SaaS-pocalypse, meet Anthropic

Anthropic PBC is in the middle of several storms, as it battles the Trump administration on two fronts - most recently a government restriction on its AI cybersecurity tools that prompted the company to pull them off the market - while its Claude Code continues to send software-as-a-service stocks plummeting.

The so-called SaaS-pocalypse has brought mergers and acquisitions activity in the sector to a slowdown as valuations among leading companies in the sector have sunk to 15-year lows, according to data compiled by SaaS Capital.

Salesforce Inc. has dropped 40% so far this year, ServiceNow Inc. has fallen 35%, and Intuit Inc. is down 57% -- even as the S&P 500 is up 9% this year and the tech-heavy Nasdaq has gained 14%. Investors have expressed concern that software subscriptions could be displaced by AI agents.

Attorneys and other market analysts say the fall of traditional software stocks due to concerns about the impact of AI on their businesses is damaging the M&A market for companies not tied to AI.

Louis Lehot, a partner with Foley & Lardner LLP, said private equity firms are looking to sell or restructure "legacy tech investments" and do not want to make new platform investments or portfolio add-ons unless they are AI-native.

Two tech markets

"In tech M&A, it's a tale of two markets right now," he said. "There are AI-native companies that are growing in the triple digits that can command large valuations based on high multiples, and non-AI-first legacy software-as-a-service companies that don't.

"The latter have to do a 'pivot' to be AI-native and kickstart AI-led growth," Lehot continued. "Enterprise software companies that came to market before AI and offered software as a service, which recognizes revenue on a monthly or annual subscription basis, cannot command the same multiples that private equity firms paid to get in and need to be restructured."

The timing of the SaaS companies' decline coincided with the release in February of Anthropic's Claude Code and Claude Cowork.

Since then, global spending on software M&A has dropped, according to publicly available data.

"Overall market volume has fallen off substantially because of the SaaS-pocalypse," Lehot said. "There are still deals happening, just [fewer] of them. We are in the midst of a real correction phase."

Lehot said he thinks the valuation decline is overstated, because companies like Salesforce maintain a "system of record" and are still necessary. New AI-first businesses like Claude can drive productivity but do not have the historical data that systems of record have.

Buyers are not willing to pay a premium for legacy software companies due to concerns about growth going forward due to AI, he added.

Lehot said software companies have been evaluated by what the market refers to as the "Rule of 40," a combination of annual revenue growth rate plus the profit margin under Earnings Before Interest, Taxes, Depreciation, and Amortization [EBITDA] rule.

That meant VC firms and private equity firms could sell companies exceeding 40 under the rule for 10 times EBITDA revenues, and more during the 2021 spike in valuations.

"Now they can't," Lehot added. "Some companies were purchased for 10x revenues and cannot find a willing buyer for more than 3x revenues."

Anthropic's fights

While software companies struggle under the shadow of AI, one of the leading AI companies, Anthropic PBC, faces an unprecedented challenge of trying to seek government permission to go public while battling the administration.

Legal observers said they could not think of a situation in which a large company tried to file an IPO while in the middle of two major squabbles with the government.

"I can't think of any other IPO with as many serious tangles with the U.S. government," said Jay R. Ritter, an emeritus professor at the Warrington School of Business at the University of Florida who tracks initial public offerings.

The Department of Commerce on June 12 issued an export control directive to suspend all access to Fable 5 and Mythos 5 by any foreign national, whether inside or outside the United States. Anthropic said that order includes foreign national Anthropic employees.

The company disabled the cybersecurity tools to ensure compliance and subsequently sent its technical staff to Washington to try to resolve the dispute.

Meanwhile, lawyers for Anthropic have filed a motion for summary judgment in its lawsuit against the federal government over Defense Secretary Pete Hegseth's designation of the company as a national security supply chain risk.

Hegseth and Trump objected to Anthropic's refusal to allow the Defense Department to use its AI tools for mass surveillance and autonomous lethal weapons without human oversight.

Wilmer Cutler Pickering Hale and Dorr LLP partner Michael J. Mongan, who represents Anthropic, wrote that the government's "campaign of retaliation" acknowledged that they were acting against the company for its 'rhetoric' and 'ideology.'" Anthropic PBC v. U.S. Department of War et al., 26-cv-01996 (N.D. Cal., filed March 9, 2026).

A related case is pending before the D.C. Circuit Court of Appeals.

Valuation unaffected, thus far

Up until now, the disputes have not hurt Anthropic's valuation, which has soared on the strength of its appeal to corporate clients.

Anthropic's estimated valuation rose from $380 billion in February to $965 billion in May, an increase of 154% in less than four months, according to the company's Series G and Series H financing announcements. That is higher than OpenAI Inc., another AI company that also has filed to go public later this year.

The company's attorneys will need to disclose its well-publicized disputes with the government in risk factors in its S-1 statement.

Jill E. Fisch, a professor of business law with the University of Pennsylvania Carey Law School, said Anthropic would be wise to go public quickly "while the market is hot. Who knows how and when all this litigation and uncertainty will be resolved?"

John C. Coffee Jr., a professor with Columbia Law School, said Trump is an unpredictable factor. His administration has been supportive of AI but the president has been sharply critical of Anthropic and its CEO, Dario Amodei.

"The risk for Anthropic of either a short-term or a long-term retaliation from Trump is real," Coffee said. "If there is even a 10% or a 20% chance of such retaliation, it should affect the IPO adversely."

Corporate lawyers and other legal observers are sanguine, saying that investors in the market's hottest sector do not seem fazed even by Anthropic's disputes with the president.

"Investor enthusiasm for AI companies makes this an ideal time for them to go public," Ritter said. "I think that the market is expecting that Anthropic will be able to make some modifications in Fable 5 and other products so that the current draconian government restrictions are lifted in the near future."