technologies, Inc. (NASDAQ:AKAM) is a profitable SaaS company.
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Disclosure: None. 10 Profitable SaaS Companies for 2023 is originally published on Insider Monkey.