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    SPSC
    Earnings call· Jun 2026(Q2 FY26)

    SPS COMMERCE Q2 FY26 earnings call SPSC

    Jul 30, 2026 Source

    Executive summary

    SPS Commerce Q2 FY26 — Strong Core Business Performance and AI Monetization Path

    SPS Commerce delivered a strong Q2 FY26, driven by high single-digit growth in its core business and significant adjusted EBITDA expansion. The company divested its 3P revenue recovery business to sharpen focus on strategic 1P suppliers, while its new MAX AI agent is demonstrating tangible ROI for beta customers and is expected to be monetized by late Q4. Management is also enhancing its analytics platform and expects continued ARPU expansion and operational rigor.

    Highlights

    5

    • Core business revenue grew high single digits in Q2 FY26, driven by ARPU growth.

    • Adjusted EBITDA increased to $66.6 million in Q2 FY26, reflecting strong operational execution and margin expansion.

    • Trailing 12-month free cash flow was $198.7 million, up 40% year-over-year.

    • MAX AI agent demonstrated immediate ROI for beta customers, including cutting a $290,000 invoice failure and achieving 90% weekly time savings.

    • Divestiture of the 3P revenue recovery business sharpens focus on strategic 1P suppliers with multi-retailer relationships.

    Concerns

    3

    • Incurred a loss on sale of $23.5 million in Q2 FY26 from the divestiture of the 3P revenue recovery business.

    • 1P customer count was down over 200 sequentially in Q2 FY26 due to timing effects of retail enablement programs.

    • The ERP market has been slower in 2025 and so far in 2026, particularly at the medium to large end.

    Guidance & targets

    11
    CategoryTargetConfidence
    Revenue
    $196.3 million to $198.3 million
    high materiality
    High
    Adjusted EBITDA
    $67.4 million to $69.4 million
    high materiality
    High
    Fully diluted EPS
    $0.72 to $0.76
    medium materiality
    High
    Non-GAAP diluted income per share
    $1.20 to $1.23
    high materiality
    High
    Revenue
    $788.4 million to $793.4 million
    high materiality
    High
    Core business revenue growth
    high single digits
    high materiality
    High
    Adjusted EBITDA
    $264.6 million to $269.1 million
    high materiality
    High
    Fully diluted EPS
    $2.24 to $2.33
    medium materiality
    High
    Non-GAAP diluted income per share
    $4.84 to $4.93
    high materiality
    High
    Effective tax rate
    approximately 30%
    medium materiality
    High
    MAX AI agent monetization
    selling agents
    high materiality
    High

    Operational metrics

    30
    Revenue
    $197.8M6% increase YoY
    Q2 FY26

    Total company revenue.

    Recurring revenue growth
    6%YoY
    Q2 FY26

    Year-over-year growth for recurring revenue.

    Core business revenue growth
    high single digits
    Q2 FY26

    Excludes the divested 3P revenue recovery business.

    Total recurring revenue customers
    46,650
    Q2 FY26

    Total customers after the divestiture of approximately 7,300 3P revenue recovery customers.

    Average revenue per customer (ARPU)
    $15,100
    Q2 FY26

    ARPU skewed higher due to the divestiture's impact on the calculation, which used an average of beginning and end of quarter customer counts.

    Adjusted EBITDA
    $66.6M
    Q2 FY26

    Reflects strong operational execution and improving process efficiencies.

    Cash and cash equivalents balance
    $173M
    Q2 FY26

    Balance at quarter end.

    Share repurchases
    $51.2M
    Q2 FY26

    Amount of SPS shares repurchased.

    Stock-based compensation expense
    $16.4M
    Q3 FY26

    Expected expense for Q3 FY26.

    Depreciation expense
    $5.4M
    Q3 FY26

    Expected expense for Q3 FY26.

    Amortization expense
    $8.5M
    Q3 FY26

    Expected expense for Q3 FY26.

    Stock-based compensation expense
    $69.8M
    FY26

    Expected expense for full year FY26.

    Depreciation expense
    $23.4M
    FY26

    Expected expense for full year FY26.

    Amortization expense
    $35.6M
    FY26

    Expected expense for full year FY26.

    Fully diluted weighted average shares outstanding
    36.8M
    Q3 FY26

    Expected shares outstanding for Q3 FY26.

    Fully diluted weighted average shares outstanding
    36.9M
    FY26

    Expected shares outstanding for full year FY26.

    Loss on sale of 3P revenue recovery business
    $23.5M
    Q2 FY26

    Loss incurred in connection with the transaction.

    3P revenue recovery divestiture cash payment
    $9.5M
    Q2 FY26

    Cash payment received at closing of the divestiture.

    3P revenue recovery divestiture revenue reduction
    $10.5M
    H2 FY26

    Expected reduction to revenue in the second half of 2026 due to the divestiture.

    1P customer count change
    down over 200sequentially
    Q2 FY26

    Sequential decline in 1P customer count, primarily affecting low ARPU customers.

    Customer count growth
    flat to slightly positive
    FY26

    Expected customer count for the full year.

    ARPU growth contribution to total growth
    2/3
    long-term

    Expected proportion of total growth from ARPU expansion in the long-term algorithm.

    Customer count contribution to total growth
    1/3
    long-term

    Expected proportion of total growth from customer count in the long-term algorithm.

    Customer AI readiness improvement
    83%
    Q2 FY26

    Percentage of customers who said the data in the SPS network improved their AI readiness.

    Customer scalability improvement
    87%
    Q2 FY26

    Percentage of customers who cited improved scalability with SPS.

    Customer headcount impact without SPS
    100%
    Q2 FY26

    Percentage of surveyed customers who said without the SPS network, they would need more headcount, tools, or time, or could not operate at current scale.

    Deduction recovery rate
    30%
    Q2 FY26

    Automated dispute management successfully recovered approximately 30% of outstanding deductions for Chosen Foods.

    Deduction recovery amount
    $1.4M
    6 months

    Alete recovered $1.4 million within 6 months using the solution, including 100% recovery on a $423,000 settlement.

    Post-audit challenge savings
    $200,000
    Q2 FY26

    Serta Simmons Bedding saved $200,000 by successfully challenging a post-audit with a large retailer.

    MAX time savings
    90%
    weekly

    MAX helped Branch Furniture achieve 90% weekly time savings in managing overdue orders from a key retail partner.

    Industry KPIs

    7
    MetricValueDetails
    Revenue growth$197.8MUSD
    Arr net new arr$15,100USD
    Customer account count46,650customers
    Gross retention renewal ratestrong
    Operating FCF margin rule of 4034%%
    Ai product adoption monetization83%%
    Net revenue net dollar retentionimproving

    Product announcements

    2
    ProductTypeDetails
    MAX AI agentlaunch
    Analytics solutionupdate

    Deals & partnerships

    1
    unnamedSale of 3P revenue recovery business$9.5M cash payment

    Divestiture of the 3P revenue recovery business to sharpen focus on strategic 1P suppliers. The business had approximately 7,300 customers.

    Risks & headwinds

    3
    ERP market slowdown2025 and so far this year (2026)

    Unquantified, but noted as impacting the medium to large end of the market.

    Mitigation: AI-enabled onboarding is expected to speed up customer time to value and act as a differentiator, helping to mitigate the impact of a slower ERP market.

    1P customer count declineQ2 FY26

    Down over 200 customers sequentially.

    Mitigation: Attributed to timing effects of retail enablement programs. Management expects a strong pipeline in H2 FY26 to lead to a flat to slightly positive customer count for the full year.

    Macroeconomic environmentCurrent

    Unquantified, but includes concerns like higher fuel costs, higher freight costs, and the 'cape economy'.

    Mitigation: Management states no substantial headwinds currently from customers. Prior tariff-related contract rightsizing in 2025 has dissipated, and these factors are being monitored but are not currently impacting customer engagement.

    What to watch in Q3 FY26

    4

    MAX AI Agent Monetization

    Late Q4 FY26
    CurrentBeta phase, general availability by end of summer
    TargetInitial sales and revenue contribution from autonomous agents

    Why it matters

    This is a key new revenue stream and ARPU expansion driver, indicating the success of the company's AI strategy.

    In terms of the timing of📎 all that, we expect that we will be in a position to be selling agents kind of by late Q4 of this year. Now obviously, that will take some time to flow through to revenue, but we do think we'll be in a position where we're actually monetizing this agent architecture still here this year.

    Q&A highlights

    8

    Why was the 3P revenue recovery business divested now, given previous positive outlook?

    Management explained that the 1P side of the business is more attractive due to greater overlap with their ideal customer profile (multi-retailer relationships) and better alignment with their portfolio, especially considering the 3P business's take-rate model and Amazon policy changes. The 3P business had less overlap with other parts of their portfolio.

    “The 1P sellers really can use our whole portfolio of revenue solutions across multiple retailers, whereas the 3P business was -- those were more Amazon Marketplace sellers there didn't turn out to be a lot of overlap with the other parts of our portfolio for those customers.”

    asked by Scott Berg · answered by Chad Collins

    2 min read6 chapters

    Detailed Narrative

    01

    Divestiture of 3P Revenue Recovery Business

    SPS Commerce divested its 3P revenue recovery business on June 30, 2026, receiving a cash payment of $9.5 million and incurring a loss on sale of $23.5 million in Q2 FY26. This strategic move aims to sharpen the company's focus on 1P suppliers who operate multi-retailer trading relationships, where there is greater overlap with SPS's core portfolio and a more attractive margin profile. The divestiture is expected to reduce H2 FY26 revenue by approximately $10.5 million but be neutral to adjusted EBITDA for the same period.

    02

    MAX AI Agent Launch and Impact

    The MAX AI agent, powered by SPS's network intelligence, is transitioning from its beta phase to general availability for all fulfillment customers by the end of summer. Beta customers have reported significant ROI, including cutting a $290,000 invoice failure, identifying 100 stalled drop-ship orders, and flagging $70,000 in unacknowledged purchase orders. The company plans to monetize autonomous agents by late Q4 FY26 through tiered subscriptions, converting successful chat-based problem-solving into automated solutions.

    03

    Enhanced Analytics Platform

    SPS Commerce has launched an enhanced analytics platform, delivering significant gains in power and scale. This new platform provides an improved user experience, enabling faster time to insight and supporting growing data volumes, broader use cases, and future AI predictive capabilities. It helps customers protect revenue, margin, and shelf space by catching risks early and uncovering new growth opportunities. Early feedback from customers, such as Raffles, has been highly positive, prompting consideration for adding more major retailers to their reporting.

    04

    Customer Success and Network Value

    A recent study of SPS customers quantified the value delivered, with 83% reporting improved AI readiness and 87% citing improved scalability due to the SPS network. 100% of surveyed customers stated they would require more headcount, tools, or time without SPS. Specific examples include Chosen Foods recovering approximately 30% of outstanding deductions, Alete recovering $1.4 million within six months, and Serta Simmons Bedding saving $200,000 by challenging a post-audit.

    05

    Operational Rigor and Margin Expansion

    The company demonstrated strong operational execution, exceeding its margin expansion goals. Adjusted EBITDA margin is projected to reach 34% at the midpoint of FY26 guidance, representing an increase of approximately 300 basis points compared to FY25. This improvement is attributed to economies of scale, strong operational efficiency, and optimizing processes, with future AI internal use cases expected to be additive to these gains.

    06

    Customer Count Dynamics and ARPU Growth

    Following the 3P divestiture, total recurring revenue customers were approximately 46,650. The 1P customer count was down sequentially by over 200 in Q2 FY26, primarily due to the timing of📎 retail enablement programs. However, the company expects the full-year customer count to be flat to slightly positive, with momentum from H2 enablement programs carrying into early FY27. SPS aims for ARPU expansion to drive a higher proportion of its growth, targeting a long-term algorithm of roughly two-thirds growth from ARPU and one-third from customer count.

    AI-generated summary of the company’s earnings call. Not investment advice.