Hackett Group (HCKT) Q4 2025: SAP Segment Jumps 32% as GenAI Platforms Reshape Delivery Model
Hackett Group’s aggressive pivot to GenAI-enabled platforms is beginning to show both operational leverage and business model transformation, even as legacy segments face pressure. SAP-driven growth and the rollout of proprietary AI tools underpin a shift from labor-based to platform-led services, setting the stage for margin expansion and new revenue streams in 2026. Investors should focus on execution of licensing, channel partnerships, and the pace of client adoption as the company moves deeper into the agentic enterprise era.
Summary
- GenAI Platform Rollout: Proprietary AI Explorer, XT, and AIX platforms are now fully licensable, moving delivery toward labor-led models.
- SAP-Driven Growth: SAP Solutions segment delivered standout performance, offsetting declines in other business lines.
- Margin Expansion Focus: Productivity gains from AI enablement and outcome-based pricing are expected to drive margin improvement in 2026.
Performance Analysis
Hackett Group’s Q4 2025 results reflect a business in transition, with total revenues before reimbursements of $74.8 million, exceeding the high end of guidance. The SAP Solutions segment was the clear growth engine, rising 32% year-over-year, fueled by strong software-related sales and increased client demand for S4 HANA Cloud migrations. SAP now represents a material and growing share of overall revenue, a shift from previous quarters dominated by legacy consulting and Oracle implementation work.
Conversely, the Global SMBT segment, which houses GenAI consulting and transformation offerings, declined 11% year-over-year, and Oracle Solutions fell 20%, illustrating the disruption of legacy lines as clients pivot toward AI-enabled services. Gross margin compressed slightly to 46.6%, with SG&A rising due to higher commissions from SAP license sales. Adjusted EBITDA margin declined to 21.3%, reflecting the cost of transition and investment in new platforms. Notably, recurring multi-year and subscription revenue now comprises 22% of the total, a signal of the company’s shift toward more predictable, IP-driven income streams.
- SAP Outperformance: SAP Solutions revenue surge was attributed to both software sales and implementation fees, validating increased sales investment and SAP’s cloud migration success.
- Legacy Headwinds: Declines in SMBT and Oracle segments underscore the near-term impact of client hesitation and the disruptive nature of the GenAI pivot.
- Cash Flow and Capital Return: Strong operating cash flow enabled a $42 million share repurchase and continued dividend, even as debt rose to fund buybacks.
Overall, the quarter highlights a business model in flux, with SAP-led growth and GenAI platform adoption offsetting legacy decline and supporting the path to higher-margin, recurring revenue streams.
Executive Commentary
"By embedding our IP into our new platforms and models, We believe we will be able to generate new revenue with higher margins in entirely new ways that allow us to deliver breakthrough value to clients."
Ted Fernandez, Chairman and CEO
"AI is becoming an increasing percentage of all of our client engagements as the convergence of traditional and new AI-oriented services is occurring at an accelerated rate. Given our expanded platform delivery capabilities, we can accelerate value realization and realize productivity improvements utilizing our XT and AI Explorer platforms."
Rob Ramirez, Chief Financial Officer
Strategic Positioning
1. GenAI-Enabled Platform Suite
Hackett has fully commercialized a suite of GenAI-enabled platforms—AI Explorer, XT, and AIX— each targeting a distinct service line. AI Explorer, powered by the proprietary Hackett solution language model, is positioned as a differentiator for enterprise-wide solution design and ROI modeling. This platform-centric approach is intended to shift the business from labor-based delivery to labor-led services, enabling both margin expansion and scalability.
2. SAP-Led Revenue Shift
The SAP Solutions segment stands out as a growth driver, benefiting from industry-wide S4 HANA Cloud migrations and Hackett’s increased sales investment. This segment’s robust performance is offsetting declines in legacy consulting and Oracle work, and management expects continued strength throughout 2026 as SAP’s cloud transition accelerates.
3. Channel and Licensing Expansion
Strategic channel partnerships and licensing are central to Hackett’s growth thesis. The company is finalizing a global collaboration with a major technology and consulting partner after a six-month pilot, aiming to scale AI Explorer adoption. Additionally, a ServiceNow pilot is launching, targeting joint go-to-market opportunities. The move to license platforms for client self-service and recurring revenue is a marked shift from traditional consulting models.
4. Outcome-Based Pricing and Productivity Gains
Hackett is transitioning its pricing model from billable hours to outcome-based fees, leveraging GenAI to deliver faster, higher-value results. Early data show productivity improvements exceeding 25% in some engagements, with headcount reductions in low-leverage roles as AI platforms automate routine tasks. This operational leverage is expected to drive margin expansion as the new model scales.
5. Recurring Revenue and IP Monetization
Recurring, subscription-based revenues now represent over one-fifth of total sales, driven by executive advisory, application maintenance, and GenAI license contracts. Management expects this mix to grow as clients adopt Hackett’s platforms post-engagement, further stabilizing cash flow and supporting valuation multiples.
Key Considerations
Hackett Group’s quarter is defined by a deliberate and disruptive pivot to GenAI-enabled service delivery, with implications for revenue mix, margin structure, and client engagement models.
Key Considerations:
- SAP as a Growth Anchor: Continued SAP outperformance is critical for offsetting near-term volatility in legacy and Oracle segments.
- AI Platform Monetization: Success in licensing AI Explorer and other platforms will be a key determinant of recurring revenue growth.
- Channel Leverage: Execution of global partnerships could accelerate client access and adoption, but timing and scale remain uncertain.
- Operational Leverage from AI: Headcount reductions and productivity gains are beginning to materialize, but require careful management to avoid service disruption.
- Shift to Outcome-Based Pricing: Transitioning clients to outcome-based models may face resistance or require education, impacting near-term deal cycles.
Risks
Risks center on the pace and breadth of client adoption of GenAI platforms, as legacy revenue headwinds continue and the company absorbs transition costs. Competitive intensity in both AI consulting and enterprise software, execution risk in scaling channel partnerships, and potential client confusion around emerging technologies all pose challenges. Elevated SG&A and restructuring charges could pressure margins if productivity gains lag expectations or if recurring revenue adoption is slower than forecast.
Forward Outlook
For Q1 2026, Hackett guided to:
- Total revenues before reimbursements of $70.5 million to $72 million
- Adjusted diluted net income per share of $0.34 to $0.36
For full-year 2026, management expects:
- Sequential revenue and gross margin improvement throughout the year
- AI transition charges of $1 million to $1.5 million in Q1, with possible additional charges as AI-led delivery expands
Management cited ongoing SAP momentum, the rollout of AI platform licensing, and the launch of major channel partnerships as key growth drivers. They expect productivity improvements and outcome-based pricing to support margin expansion, while recurring revenue mix continues to rise.
- SAP revenue strength to persist
- Ongoing investment in GenAI transition and platform innovation
Takeaways
Hackett Group is executing a high-stakes transition from legacy consulting to a GenAI-enabled, platform-led model, with SAP performance and proprietary IP as key growth levers. The company’s ability to monetize new platforms, scale channel partnerships, and deliver on promised productivity gains will determine its trajectory in 2026 and beyond.
- SAP’s outsized growth is stabilizing overall results, providing cover for the GenAI transition and funding continued investment in platform innovation.
- Licensing and channel execution are pivotal, as management bets on recurring revenue and outcome-based pricing to reshape the business model and drive margin expansion.
- Investors should monitor adoption rates, client migration to platform solutions, and the pace of recurring revenue growth as leading indicators of sustainable transformation.
Conclusion
Hackett Group’s Q4 2025 results underscore a business at an inflection point, with SAP-driven growth balancing legacy headwinds and GenAI-enabled platforms poised to redefine delivery and margins. The company’s success will hinge on execution of its platform strategy, client adoption, and the ability to scale new revenue streams while managing transition risks.
Industry Read-Through
Hackett’s experience highlights the disruptive yet expansive impact of GenAI on consulting and enterprise software services. As clients demand more outcome-based, platform-enabled solutions, traditional labor-based models face margin pressure and competitive displacement. The SAP migration wave and the move toward IP-driven, recurring revenue are themes likely to play out across the IT services and digital transformation landscape. Vendors that can combine proprietary process knowledge, platform innovation, and channel leverage will be best positioned to capture share in the agentic enterprise era. The shift toward cognitive automation and digital labor is set to expand the addressable market for both software and services, but execution risk and client education will remain key hurdles for incumbents and challengers alike.