Both are valid. It depends on the footprint, type of SaaS (e.g. running complex offline-processing vs running heavily customized web-shops), your PII regulations and your ideal customer type and size.

It can be easier to have custom subdomains running separate instances, since this will limit how outages/upgrades/security affect customers. You also can intentionally keep a customer on an old version, which can be a bug or a feature.

But it can also be easier to have tenants, since you can update all users at the same time and you will pay less overall for infrastructure.

Having done both, I personally prefer tenants since it's easier to write, support and scale. But if you're B2B, you should carefully investigate the other option.