Software as a Service (“SaaS”) firms continue to grapple with investor concerns about their competitiveness in an increasingly AI-driven business environment.

SaaS firms were wracked with massive selloffs during the early months of 2026. While the group has seen some recovery, shares remain down, with the S&P Software & Services Select Industry Index down nearly 10% year-to-date.

Though investors have adopted a pessimistic sentiment toward SaaS firms, not every stock in this group will be replaced by AI-powered alternatives.

One of those companies is SPS Commerce (SPSC).

SPS Commerce is a cloud-based supply chain network company that facilitates data exchange across the retail ecosystem.

The company provides customers with cloud-based electronic data interchange, intelligent order routing, and supply chain visibility solutions.

SPS’ suite of solutions include order collaboration between retail partners, production reliability and inbound material visibility, product information sharing, retail performance data retrieval and analysis, vendor compliance improvement, and third-party efficiency improvements.

SPS Commerce works with suppliers, manufacturers, retailers, groceries, distributors, logistics, and e-commerce marketplaces.

In all, the company serves over 50,000 recurring customers. It also has a vast network across the retail ecosystem, working with big firms such as Microsoft (MSFT), Oracle (ORCL), Intuit (INTU), SAP (SAP), and others. It also works with retail giants like Target (TGT), Walmart (WMT), and Home Depot (HD), and eCommerce platforms like Amazon (AMZN).

Since suppliers and retailers need constant and reliable access to electronic data interchange systems and other backend systems related to compliance and operations, switching to a different provider becomes a costly and time-intensive undertaking.

SPS Commerce has more than 300,00 trading relationships and processes over 750 million transactions annually, making it attractive due to its ubiquity and the data it has acquired and processed in the retail supply chain.

The company has leveraged its mission-critical status to grow its returns over the past few years. Its annual revenue has grown from $450 million in 2022 to $751 million last year.

SPS Commerce has delivered above-average returns over the same period as well. Its Uniform return on assets (“ROA”) since 2022 has trended above 30%. Last year, it posted a Uniform ROA of 39%, alongside a Uniform asset growth of 13%.

Despite delivering strong returns, the company currently trades at a Uniform P/E of 12x, well below the corporate average. Moreover, investors expect the company’s returns to drop significantly in the next few years.

The market expects SPS Commerce’s Uniform ROA to decline to 18% by 2030, well below the 30%+ returns that it has delivered since 2022.

This indicates that investors are cautious about consumer spending trends. While the services SPS Commerce offers can’t be automated away by AI, a deceleration in American and global consumer retail volumes could negatively impact the company.

That said, SPS Commerce’s vast network and ability to retain clients support durable earnings growth. This company could be an opportunity for investors to capitalize on recent pessimism in the software space.

Best regards,

Joel Litman & Rob Spivey
Chief Investment Officer &
Director of Research
at Valens Research

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