What They Do
Manhattan Associates provides cloud-based supply chain and omnichannel commerce software solutions for retailers, manufacturers, and logistics providers. They solve critical inventory management, warehouse optimization, and order fulfillment challenges that help companies deliver products faster and more efficiently. The company generates revenue through cloud subscriptions (growing 21% annually), software licenses, and implementation services.
Investment Thesis
**Cloud transformation accelerating** — Cloud revenue hit $408M (+21% YoY) with ramped ARR exceeding $600M, while remaining perpetual license customers create a large conversion opportunity**AI monetization opportunity** — Just launched commercial AI agents across entire cloud base of customers, with management calling it the first company-wide upsell opportunity since cloud launch**Strong competitive moat** — Win rates above 70% and 75% of Q4 cloud bookings from new customers demonstrate market share gains in mission-critical supply chain softwareKey Risks
**Services revenue volatility** — Services segment ($503M, -4% in 2025) just returned to growth in Q4, creating execution risk as they ramp 100 new hires**Customer concentration pressure** — Customer liquidation already created $2.5M annualized revenue headwind, highlighting vulnerability to retail/logistics customer healthGrowth Story
Revenue is expected to grow 6.5% in 2026 to $1.146B, with cloud revenue driving the expansion at 21% growth while legacy license/maintenance naturally declines. The company is positioned to capture share in the $15B+ supply chain software market as customers prioritize digital transformation and AI-powered optimization. New AI agents represent a significant incremental revenue opportunity beyond current conservative guidance.
Profitability Profile
Manhattan Associates demonstrates best-in-class SaaS economics with 55.7% gross margins and expanding operating margins (35.8% in 2025, up 100+ bps YoY). The company generates strong free cash flow ($389M in 2025, +32% YoY) with 34.6% FCF margins, enabling aggressive capital returns including $275M in share repurchases. Operating leverage from cloud transition and AI upsells should drive continued margin expansion.
Competitive Position
Manhattan Associates holds a leading position in supply chain execution software, competing against SAP, Oracle, and Blue Yonder with superior win rates above 70%. Their differentiation comes from deep vertical expertise in retail/logistics and seamless omnichannel capabilities that integrate inventory, warehouse, and order management. The new AI agent platform strengthens their moat by delivering immediate productivity gains without requiring complex data infrastructure.
Recent Momentum
Q4 delivered record cloud bookings driving RPO to $2.2B (+25% YoY) and marked the return of services revenue growth ahead of plan. The commercial launch of AI agents after successful pilot programs represents a major catalyst, with management highlighting this as their first opportunity to upsell the entire cloud customer base simultaneously. Strong new logo acquisition (75% of Q4 cloud bookings) demonstrates continued market share gains.
What Wall Street Thinks
Analysts are cautiously optimistic about the AI monetization opportunity and cloud conversion acceleration, though services execution remains a key focus area. The company's conservative guidance approach and strong competitive positioning in a defensive software vertical appeal to growth-at-reasonable-price investors. Consensus expects steady 6-8% revenue growth with expanding margins as the cloud mix increases.
The Bottom Line
Manhattan Associates is a profitable, cash-generative leader in mission-critical supply chain software with a newly launched AI platform that could meaningfully accelerate growth beyond conservative guidance assumptions.
