The convention of adding stock comp back to EBITDA, operating income and free cash flow treated 5-8% annual shareholder dilution as a footnote. Non-cash was read as non-economic, but the dilution and the vest-day selling pressure were always real.
The most exposed companies are the ones that never reached profitability with stock comp counted. Equity grants were quietly subsidizing a cost structure that could not stand alone, and that subsidy just got far more expensive.
The argument is not that SaaS is broken. Recurring revenue, high gross margins and scalable delivery still work. What changes is counting stock comp for what it is: compensation, denominated in cash, paid for by shareholders.
Why it matters
How stock-based comp has masked the true costs of SaaS, and why AI disruption forces the bill due. A financially literate take for founders and operators who want the numbers behind the "AI breaks SaaS economics" headlines.
Key quotes
“The uncomfortable truth is that RSUs have always been a cash equivalent.”
“They experience it as a pay cut.”
“In a capital-light, talent-heavy model, there is no version of this that doesn't hurt.”
“But the current environment is revealing a cost that was always there, hidden in plain sight behind an add-back.”
