SPS Commerce (SPSC) reported a disappointing Q1 with revenue missing consensus and continued headwinds from the Amazon (AMZN) policy change weighing on growth and prompting a reduction in full-year outlook, Morgan Stanley said in a Friday note.

The company lowered its fiscal 2026 revenue guidance to a midpoint of 6.3% from 6.8%, reflecting lower than expected revenue from its Amazon recovery business in Q1, the investment firm said.

While SPS Commerce's core business is growing at a high-single-digit rate, another quarter near the low end of guidance and a further reduction to its full-year revenue outlook are likely to weigh on investor confidence, according to the research note.

The investment firm added that concerns around software growth and artificial intelligence-related risks remain elevated, and new growth initiatives are unlikely to materially contribute until 2027.

Morgan Stanley maintained its equalweight rating on SPS Commerce and lowered its price target to $70 from $95.

Shares of SPS Commerce were up nearly 5% in Friday trading.

Price: 58.84, Change: +2.72, Percent Change: +4.84