Cloud Adoption And AI Integration Will Drive Supply Chain Modernization

Key Takeaways

• Cloud and AI-driven solutions, unified products, and process automation drive recurring high-margin revenue, margin expansion, and long-term earnings visibility through increased adoption and customer migration.
  
• Strategic sales expansion, partnerships, and an upcoming SaaS renewal cycle enable market share gains, improved sales efficiency, and accelerated top-line and cloud revenue growth.
  
• Slow cloud migration, volatile services revenue, rising costs, and intense competition threaten revenue growth, margin stability, and earnings predictability in a challenging macro environment.

Catalysts

Develops, sells, deploys, services, and maintains software solutions to manage supply chains, inventory, and omni-channel operations.

• The accelerating adoption of cloud-based and AI-powered supply chain solutions continues to unlock recurring, higher-margin revenue streams for Manhattan Associates, as evidenced by sustained +20% cloud revenue growth, strong cross-sell rates, and an expanding pipeline of large and longer-term contracts-indicating a likely positive impact on revenue growth, margin expansion, and long-term earnings visibility.
  
• Enhanced investments in AI, automation, and unified product development (such as Agentic AI and the Manhattan Active Agent Foundry) position Manhattan to capture increasing customer demand for real-time analytics and next-generation supply chain automation, potentially driving new bookings, average contract value, and expansion into underpenetrated markets-supportive of sustainable double-digit top-line growth.
  
• Strategic go-to-market initiatives-including increased direct sales headcount, new global sales leadership, and deeper partnerships with Google Cloud and Shopify-are expected to accelerate sales velocity and market share gains, especially in large addressable segments like point-of-sale (POS) and transportation management systems (TMS), fueling further revenue growth and improved sales efficiency.
  
• The ongoing migration of the installed customer base from on-premise to cloud solutions, combined with process automation and reduced implementation complexity, is likely to lift net margins (via operating leverage) and enhance operating cash flow due to elevated recurring subscription revenues and faster customer ROI realization.
  
• The upcoming multi-year SaaS contract renewal cycle (2026–2027), with cross
• and up-sell opportunities (driven by expanded offerings and unification), provides a clear long-term catalyst for accelerating RPO and cloud revenue growth, while also benefiting net margins as renewals occur at higher run rates and include additional modules and price escalations.

Manhattan Associates Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Manhattan Associates's revenue will grow by 7.3% annually over the next 3 years.
• Analysts assume that profit margins will increase from 20.9% today to 22.8% in 3 years time.
• Analysts expect earnings to reach $297.9 million (and earnings per share of $4.88) by about September 2028, up from $221.2 million today.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 56.5x on those 2028 earnings, down from 59.0x today. This future PE is greater than the current PE for the US Software industry at 36.2x.
• Analysts expect the number of shares outstanding to decline by 0.99% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 8.4%, as per the Simply Wall St company report.

Manhattan Associates Future Earnings Per Share Growth

Risks

• The ongoing transition of customers from on-premise to cloud continues to advance slowly, with only about 20% of on-premise customers having converted, suggesting that recurring cloud revenue growth may fall short of long-term expectations if further conversions are delayed-potentially constraining revenue and earnings visibility.
  
• The company remains significantly exposed to "time and material" services contracts and faces persistent uncertainty in the global macro environment, allowing customers to more easily defer or slow down services projects, which can lead to services revenue volatility and pressure on overall top-line growth and operating margins.
  
• While Manhattan Associates is making significant go-to-market investments (e.g., new sales hires, expanded partnerships with Google and Shopify, enhanced marketing), the near-term impact on revenue and margin is uncertain and increased costs could weigh on net margins if these initiatives don't yield sufficient incremental bookings or market share gains amid intensifying competition.
  
• Despite reporting high win rates against top competitors, the company is actively hiring talent from established rivals (e.g., Blue Yonder, Oracle) and acknowledges a need for greater market awareness in key segments like POS and TMS, indicating that heightened competition from both major ERP vendors and specialized SCM providers could increase customer acquisition costs and compress pricing, impacting both revenue growth and profitability over time.
  
• The extended contract ramp times and customer tendency to take a conservative approach to implementation, even with noncancelable contracts, means a significant portion of remaining performance obligations may not convert to revenue promptly, making cash flow and earnings less predictable and potentially exposing the company to downside if macro conditions deteriorate or project deployments are further delayed.

Valuation

• The analysts have a consensus price target of $227.889 for Manhattan Associates based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $250.0, and the most bearish reporting a price target of just $205.0.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $1.3 billion, earnings will come to $297.9 million, and it would be trading on a PE ratio of 56.5x, assuming you use a discount rate of 8.4%.
• Given the current share price of $215.61, the analyst price target of $227.89 is 5.4% higher. The relatively low difference between the current share price and the analyst consensus price target indicates that they believe on average, the company is fairly priced.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.