Executive Summary / Key Takeaways

• Cloud-Native Dominance: Manhattan Associates is solidifying its market leadership through a robust cloud-native, microservices-based platform, driving significant cloud subscription revenue growth (21% in Q3 2025) and expanding its total addressable market.
• AI-Driven Differentiation: The company's strategic investments in Agentic AI, including Manhattan Assist and the Agent Foundry, offer tangible, real-time operational benefits, enabling rapid deployment of intelligent agents in minutes and widening its competitive moat.
• Strategic Growth Vectors: MANH is actively pursuing growth through new customer acquisition (50% of new cloud bookings year-to-date), cross-selling its unified product portfolio, and a proactive, fixed-fee conversion program for on-premise customers, supported by strengthened sales and marketing.
• Resilient Financials Amidst Headwinds: Despite macroeconomic volatility impacting services revenue (down 3% in Q3 2025), strong cloud performance and operational leverage are driving healthy adjusted operating margins (37.5% in Q3 2025) and robust free cash flow, with RPO growing 23% to $2.1 billion.
• Positive Outlook: Management anticipates continued 20% cloud revenue growth in 2026, a return to services growth, and margin expansion, underpinned by a significant upcoming renewal cycle and ongoing innovation.

The Unseen Backbone of Global Commerce: Manhattan Associates' Strategic Evolution

Manhattan Associates, Inc., founded in 1990, has evolved into a critical enabler of global commerce, providing sophisticated software solutions that manage supply chains, inventory, and omnichannel operations for a diverse client base. The company's core mission is to optimize these complex processes, a necessity amplified by the digital transformation sweeping through manufacturing, wholesale, and retail sectors. MANH's foundational strength lies in its unwavering commitment to organic innovation, particularly its nearly $1 billion investment in research and development since embarking on its cloud journey. This strategic pivot to a cloud-native architecture has not only reshaped its product portfolio but also fundamentally altered its business model, driving a shift towards recurring subscription revenue.

The industry landscape in which Manhattan Associates operates is intensely competitive and characterized by rapid technological change. Key competitors include enterprise software giants such as SAP SE , Oracle Corporation , and IBM Corporation (IBM), all offering supply chain and logistics capabilities within their broader portfolios. While these larger players boast extensive global reach and diversified offerings, Manhattan Associates distinguishes itself as a specialized market leader, particularly in omnichannel and supply chain software solutions, a position recognized by industry analysts like Gartner and ARC Advisory Group. Its competitive strategy centers on delivering best-in-class functionality and superior operational execution, often leading to faster implementations and more tailored solutions for specific industries like grocery, food distribution, and third-party logistics.

Broad industry trends underscore the criticality of MANH's offerings. The turbulent global macroeconomic environment, marked by geopolitical volatility and fluctuating tariffs, has made precise inventory management and agile supply chain execution more vital than ever. Past disruptions, such as the COVID-19 pandemic, have consistently demonstrated that companies with the most agile supply chains are those that excel, creating enduring demand for Manhattan Associates' products. Furthermore, the accelerating trend towards B2B order fulfillment mirroring direct-to-consumer experiences, coupled with customers reevaluating ERP workloads in the cloud, presents significant opportunities for MANH's specialized, agile solutions.

Technological Edge: The Manhattan Active Platform and Agentic AI

At the heart of Manhattan Associates' competitive advantage is its Manhattan Active platform, a truly cloud-native, microservices-based, and API-first architecture. This foundational technology offers tangible benefits that directly translate into operational efficiency and strategic agility for its customers. Unlike traditional monolithic systems, the Manhattan Active platform enables continuous innovation and updates with zero downtime, ensuring customers always have access to the latest features and security enhancements. This architecture allows for unparalleled speed and flexibility in deployment, a critical differentiator in today's fast-paced market.

The company's investment in Agentic AI is a testament to its technological leadership. Manhattan Associates is embedding purpose-built agents across its entire Manhattan Active suite, focusing on high-impact use cases that empower users and automate complex processes. For instance, in Manhattan Active Warehouse, agents monitor operational performance in real-time, providing recommendations for wave planning to significantly enhance productivity. In Active Transportation, freight audit and pay agents automate the induction and payment of freight bills, boosting efficiency, speed, and accuracy while minimizing human intervention. The "so what" for investors is clear: this cloud-native AI approach eliminates the need for data lakes or concerns about latency and security, allowing agents to be deployed "in minutes, not months." This rapid time-to-value strengthens MANH's competitive moat, drives customer satisfaction, and expands its total addressable market by making sophisticated solutions more accessible.

Beyond these out-of-the-box agents, the Manhattan Active Agent Foundry empowers customers to build their own custom agents within the platform using MANH's extensive API library. This capability, combined with Manhattan Assist, which has serviced hundreds of thousands of inquiries and can now incorporate customer-specific operational documentation, further deepens customer engagement and value. The company's R&D initiatives also include new product offerings like Enterprise Promise & Fulfill (EPF), launched in Q1 2025, designed to augment existing ERPs by providing B2B customers with real-time inventory visibility, intelligent order promising, and fulfillment optimization. EPF serves as a "natural bridge" between supply chain planning and execution, facilitating forecasting, procurement, and selling across the widest possible market. The company's first Manhattan Active Supply Chain Planning customer, a pet supplies retailer, is expected to be live by mid-2025, demonstrating the early success and unification potential of these new solutions.

Financial Performance and Operational Momentum

Manhattan Associates' financial performance reflects its successful cloud transition and operational effectiveness, even as it navigates a challenging macroeconomic climate. For the nine months ended September 30, 2025, total revenue reached $811.003 million, a 3% increase over the prior year. Cloud subscriptions revenue was a primary growth driver, surging 21% year-over-year to $299.580 million for the nine-month period and 21% to $104.852 million in Q3 2025 alone. This segment now constitutes 38% of total revenue in Q3 2025, underscoring the shift in the company's revenue mix. The robust growth in cloud subscriptions is a direct outcome of customer preference for cloud-based solutions and successful migrations from on-premise offerings.

Despite the strong cloud performance, the services segment experienced headwinds. Services revenue decreased 6% to $383.033 million for the nine months ended September 30, 2025, and 3% to $133.007 million in Q3 2025. This decline was primarily attributed to "customer budgetary constraints that shifted services work to future periods," particularly impacting professional services revenue related to cloud subscriptions. In response, the company undertook a restructuring in January 2025, eliminating approximately 100 positions to align services capacity with demand, incurring a $2.9 million restructuring expense. Maintenance revenue also saw a decline, decreasing 7% to $97.693 million for the nine months ended September 30, 2025, as customers continued to convert to cloud subscriptions.

Profitability metrics demonstrate strong operating leverage from the scaling cloud business. Adjusted operating income for the nine months ended September 30, 2025, was $212.788 million, up 6% year-over-year, with an adjusted operating margin of 26.2%. In Q3 2025, adjusted operating profit reached $103 million, yielding an impressive adjusted operating margin of 37.5%, "nicely ahead of plan." Diluted earnings per share for the nine months ended September 30, 2025, was $2.75.

Manhattan Associates maintains a strong liquidity position, with $263.555 million in cash and cash equivalents and no debt as of September 30, 2025.

Operating cash flow for the nine months ended September 30, 2025, was robust at $242.420 million, a 27% increase year-over-year, partly benefiting from a decrease in cash taxes owed due to the acceleration of domestic R&D expenditure deductions. The company actively returns capital to shareholders, repurchasing approximately $199.5 million of common stock year-to-date through Q3 2025, and its Board approved an additional $100 million share repurchase authority in October 2025.

Competitive Positioning and Strategic Responses

Manhattan Associates' competitive standing is defined by its specialized focus and technological superiority within the supply chain commerce ecosystem. The company consistently achieves strong win rates, reporting approximately 70% against its top five competitors. This success is largely attributed to its unified cloud-native platform, which allows for rapid innovation and deployment of features. While larger rivals like SAP (SAP) and Oracle (ORCL) offer broader enterprise suites, MANH's dedicated focus on supply chain and omnichannel solutions often translates into greater functional depth and agility, particularly in areas like warehouse management and order management. For instance, no other provider has been named a leader in both Point of Sale and omnichannel order management by Forrester, a distinction MANH holds.

The company's Agentic AI capabilities further differentiate it. Unlike competitors who may rely on data lakes and external processing, MANH's AI agents operate natively within its platform, eliminating latency and security concerns. This allows for "deploy in minutes, not months," a significant advantage over more complex, integration-heavy solutions offered by some rivals. This technological edge enables MANH to continuously expand its product footprint and "mak the gap between us and the competition, bigger and bigger every quarter."

Manhattan Associates is strategically responding to competitive dynamics and market shifts through several initiatives:

• Sales and Marketing Expansion: The company is making incremental investments in sales and marketing, including hiring new sales leaders and product specialists for areas like Point of Sale and Transportation Management, and expanding key go-to-market partnerships with Google Cloud (GOOGL) and Shopify (SHOP). The availability of Manhattan Active solutions on Google Cloud Marketplace and a connector app for Manhattan Active Order Management in the Shopify App Store streamline procurement and deployment for customers.
• Proactive Conversion Programs: Recognizing that approximately 80% of its on-premise customers have yet to migrate to the cloud, MANH is adopting a "more proactive and consultative approach" to conversions. This includes offering fixed-fee, fixed-timeline conversion options for cohorts of similar customers, a strategy designed to accelerate cloud adoption and generate new cloud and services revenue.
• Unified Platform Leverage: The "unification story" is resonating, with "exceptional cross-sell results." Roughly 80% of customers buying Manhattan Active Transportation Management also purchased Manhattan Active Warehouse Management over the past five quarters, demonstrating the value of its integrated solutions. An engineering team is solely focused on building unified functional advantages, and a product council co-innovates with customers.
• Operational Efficiency: The company is leveraging automation and AI to "reduce implementation timelines" and complexity, which "absolutely makes our TAM bigger" by making its solutions more accessible and faster to deliver ROI.

Outlook and Guidance: Fueling Future Growth

Manhattan Associates' outlook for 2025 and preliminary parameters for 2026 underscore its confidence in sustained growth, driven by its cloud strategy and innovation. For the full year 2025, the company expects to achieve "toward the high end of our full year 2025 RPO outlook," targeting $2.11 billion to $2.15 billion, excluding FX movements. Total revenue is projected to be between $1.03 billion and $1.077 billion, with a midpoint of $1.075 billion, reflecting year-to-date outperformance. Adjusted operating margin is expected to increase its midpoint to 35.6%, demonstrating continued operating leverage. Full-year adjusted diluted EPS is guided to $4.96 at the midpoint.

Looking ahead to 2026, management "continue to expect 20% cloud revenue growth." This projection is supported by a robust Remaining Performance Obligation (RPO) of $2.1 billion as of Q3 2025, strong bookings, an expanding total addressable market (TAM), and strategic investments to accelerate sales velocity. A significant factor underpinning this confidence is the upcoming major renewal cycle, particularly for Manhattan Active Warehouse Management customers, which is expected to "pick up pace next year." These renewals are anticipated to drive higher RPO and subscription revenue due to increased usage, cross-sell opportunities (e.g., for newer products like Transportation Management or AI agents), and potential price increases. Services revenue is also expected to return to growth in 2026, with maintenance attrition accelerating as more customers migrate to the cloud. The company anticipates adjusted operating margin to expand by 50 to 75 basis points in 2026, even with increased investments in sales and marketing.

Risks and Challenges

Despite the compelling growth narrative, investors should consider several key risks. The "turbulent global macro environment" remains a significant concern, potentially leading to "extended" sales cycles for large cloud subscriptions and impacting customer enterprise software buying decisions. Customer budgetary constraints have already "shifted services work to future periods," causing a temporary decline in services revenue. While contracts are non-cancelable, customers may adopt "a more conservative approach to the implementation time line of their contracts," affecting revenue recognition.

Manhattan Associates is also currently involved in securities litigation, with two putative class action lawsuits filed in February and April 2025, consolidated in May 2025, alleging violations of securities laws. A related shareholder derivative lawsuit was filed in September 2025. The company is "unable to predict the ultimate timing or outcome of, or reasonably estimate the possible losses or a range of possible losses resulting from, these proceedings." Furthermore, while MANH's specialized focus is a strength, it also presents a vulnerability to industry concentration, as downturns in key sectors like retail could disproportionately impact its financial performance. While the company leads in many areas, maintaining its technological edge in rapidly evolving fields like AI requires continuous, substantial R&D investment to avoid potential technological gaps relative to competitors with broader research capabilities.

Conclusion

Manhattan Associates stands as a formidable leader in the supply chain commerce software market, driven by its innovative cloud-native platform and a strategic embrace of Agentic AI. The company's consistent investment in R&D has yielded a differentiated product portfolio that delivers tangible, quantifiable benefits to customers, from rapid AI agent deployment to enhanced operational efficiency and unified functional advantages. This technological leadership, coupled with a proactive go-to-market strategy focused on new logos, cross-selling, and accelerated cloud conversions, underpins a compelling investment thesis.

While macroeconomic uncertainties and services revenue headwinds present near-term challenges, Manhattan Associates' robust financial health, strong RPO growth, and disciplined capital allocation, including share repurchases, demonstrate resilience. The anticipated 20% cloud revenue growth in 2026, supported by a significant renewal cycle and expanding market opportunities, signals a clear path for continued top-line expansion and margin accretion. Investors seeking exposure to a critical, high-growth sector powered by cutting-edge technology and a clear strategic roadmap will find Manhattan Associates a compelling proposition, poised to extend its leadership in the evolving landscape of global commerce.