Manhattan Associates Leans Into Cloud and AI Growth

Manhattan Associates ((MANH)) has held its Q4 earnings call. Read on for the main highlights of the call.

Manhattan Associates Earnings Call Signals Confidence Amid Transition Headwinds

Manhattan Associates’ latest earnings call struck a decidedly upbeat tone, with management emphasizing record cloud bookings, robust remaining performance obligation (RPO) growth, strong cash generation, and early traction in its new AI offerings. While executives acknowledged headwinds from steep maintenance attrition, modest services growth, deal lumpiness and a small customer liquidation impact, the message was clear: the cloud transition is firmly on track, profitability remains strong, and the company is leaning into investments to sustain growth through 2026.

Record cloud bookings and RPO growth

Manhattan Associates highlighted a powerful demand backdrop, with RPO up 25% year-over-year to $2.2 billion and record cloud bookings in the fourth quarter. Management underscored particularly strong new-logo momentum and competitive win rates exceeding 70%, suggesting the company is capturing share in a consolidating market. This backlog strength provides multi-year visibility and supports the narrative that customers continue to prioritize Manhattan’s cloud-native supply chain and commerce platforms despite macro uncertainty.

Revenue and cloud revenue growth

Top-line results showed steady expansion, led by the cloud business. Fourth-quarter total revenue grew 6% to $270 million, while cloud revenue surged 20% to $109 million. For the full year, cloud revenue climbed 21% to $408 million, confirming that the company’s pivot away from legacy license and maintenance is gaining momentum. Management framed the slower overall revenue growth versus cloud as a function of expected attrition in older on-premise streams rather than any demand softening.

New ramped ARR metric boosts visibility

To give investors a clearer line of sight into future cloud revenue, Manhattan introduced a four-year “ramped ARR” metric for the first time. Ramped ARR ended the year above $600 million, up 23% from a year earlier, reflecting the phased go-lives and usage ramp typical of large cloud contracts. Management positioned this measure as a better indicator of the revenue runway embedded in signed deals, and as a key proof point that the cloud growth engine is still accelerating.

Margin strength and operating leverage

Profitability remained a central highlight. Adjusted operating profit in Q4 reached $91 million with a 33.8% margin, while full-year adjusted operating income was $387 million at a 35.8% margin—more than 100 basis points higher than the prior year. Management pointed to strong operating leverage from the cloud model and disciplined cost control, even as they ramp investments in sales, services, and product innovation. The result is a business that is simultaneously growing and expanding margins, a combination investors typically reward.

Robust cash generation and debt-free balance sheet

Cash flow metrics underscored the quality of Manhattan’s earnings. Operating cash flow jumped 40% in Q4 to $147 million and rose 32% for the full year to $389 million. Free cash flow margins were notably high—52.7% in the quarter and 34.6% for the year—supporting the case that the subscription model is converting profit into cash efficiently. The company ended the year with $329 million in cash and no debt, giving it ample flexibility to fund organic investments, pursue selective M&A, or return capital.

Steady share repurchases support shareholder returns

Manhattan continues to complement growth with consistent capital returns. The company repurchased $75 million of stock in the fourth quarter and $275 million over the year, demonstrating confidence in its long-term value. The board also approved a $100 million replenishment of the repurchase authorization, signaling that buybacks remain a core tool in the capital allocation playbook, even as management prioritizes growth spending.

AI agents and Agent Foundry move into commercial phase

A key strategic update centered on the commercial launch of Manhattan’s AI capabilities. The company announced general availability of its agentik.ai base AI agents and Agent Foundry platform following a successful early-access period. Manhattan is offering 90-day, low-risk pilots supported by forward-deployed engineers to speed time to value for customers. Early adopter feedback points to meaningful operational benefits, suggesting AI could become both a differentiator in competitive deals and a new driver of expansion within the installed base.

Broad product momentum across the portfolio

Beyond AI, Manhattan reported continued traction across its core product set. Active Warehouse and Active Transportation solutions saw strong sales and implementation activity, reinforcing the company’s positioning in modern, cloud-native supply chain execution. New capabilities such as fulfillment optimization simulation and Active POS with embedded AI selling assistance broaden the platform’s value proposition. Management framed this breadth as critical to winning enterprise-wide transformations and driving larger, multi-solution deals.

2026 outlook: balanced growth and margin expansion

Looking ahead, Manhattan’s 2026 targets suggest confidence in sustained growth with disciplined profitability. The company guided RPO to $2.62–$2.68 billion, up 18%–20%, with renewals contributing a similar share of bookings, and total revenue of $1.133–$1.153 billion. At the midpoint, revenue growth is about 10% excluding license and maintenance attrition, or roughly 6% including those headwinds. Cloud revenue is expected to rise 21% to $492 million, with services up 3% to $517 million. Adjusted operating margin is forecast at 34.5%–35%, implying modest margin expansion once the attrition drag is stripped out. Adjusted EPS is guided to $5.04–$5.20 for the year, with management also outlining quarterly revenue, cloud, services, and margin expectations to frame the trajectory.

Maintenance and license attrition remain a drag

The company was candid about the pressure from its legacy maintenance and license streams as customers migrate to the cloud. Maintenance revenue is projected to fall about 19% in 2026 to $105.5 million, with license revenue expected to hover near $1 million per quarter. Management estimates that attrition in these lines will shave roughly 4.4 percentage points off reported revenue growth next year. While this weighs on headline numbers, executives argued that the shift is economically beneficial given the higher lifetime value and margin profile of cloud subscriptions.

Services revenue: modest growth and inherent volatility

Services remain a more mixed story. For 2025, services revenue declined 4% to $503 million, even though Q4 returned to growth at $120 million. The company now expects only mid-single-digit growth in services during 2026, reflecting a more cautious stance on demand visibility and project timing. Management reiterated that services revenue is inherently harder to forecast than subscriptions, as it depends on customer implementation schedules and project scope. Still, the outlook for 3% growth next year suggests a gradual stabilization rather than a structural downturn.

Deal lumpiness and dependence on larger contracts

Executives reminded investors that bookings will remain lumpy quarter to quarter, given the size and timing of major enterprise deals. While the full-year picture remains strong—evidenced by record cloud bookings and rising RPO—individual quarters can swing based on when large contracts close. Management encouraged the market to focus on annual trends in RPO, ramped ARR, and cloud revenue rather than short-term volatility, framing deal lumpiness as a byproduct of success in landing bigger, more complex engagements.

Customer liquidation: a small but notable headwind

The call also addressed a specific, unexpected negative: the liquidation of a customer, which created a $1.3 million revenue headwind in Q4, or approximately $2.5 million on an annualized basis. While management did not characterize this as indicative of broader demand issues, it does illustrate the occasional idiosyncratic risks inherent in a large enterprise customer base. The impact was not included in prior guidance, but is manageable in the context of the company’s overall scale and growth.

Tax reserve dynamics add complexity

Manhattan discussed higher tax reserves tied to the acceleration of domestic R&D deductions, which complicates the tax outlook and accounting presentation. While this dynamic affects reported tax rates and reserves, management noted that it is associated with lower cash taxes, which is favorable for free cash flow. Investors may need to parse reported effective tax rates carefully, but the underlying cash economics remain supportive of Manhattan’s strong cash generation profile.

Investments temper near-term margin upside

Finally, the company made clear that it is deliberately sacrificing some near-term margin upside to fund growth. The 2026 guidance assumes higher spending on sales and marketing as well as significant expansion of the services organization, including roughly 100 new services hires in January alone. These investments are intended to support cloud adoption, accelerate implementations, and commercialize AI offerings at scale. Even with these outlays, Manhattan still expects slight operating margin expansion, underscoring the underlying strength of the model.

In sum, Manhattan Associates’ earnings call painted the picture of a company successfully executing a cloud and AI-led transformation while carefully navigating the drag from legacy products and the inherent volatility of large enterprise deals. Record cloud bookings, solid RPO and ramped ARR growth, strong cash flow, and disciplined but growth-oriented guidance all support a constructive view. For investors, the key themes are clear: the core cloud engine is healthy, AI is an emerging catalyst, and management is willing to invest behind its momentum while still delivering attractive margins and returns.