Private SaaS Rebound: ARR Growth Nears 20%, Retention Rising & Profits by 2026

The 2025 Private SaaS Company Survey from KeyBanc Capital Markets and Sapphire Ventures signals a sector pivot — after several years of deceleration, private SaaS firms are rebalancing toward profit amid renewed growth, with AI acting as both catalyst and strategic differentiator. ARR growth’s rebound to ~20% YoY points to prevailing confidence in demand, product-market fit, and monetization strength. Retention trends—gross retention nearing 90% and net retention consistently above 100%—reduce the burden of acquisition and emphasize expansion and upsells as sources of revenue.

AI is no longer experimental in private SaaS: it has shifted into execution. With over half of surveyed companies increasing their AI budgets by 21% or more, those monetizing AI now represent two-thirds of the cohort. Subscription-based models dominate monetization strategies, suggesting customers value predictable pricing for AI-enabled products. This puts pressure on firms relying on usage-based or hybrid models to demonstrate equivalent value and predictability.

Operational discipline is rising. Margin improvements, especially in EBITDA, are being achieved while growth is maintained. The expectation of becoming EBITDA-positive by 2026 suggests many firms are nearing inflection points where scale and efficiency can drive profitability. Still, reaching “Rule of 40” benchmarks—growth plus margin ≥40%—remains uncommon for private SaaS firms, though many are gravitating closer as margins improve. Public SaaS peers—growing more slowly—are also under valuation pressure favoring those exhibiting both growth and profitability.

Strategically, this environment favors companies that can combine strong retention with efficient go-to-market execution and monetizable AI offerings. Key strategic implications include prioritizing expansion ARR, shifting investment from aggressive growth toward margin leverage, choosing monetization models that align with customer expectations, and underwriting AI spend with disciplined ROI metrics. Open questions remain around how durable this growth is as macroeconomic, funding, and inflationary pressures persist; whether monetization models will hold or evolve; and how competitive differentiation will shape exit opportunities and valuations in the next 12–24 months.