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People Analytics Spending Hit $12.2 Billion in 2025. The Bundle Around It Is Unraveling.
People analytics is the software employers use to measure hiring, retention, and performance.
People analytics is the software employers use to measure hiring, retention, and performance.
The $12.2 billion that employers spent on people analytics software at the end of 2025 came with something the headline numbers do not show: a quieter, more consequential change in what that subscription actually buys.
People analytics is the category of software employers use to measure hiring, retention, performance, and broader workforce planning. By the close of last year, the market reached an estimated $12.2 billion, up 26% from $9.7 billion in 2024, according to RedThread Research's seventh annual "People Analytics Tech Market Trends 2026: Old Market, New Pressures" report. That growth rate is well off the 50% peak of 2022, but it is still the kind of growth most enterprise software categories would envy. The story is not the slowdown. It is what vendors are doing inside that growth.
RedThread's report, based on a 47-vendor survey and a broader mapping of 163 people analytics solutions, flags four structural shifts that together amount to a deliberate change in how the market extracts revenue. Three of them land directly on enterprise buyers.
The first is unbundling. Contracts that once folded customer support and implementation help into a base subscription are being split apart. The functions are still there. They just cost extra now. The shift leaves HR and people-analytics leaders paying line-item prices for services they used to assume were part of the platform, and it is happening at exactly the moment the same vendors are urging those buyers to take AI-driven features more seriously.
Those features are the second shift. RedThread describes AI adoption in people analytics as near-universal on paper. In practice it rarely moves past what the firm calls "assist" mode: a feature here, a summary there, nothing that reorders how the work gets done. The structural pressure on buyers is that the same vendors, having under-delivered on AI so far, have an incentive to repackage it as a premium-priced addition. The effect, for buyers, is a base price that is still climbing, with an entirely new set of AI-driven features to evaluate separately.
The third shift is a quieter one with louder consequences. The data-governance standards that vendors maintain for their own internal operations are, per the report, outpacing the support and controls they extend to customers. For a mid-to-large employer handling sensitive employee data, pay, performance, time tracking, attrition risk, that gap is not academic. It is a measure of how much compliance work the buyer inherits quietly when they sign.
A fourth shift, less visible to buyers but worth flagging, is a sharp rebound in M&A. The consolidation is reshaping which vendors an enterprise HR team is actually betting on when they sign a multi-year deal, because the company on the contract may not be the same company two renewals from now.
Behind all of this is a market that is no longer behaving like one market at all. RedThread's vendor survey shows the share of vendors projecting more than 31% revenue growth falling from 56% in 2022 to 37% in 2026. Over the same window the share projecting only 1-10% growth climbed from 3% to 17%. Some vendors are still competing for expansion. Others are harvesting. Buyers negotiating a renewal have to figure out which kind they are sitting across from.
Financial services remains the largest vertical for PAT spend, per the report, a reminder that the unbundling shock is concentrated in the sector with the deepest HR data footprint and the most regulatory drag, not in some generic enterprise category.
A caveat on the data itself. The figures come from a vendor-aligned research firm surveying vendors, and the published study is itself a paid annual product. The market sizing covers 163 mapped solutions across 47 surveyed vendors, broad enough to ground a structural read but narrow enough that the topline growth number is best read as a survey-based estimate, not an audited market total. Independent validation would matter more if the angle pivoted to adoption, safety, or contested impact. For a buyer-mechanic read, the unbundling pattern is the signal.
There is also a footnote worth flagging on the prior-year number. RedThread's earlier release cited the 2024 market at $10.4 billion. The 2026 study now cites 2024 at $9.7 billion. The likeliest explanation is methodological rebasing as vendor coverage expanded, not a contradiction, but the revision matters if anyone was using the prior figure as a benchmark.
What to watch next is not the topline. It is the bifurcation. The same vendor survey will land this time next year measuring how many vendors dropped from the >31% growth bracket into the 1-10% bracket, and whether the unbundling lines, customer support, implementation, AI agents, governance tooling, have become standalone priced categories in their own right. For a CHRO or people-analytics leader at a mid-to-large employer, the practical move is to ask vendors, on the next renewal, what is in the base subscription now and what is being sold separately, and to assume that list will be longer at the end of the next cycle than it is at the start of this one.