Cloud Consolidation And Regulation Will Undermine Contracts Yet Spur Recovery

Key Takeaways

• Heavy reliance on large enterprise contracts and evolving integration challenges expose revenue to volatility and limit predictability amid competitive, fast-changing market dynamics.
  
• Escalating compliance costs, data privacy complexities, and intensifying SaaS competition threaten profitability and could slow global expansion despite strong market demand.
  
• Competitive threats, regulatory uncertainties, and rapid SaaS transitions risk compressing margins, constraining growth, and creating revenue unpredictability, despite international expansion efforts.

Catalysts

OneStream, Inc. delivers a unified, AI-enabled, and extensible software platform in the United States and internationally.

• While the accelerating adoption of cloud-based financial platforms and increasing demand for AI-driven analytics are expected to expand OneStream's addressable market, the company faces the risk that hyperscaler consolidation could tighten integration options, making it harder to access enterprise contracts and potentially limiting future revenue growth.
  
• Despite strong long-term drivers such as rising regulatory requirements for real-time financial transparency and ESG reporting, compliance costs and mounting data privacy laws worldwide may increase product complexity and slow international sales, putting pressure on net margins.
  
• Although OneStream's core platform continues to drive robust subscription growth and customer satisfaction remains high, the heavy dependence on large enterprise contracts-particularly within sectors like the U.S. federal market-exposes the company to revenue volatility and limits earnings predictability if customers delay or renegotiate spending.
  
• Even as OneStream expands its partner ecosystem and invests in sophisticated product modules like SensibleAI Agents, the accelerating emergence of fully AI-native enterprise platforms could shift client preferences away from traditional CPM/EPM solutions, raising customer churn risk and challenging future earnings growth.
  
• While the continued migration from legacy on-premise solutions to SaaS supports a multi-year growth cycle, increasing competition from ERP incumbents integrating advanced CPM capabilities and the threat from open-source or low-code alternatives may pressure OneStream's pricing power, ultimately affecting long-term profitability.

OneStream Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more pessimistic perspective on OneStream compared to the consensus, based on a Fair Value that aligns with the bearish cohort of analysts.
• The bearish analysts are assuming OneStream's revenue will grow by 17.6% annually over the next 3 years.
• The bearish analysts are not forecasting that OneStream will become profitable in next 3 years. To represent the Analyst Price Target as a Future PE Valuation we will estimate OneStream's profit margin will increase from -42.0% to the average US Software industry of 13.4% in 3 years.
• If OneStream's profit margin were to converge on the industry average, you could expect earnings to reach $119.4 million (and earnings per share of $0.41) by about August 2028, up from $-229.4 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bearish analyst cohort, the company would need to trade at a PE ratio of 72.0x on those 2028 earnings, up from -15.5x today. This future PE is greater than the current PE for the US Software industry at 37.7x.
• Analysts expect the number of shares outstanding to grow by 7.0% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 8.46%, as per the Simply Wall St company report.

OneStream Future Earnings Per Share Growth

Risks

• OneStream's increasing reliance on rapid SaaS conversions and new lower-priced offerings like CPM Express could compress average revenue per user and delay top-line growth, impacting future revenue and earnings expansion.
  
• Competitive pressures remain intense as hyperscalers and large ERP vendors like Oracle and SAP aim to natively integrate advanced CPM capabilities, potentially shrinking OneStream's addressable market and constraining revenue growth.
  
• The shift to hybrid AI monetization models is still being fine-tuned, with uncertainty around the predictability and scale of AI-driven revenues possibly limiting margin expansion and earnings stability in the longer term.
  
• Heightened regulatory uncertainties and potential public sector restructuring, especially in the U.S. federal government segment, introduce risks of delayed or downsized contracts and materially affect revenue consistency and billings momentum.
  
• Although international revenue grew rapidly, exchange rate volatility has materially affected billings and recognized revenue in the past, and future FX swings could dampen reported revenue growth and reduce earnings visibility.

Valuation

• The assumed bearish price target for OneStream is $23.0, which represents the lowest price target estimate amongst analysts. This valuation is based on what can be assumed as the expectations of OneStream's future earnings growth, profit margins and other risk factors from analysts on the more bearish end of the spectrum.
  
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $38.0, and the most bearish reporting a price target of just $23.0.
  
• In order for you to agree with the bearish analysts, you'd need to believe that by 2028, revenues will be $888.2 million, earnings will come to $119.4 million, and it would be trading on a PE ratio of 72.0x, assuming you use a discount rate of 8.5%.
  
• Given the current share price of $20.12, the bearish analyst price target of $23.0 is 12.5% higher.
  
• 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.