SPS Commerce (SPSC) Q2 FY26 earnings call: guidance and Q&A

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

How did the divestiture impact the ARPU calculation in Q2, and how should investors think about its impact in Q3?

The Q2 ARPU calculation was skewed higher because the full quarter's revenue included the divested 3P business, but the ending customer count did not. Going forward, ARPU will be more consistent as only 1P customers will be included in both revenue and customer count for the full period.

“So we had those 7,300 3P customers in the beginning customer account, but they weren't in the ending customer count -- and then that's compared against the revenue in the quarter and the full 3P revenue was in the quarter, but not the ending customer accounting. So because of that, the ARPU overall skewed higher than it normally would have.”

asked by Scott Berg · answered by Joseph Del Preto

Now that the focus is solely on the 1P side of revenue recovery, how will resources and investment be allocated, and does it warrant incremental investment?

The 1P business is nearing consistency with the overall company's margin profile and is not receiving oversized investment. The divestiture helps focus on the product and customer overlap with the network, making it a well-aligned part of the business.

“The 1P business, I would say, is nearing consistent with our overall margin profile in the business overall. It wasn't that way right out of the gate with divest with the acquisition of Supply Pike and Carbon 6. But as that has gotten more integrated into our overall business, it's more approaching our overall margin profile.”

asked by Jackson Bogle · answered by Joseph Del Preto

Are AI-enabled customer onboardings changing customer readiness or attach rates, and are migration delays building pent-up expansion demand?

AI-enabled onboarding significantly speeds up simpler cases from days to minutes. While more complex ERP integrations will also benefit, the ERP market has been slower. Management doesn't see substantial pent-up demand but views the speed of AI-enabled onboarding as a massive differentiator for customer time to value.

“I wouldn't necessarily say that there's substantial pent-up demand just kind of waiting for this. Admittedly, the ERP market has been a little bit slower in 2025 and so far this year, especially at the kind of medium to large end of that market.”

asked by Jackson Bogle · answered by Chad Collins

What are management's thoughts on the macro environment and customer feedback regarding higher fuel/freight costs or the 'cape economy'?

Management reported no substantial headwinds from customers regarding the macro environment. The tougher 2025 due to tariffs has dissipated, and while fuel prices and tariff uncertainty are monitored, they are not currently impacting customer engagement.

“I mean, I would say no substantial headwinds we're hearing from our customers relative to the macro we were coming off a tougher 2025, especially on the supplier side of our network where they did cite some headwinds related to tariffs and that did cause some contract rightsizing last year.”

asked by Christopher Quintero · answered by Archie Black

Given the positive MAX beta anecdotes, how is management thinking about market sizing, potential uplift, and the evolving packaging and pricing strategy?

MAX chat users are identifying supply chain anomalies and achieving ROI. The strategy is to convert these chat-based actions into autonomous agents, which will be monetized through tiered subscriptions. Sales of these agents are expected to begin by late Q4 FY26, initially targeting larger, more complex customers.

“What we believe the major monetization activity will be is when we deliver those agents on top of that, that are more autonomous and self acting that customers will be willing to pay for that. And that's really where the monetization would come in.”

asked by George Kurosawa · answered by Joseph Del Preto

What is the expected adoption cycle for MAX monetization among existing customers, when will bundles be in place, and what uplift is expected?

Management expects strong agent adoption, as MAX chat is already becoming a primary interface. They anticipate selling agents by late Q4 FY26, with initial monetization targeting larger, more complex customers. The degree of ARPU uplift is still being worked through, but the focus is on automating tasks currently done via chat.

“I do think the first set of agents that we put out are going to be probably more addressable for the more highly complex customers with more trading relationships. And over time, we'll be able to bring that back down to more of our medium and small customers over time.”

asked by Matt Van led · answered by Chad Collins

What are the drivers behind the improving Gross Revenue Retention (GRR) that the company is seeing?

Improving GRR is attributed to a combination of factors: a more favorable macro environment (less headwinds than 2025), improvements in customer treatment strategy, and new innovation (MAX, revenue recovery, analytics) demonstrating long-term partnership value to customers.

“I do think a little bit is macro. We did see some headwinds last year in our customer base that drove them to kind of rightsize some contracts. We're not seeing that this year. The other factor is, I believe, we've made some improvements in our customer treatment strategy.”

asked by Nehal Chokshi · answered by Joseph Del Preto