SaaS operating margins worsened in Q1 2025. Every quarter we look at the operating income and margin of every SaaS company that has IPO’d since October 2017 (58 active companies). The data is below.
Margin has really improved. In Q1 2022, operating margin on median was -30%. Since then, the margin has improved trending to -4% as of Q4 2024. However Q1 shows a tick back up, with operating margin coming in at -9% on median.
Operating loss has also improved, generally. In Q1 2022, operating loss on median was a high of -$19.8mm. Operating loss in Q4 2024 was -$7.1mm. However Q1 saw a tick back up to a median of -$11.8mm.
Profitability came down. Out of the 58 companies shown, 44 of them were unprofitable. That’s 76% of the dataset, which in an improvement versus Q1 2022, when 82% were unprofitable, but a step back from Q4 2024 when 60% were unprofitable.
We think Q1 2025 may be an anomaly, but we need to see more quarters. We do not expect the sector to attain significant profitability on median, but the efficiency at which these companies grow will continue to improve in our view to a point where some level of profitability (<10% operating margin) is achievable with modest growth (10%+ YOYG).
Thank you for the readership. Visit blossomstreetventures.com for more blogs and SaaS data. Email the author at sammy@blossomstreetventures.com or connect on LinkedIn.
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