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

Databricks announced Monday that it reached a revenue run rate of $5.4 billion, up 65% year over year, of which more than $1.4 billion came from its AI products.

Co-founder and CEO Ali Ghodsi wanted to share these growth numbers because there’s a lot of talk about how AI is killing SaaS businesses, he told TechCrunch.

“Everyone says, ‘Oh, it’s SaaS. What will happen to all these companies? “What is AI going to do with all these companies?” For us, it’s just an increase in usage.

He certainly also wants to move Databricks away from the SaaS label, since private markets value it as an AI company. Databricks on Monday also officially closed its previously announced $5 billion mega raise at a $134 billion valuation, and also secured a $2 billion loan facility.

But the company straddles both worlds. Databricks is still best known as a cloud data warehouse provider. A data warehouse is where organizations store massive amounts of data to analyze for business insights.

Ghodsi, in particular, pointed to one AI product that is increasing the use of his data warehouse: his LLM user interface called Genie.

Genie is an example of how a SaaS company can replace its user interface with natural language. For example, he uses it to ask why warehouse utilization and revenue are higher on certain days.

Just a few years ago, such a request would have required writing queries in a specific technical language, or programming a special report. Qudsi pointed out that any product equipped with an LLM interface can be used by anyone today. He said Genie is one of the reasons the company’s usage numbers are growing.

The AI ​​threat to SaaS is not, as one VC jokingly tweeted, that companies will strip away their SaaS “systems of record” to replace them with on-premises, encrypted versions. Recording systems store critical business data, whether it’s sales, customer support, or finance.

“Why would you move your recording system? You know, it’s hard to move it,” Qudsi said.

Model makers do not provide databases to store that data and they become systems of record anyway. Instead, they hope to replace the user interface with natural language for human use, application programming interfaces (APIs) or other plug-ins for AI agents.

So the threat to SaaS companies, Ghodsi says, is that people no longer spend their careers becoming masters of a particular product: specialists in Salesforce, ServiceNow, or SAP. Once the interface becomes just a language, the products become invisible, like plumbing.

“Millions of people around the world were trained in these user interfaces. So this was the biggest pitfall for these companies,” Ghodsi warned.

SaaS companies that embrace the new LLM interface can grow, as Databricks does. But it also opens up possibilities for native AI competitors to offer alternatives that work better with AI and agents.

That’s why Databricks created its own Lakebase database designed for customers. He sees early appeal. “In the eight months that we’ve had this device on the market, it’s generated twice the revenue that our data warehouse did when it was eight months old,” says Ghodsi. “Well, that’s obviously like comparing toddlers.” “But this is a little kid twice his size.”

Meanwhile, after Databricks closed its massive funding round, Ghodsi tells us the company is not immediately working on another raise, nor is it preparing to go public.

“Now is not the time to announce the matter,” Qudsi said. “I just wanted to have really good capital” if markets went “south” again like they did in the 2022 recession, when interest rates rose sharply after years of near-zero interest rates. He added that the huge bank account “protects us and gives us many years of success.”