SPS Commerce (SPSC) Q3 2025: Revenue Recovery Miss Drives 7%–8% FY26 Growth Reset

October 30, 2025 | By EarningsIQ Research

Revenue recovery weakness and delayed retail enablement programs forced SPS Commerce to reset its FY26 growth expectations, despite robust core fulfillment and recurring revenue gains. The company’s network-led, data-driven strategy and margin expansion remain intact, but near-term guidance reflects persistent spend scrutiny and shifting customer priorities. Investors should watch for execution on cross-sell and ARPU initiatives as the next leg of growth.

Summary

• Revenue Recovery Shortfall: Q3 and Q4 revenue recovery fell below plan, exposing new seasonality and Amazon-driven volatility.
• Retail Enablement Delays: Major retailer onboarding programs pushed into 2026, reducing near-term new customer adds and one-time fees.
• FY26 Growth Reset: Initial guidance for 7%–8% growth signals a more measured outlook as spend scrutiny persists.

Performance Analysis

SPS Commerce posted its 99th consecutive quarter of revenue growth, with total revenue up 16% and recurring revenue up 18% year-over-year, highlighting the underlying strength of its core network and fulfillment offerings. The fulfillment segment, which now represents a significant portion of recurring revenue, grew 20% YoY, reinforcing SPS’s value proposition for digital supply chain automation and trading partner connectivity.

However, the revenue recovery business—focused on identifying and reclaiming lost revenue for retail suppliers—came in $3 million below expectations, as Amazon’s inventory policy changes and shipment volume volatility revealed previously underestimated seasonality. This miss, compounded by continued customer spend scrutiny and the deferral of several large retail enablement programs to 2026, weighed on near-term growth and forced a downward revision in Q4 and FY26 revenue outlook. Margin performance remained a bright spot, with adjusted EBITDA up 25% YoY, driven by improved gross margin and operational efficiencies.

• Fulfillment Momentum: 20% YoY growth in fulfillment, now the primary engine of recurring revenue expansion.
• Revenue Recovery Volatility: Amazon policy shifts and shipment declines triggered a $3 million Q3 miss, with similar pressure expected in Q4.
• Customer Adds and Churn: Net new customers rose by 450, but 3P (third-party) customer churn increased, particularly in non-strategic segments.

Cash generation and capital returns remain strong, with $134 million in cash and a new $100 million share buyback authorization, signaling continued confidence in long-term value creation despite near-term turbulence.

Executive Commentary

Strategic Positioning

1. Network-Led Growth and Data Differentiation

SPS Commerce’s network-led growth motion—leveraging its vast trading partner ecosystem to identify and cross-sell new solutions—remains its core strategic moat. The company’s pricing model, based on network connections rather than seat licenses, is designed to be resilient to AI-driven automation and user count volatility. Management cited strong early pipeline results from AI-powered network analytics, identifying high-propensity customers for revenue recovery and other cross-sell offers.

2. Revenue Recovery: Opportunity and Volatility

The revenue recovery segment, built via the Carbon 6 and Supply Pike acquisitions, targets a $750 million U.S. addressable market but is now showing more pronounced seasonality and exposure to Amazon’s third-party (3P) marketplace dynamics. While the 1P (first-party, direct-to-retailer) segment remains stable and strategic, 3P volatility has led to increased churn and revenue unpredictability, especially as shipment volumes into Amazon warehouses fluctuate. Management remains bullish on long-term cross-sell potential, but investors should expect ongoing quarterly swings.

3. Retailer Enablement and Customer Lifecycle Expansion

Retail relationship management programs—where SPS partners with retailers to digitize and standardize supplier onboarding—drove a surge in new customer adds YTD. However, several major enablement campaigns were delayed into 2026, reflecting both retailer resource constraints and holiday season timing. The new Chief Commercial Officer, Eduardo Rossini, is tasked with maximizing customer lifetime value through expanded ARPU and retention, leveraging his ERP and global go-to-market experience.

4. Margin Expansion and Operational Leverage

Gross margin improvement was driven by automation and efficiency gains in customer onboarding and support, with additional leverage expected as AI is applied to sales, marketing, and customer success workflows. Management reiterated its long-term model of at least two percentage points of annual adjusted EBITDA margin expansion, underpinned by scalable network effects and disciplined cost management.

5. M&A and Geographic Expansion

M&A remains a core pillar, focused on consolidating the EDI (electronic data interchange) market, expanding the solution portfolio for existing customers, and selectively entering new geographies. While near-term growth is pressured, management’s M&A philosophy is unchanged, with cross-sell and network synergies prioritized over pure customer acquisition.

Key Considerations

This quarter marks a pivotal recalibration for SPS Commerce, as segment-specific headwinds and macro caution force a more conservative near-term growth posture. Investors should weigh the following:

Key Considerations:

• Revenue Recovery Volatility: Seasonality and Amazon policy shifts exposed new unpredictability in this emerging segment, impacting near-term growth rates.
• Retail Enablement Timing Risk: Deferred retailer onboarding programs will slow Q4 and early 2026 net customer growth, with a catch-up expected later in 2026.
• Spend Scrutiny and Supplier Margin Pressure: Persistent supplier cost inflation, including tariffs, has increased customer focus on ROI and delayed purchasing decisions.
• Margin Expansion Durability: Operational efficiency and automation continue to drive margin gains, partially offsetting topline volatility.
• Cross-Sell and ARPU Leverage: The company’s ability to monetize its customer base through expanded solutions and network analytics is increasingly central to the growth algorithm.

Risks

Revenue recovery remains exposed to Amazon policy changes and shipment volatility, with 3P customer churn likely to persist. Macro uncertainty and ongoing supplier cost pressures may further delay purchasing cycles and retailer enablement programs. The company’s growth reset to high single digits signals a new baseline, but execution on cross-sell and ARPU initiatives is critical to reaccelerate momentum. Investors should monitor for further margin expansion and signs of stabilization in the revenue recovery segment.

Forward Outlook

For Q4 2025, SPS Commerce guided to:

• Revenue of $192.7 million to $194.7 million (13%–14% YoY growth)
• Adjusted EBITDA of $58.8 million to $60.8 million

For full-year 2025, management maintained guidance:

• Revenue of $751.6 million to $753.6 million (18% YoY growth)
• Adjusted EBITDA of $229.7 million to $231.7 million (23%–24% YoY growth)

Initial 2026 guidance calls for 7%–8% revenue growth and two percentage points of adjusted EBITDA margin expansion, reflecting carryover effects from 2025 headwinds and a more measured outlook on retail and supplier spending.

• Revenue recovery expected to grow faster than the core business, but with higher volatility.
• Margin expansion remains a priority, driven by automation and efficiency initiatives.

Takeaways

SPS Commerce’s Q3 highlighted both the resilience of its core fulfillment engine and the growing pains of scaling new product lines in a volatile retail environment.

• Revenue Recovery Volatility: Amazon-driven shipment declines and seasonality forced a reappraisal of segment growth and predictability, with 3P customer churn set to continue.
• Retail Enablement Delays: Timing shifts in retailer onboarding programs will slow near-term customer growth, but the pipeline for 2026 remains intact.
• Margin Expansion and ARPU Focus: Efficiency gains and a shift to maximizing revenue per customer are now central to the company’s growth story, with execution on cross-sell and onboarding automation as key watchpoints.

Conclusion

SPS Commerce delivered strong core growth and margin expansion, but revenue recovery volatility and delayed retail programs prompted a reset to high single-digit growth expectations for 2026. The company’s network-led strategy and margin discipline remain strengths, but near-term execution on cross-sell and ARPU will determine if growth can reaccelerate as macro headwinds persist.

Industry Read-Through

SPS Commerce’s results highlight the growing sensitivity of retail technology providers to supplier cost inflation, Amazon policy changes, and shifting retailer priorities. The pronounced volatility in revenue recovery underscores the risk of overreliance on marketplace-driven segments and the importance of diversified, network-based business models. The delayed timing of retailer enablement programs is likely to impact other supply chain SaaS and B2B integration providers, especially those dependent on large onboarding projects. Margin expansion through automation and customer lifecycle management is emerging as a key differentiator across the broader retail tech sector.

SPSC Technology Supply Chain Recurring Revenue Margin Expansion Retail Enablement Revenue Recovery ARPU