What SPS Commerce (SPSC) Said on Its Q3 Earnings Call

Key Points

• Q3 revenue rose 4% to $197.6 million, while adjusted EBITDA increased 17% to $70.9 million, lifting the margin to 36% and exceeding SPS Commerce’s long-term target.
• Amazon policy changes and the Revenue Recovery divestiture reduced reported growth by 500 basis points and led management to lower its outlook, though underlying revenue growth remains in the high-single-digit range.
• SPS highlighted growing adoption of its AI-powered MAX tools and expects advanced agent capabilities to become monetizable in 2027; it also repurchased $48.8 million of shares during the quarter.

SPS Commerce NASDAQ: SPSC reported third-quarter 2026 revenue growth of 4% as the company expanded profitability and highlighted growing use of its AI-driven supply-chain tools, while Amazon policy changes and the divestiture of a revenue-recovery business weighed on reported growth.

Revenue for the quarter totaled $197.6 million, up 4% from the prior-year period, with recurring revenue also increasing 4%, Chief Financial Officer Joe Del Preto said. The company said the June 30 divestiture of its third-party Revenue Recovery business and the performance of its first-party Amazon take-rate business together reduced reported revenue growth by 500 basis points.

Adjusted EBITDA rose 17% year over year to $70.9 million, or 36% of revenue, exceeding the company’s long-term 35% margin target. Adjusted gross margin improved 170 basis points to 73%, excluding stock-based compensation. SPS ended the quarter with $184 million in cash equivalents and short-term investments and generated $58.5 million in free cash flow.

Amazon changes weigh on Revenue Recovery

Del Preto said Amazon policy changes and a faster-than-expected shift of certain customers from take-rate contracts to subscriptions accounted for all of the reduction in SPS Commerce’s revenue outlook. Without those factors, he said, the company would have raised its full-year revenue guidance.

Under the take-rate model, SPS recognizes revenue as a percentage of funds successfully recovered for Amazon suppliers. Del Preto said recent Amazon policy changes reduced recovery yields for the company’s first-party take-rate customers. Chief Executive Officer Chad Collins said the changes involved circumstances in which suppliers make short shipments to Amazon, as well as processes governing the company’s ability to resubmit certain disputes.

Management said the majority of the impact came from Amazon policy changes, rather than from customers converting to subscriptions. Still, Collins said the company views subscription conversions positively over the long term, particularly as SPS adds features intended to help customers prevent chargebacks rather than only recover funds after the fact.

“If you exclude the Amazon take rate portion, Revenue Recovery is the fastest-growing portion of our overall business,” Collins said. He added that take-rate pricing remains common in the Amazon Revenue Recovery market and can be important in winning enterprise customers, even as SPS leads its go-to-market strategy with subscriptions.

AI tools and onboarding initiatives

Collins emphasized the company’s agentic AI strategy, centered on its MAX offering, which is now available to all Fulfillment customers. MAX uses SPS network data, trading-partner activity and retailer-specific compliance rules to identify supply-chain anomalies and guide users through workflows, according to the company.

SPS cited several customer examples to illustrate the potential financial impact of the platform. Sporting-equipment supplier RIP-IT Sports saved $200,000 in its first week using MAX after the system flagged chargebacks and late receivables, Collins said. The company also said MAX found more than 200 shipment-status failures involving beverage brand Zevia and a third-party logistics provider, potentially avoiding delays in invoicing and receivables.

The company is also using AI internally to accelerate customer onboarding. Collins said hundreds of suppliers have achieved full compliance with new trading partners within 24 hours through agentic onboarding, while some more complex ERP integration and onboarding projects have been completed in fewer than 30 days.

Management said the financial contribution from agentic onboarding to third-quarter gross-margin expansion was minimal because the rollout remains early. Del Preto said much of the year-to-date margin improvement instead reflected process improvements made over the past 12 to 15 months. He expects agentic onboarding to become a more meaningful contributor over the next 12 to 18 months as the technology is extended across more ERP integrations and customer types.

MAX’s advanced agent capabilities are expected to become a monetizable offering in 2027. Collins said SPS will prioritize customer adoption rather than attempting to maximize pricing immediately. The company has about 20 customers participating in co-development of MAX Agents and expects its early-adopter program to expand to roughly 200 customers as it moves from the fourth quarter into the first quarter.

Customer metrics and growth priorities

SPS ended the quarter with 46,700 recurring-revenue customers and average revenue per customer of $16,200. The divestiture removed approximately 7,300 smaller third-party Revenue Recovery customers, which increased average revenue per customer.

Collins said retail enablement activity was strong during the quarter and continued into the fourth quarter, with some momentum expected to carry into 2027. The activity skewed more toward average-revenue-per-customer growth than customer-count growth. Management said growth is increasingly expected to come from expanding existing customer relationships, adding more trading connections, and cross-selling Analytics, Revenue Recovery and future MAX Agent products.

The company has rebranded and replatformed its analytics product as Decision Intelligence. Collins said retention metrics for customers on the new platform have been more favorable than under the prior platform, and SPS expects to launch additional AI capabilities for Decision Intelligence in the first half of 2027.

Guidance and capital allocation

For the fourth quarter, SPS forecast revenue of $199.3 million to $201.3 million, representing approximately 4% growth at the midpoint. Excluding the Amazon take-rate and divestiture impacts, underlying revenue growth is expected to be 8% to 9%. The company forecast adjusted EBITDA of $72 million to $74 million and non-GAAP diluted earnings per share of $1.31 to $1.36.

For full-year 2026, SPS expects revenue of $786.9 million to $788.9 million, or approximately 5% growth at the midpoint. Excluding the previously cited impacts, the company expects underlying full-year revenue to grow at a high-single-digit rate. Full-year adjusted EBITDA is projected at $267.4 million to $269.4 million, implying a 34% margin at the midpoint.

During the third quarter, SPS used 84% of its free cash flow to repurchase $48.8 million of company shares. Del Preto said buybacks are currently the company’s primary capital-allocation focus, though management will continue to evaluate its options over time.

About SPS Commerce (NASDAQ:SPSC)

SPS Commerce, Inc provides cloud-based supply chain management software for retailers, suppliers, distributors and logistics providers. Its platform helps businesses manage and automate transactions and workflows across complex retail and e-commerce networks.

The company's solutions include electronic data interchange (EDI), order management, inventory visibility, fulfillment, invoice and payment processing, product information management, and supply chain analytics. These tools are designed to connect trading partners, reduce manual data entry, improve order accuracy and support more efficient movement of products from suppliers to consumers.

Founded in 2001 and headquartered in Minneapolis, Minnesota, SPS Commerce serves businesses across retail and wholesale ecosystems in North America and other international markets.

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