RedThread Study Reveals People Analytics Tech Market Reached $12.2B in 2025 as Growth Cools, Contracts Unbundle, and Vendors Reconsider their Customer Support

WOODSIDE, Calif., June 30, 2026 /PRNewswire/ -- A new study from RedThread Research finds that the people analytics technology (PAT) market reached an estimated $12.2 billion at the end of 2025—up from $9.7 billion in 2024—but its 26% year-over-year growth rate signals a market settling into a slower, more mature phase, well off its 2022 peak of 50%. The report, People Analytics Tech Market Trends 2026: Old Market, New Pressures, finds an industry reshaped by unbundled contracts, a sharp rebound in M&A, near-universal AI adoption that rarely moves past "assist" mode, and a widening gap between how vendors govern their own data and the support they extend to customers.

Now in its seventh year, the annual study draws on survey data from 47 vendor solutions and maps a broader market of 163 PAT solutions. It tracks year-over-year shifts in market size, vendor strategy, pricing, AI investment, and data ethics.

Growth is moderating, and the market is diversifying. The share of vendors expecting high growth (over 31%) has fallen from 56% in 2022 to 37% in 2026, while those expecting only 1–10% revenue growth has climbed from 3% to 17% over the same period. Financial services remains the largest customer sector at 51%, but healthcare and manufacturing are emerging as fast-growing segments as vendors broaden their reach to hit revenue goals.

"The PAT market isn't shrinking—it's maturing, and that changes the rules for buyers," said Stacia Garr, Co-founder and Principal Analyst at RedThread Research. "The era when a subscription came with consulting, implementation, and a partner invested in your success is ending. Buyers now have to be far more deliberate about what they're actually getting for the price they are paying vendors – and what else they might need to buy to make the tech work."

PAT contracts look fundamentally different from what they were two years ago. Two years ago, 53% of vendors bundled consulting and 69% bundled implementation into their technology subscriptions. Today, fewer than a quarter include consulting and only about a third include implementation—an average 20-point drop in just 12 months. Nearly 90% of vendors changed their pricing model in 2026, up from 58% in 2024. AI agents are emerging as a new, separately priced line item, with no industry standard yet: 40% of vendors charge per seat, 26% by data volume, and 17% by compute or token consumption.

M&A has rebounded after four years of decline. M&A activity quadrupled in 2025, rising from 9% of vendors in 2024 to 36%, even as external investment fell to a historic low of 11% (down from 48% in 2021). The activity is concentrated among HCM, HRIS, and talent management vendors—86% of which underwent M&A—as well-capitalized platforms acquire point solutions to fill capability gaps. Increasingly, what was once a standalone purchase is becoming a module within a larger suite.

Everyone has AI, but few have moved beyond assist mode. The share of vendors offering both traditional machine learning and Gen AI has grown from 64% to 89% in two years, making AI table stakes. But most of the build has gone into copilots and assistants—70% of vendors built new copilots for 2026—while only 16% have built agents that automate complex workflows or function as digital workers. The language of "agents" is now nearly universal even though most offerings remain assistants.

Vendors are strengthening internal ethics while customer support erodes. Nearly all vendors (94%) now have an internal code of conduct, up from 79% last year, and almost 80% provide employee training. Yet customer-facing support has fallen sharply: vendor education for customers on data ethics dropped from 62% in 2024 to 26% in 2026—the steepest decline of any metric in the study—and vendor recommendations to customers on data security and ethics fell from 87% to 74%.

"Vendors have put real effort into getting their own AI and ethics houses in order, but they're pulling back on the guidance that helps customers do the same," said Priyanka Mehrotra, Senior Analyst at RedThread Research. "That's a risky trade. As the market gets more transactional, the burden of doing this work responsibly is shifting onto the buyer."

Join the public webinar on July 29: RedThread Research will host a free, public webinar—sponsored by the RedThread Tech Consortium—on July 29, 2026, to walk through the report's key findings and what they mean for buyers. Reserve your seat at https://landing.redthreadresearch.com/pat-market-trends-2026.

Access the research: The full report—including in-depth analysis of vendor strategies, pricing shifts, AI maturity, and buyer guidance—is available to paid RedThread Research members. A free executive summary of the findings is available to anyone who joins RedThread's free starter membership. Sign up at https://members.redthreadresearch.com/plans/1522898 or email [email protected] for more information.

Research Sponsored by the RedThread Tech Consortium

This research report was made possible by the RedThread Research Tech Consortium, a growing community that remains focused on underwriting high-quality, unbiased market research. Consortium member organizations collaborate with RedThread to push the boundaries of people analytics technology and contribute to cutting-edge research. Current Tech Consortium members include: Absorb, Betterworks, ClearCompany, Cornerstone, Culture Amp, Docebo, Eightfold, HiBob, HRBench, Ingentis, Lightcast, Lytiqs, Medallia, OpenSesame, Perceptyx, QuestionPro, Revelio Labs, TechWolf, Tekstac, UKG, Visier, Workday, and Workera.

About RedThread Research

At RedThread Research, we get it.

Sure, we're experts in performance, people analytics, learning, and D&I – and we're well-versed in the technologies that support them. But we're also truth-seekers and storytellers in an industry often short on substance, and too full of #!%. Our mission (indeed, our very reason for existing) is to cut through the noise, and amplify what's good. We look for the connections (or red threads) between people, data, and ideas – even among seemingly unrelated concepts. The result is high-quality, unbiased, transformative foresight that helps you build a stronger business.

To learn more, visit www.redthreadresearch.com.

SOURCE RedThread Research