AI Cost of Goods Sold: The New SaaS Margin Problem

Classic SaaS gross margins lived in the 75–85% range and were considered table stakes. AI-first companies are routinely reporting gross margins in the 40–60% range, and there is no obvious path back to classic SaaS profile without architectural changes — model distillation, caching, request routing, and hard utilization limits.

Investors are still calibrating. The next two years will tell us whether the market accepts a structurally lower margin profile in exchange for a faster-growing top line, or whether AI-first companies are forced to retreat to higher-margin sub-segments of their markets.