ServiceTitan Inc. (NASDAQ:TTAN) stock fell sharply in Wednesday premarket trading after the software company issued third-quarter revenue guidance with a midpoint below Wall Street estimates despite reporting better-than-expected second-quarter results.
Earnings Snapshot
ServiceTitan reported fiscal 2027 second-quarter revenue of $292.76 million, up 21% year over year and above the $285.96 million estimate. Adjusted earnings of 40 cents per share beat the 35-cent estimate.
Gross transaction volume rose 17% to $26.8 billion. Adjusted for business days and weather, growth remained at 17%. However, that was about 200 basis points below recent quarters, mainly due to fewer jobs from existing customers.
Net dollar retention remained above 110%.
Total gross margin expanded 20 basis points to 74.6%. Platform gross margin rose 40 basis points to 81.1%.
Operating income climbed to $44.4 million. Operating margin expanded 310 basis points to 15.2%.
Free cash flow jumped 47% to $50.5 million. Year-to-date free cash flow reached $40.9 million, up from $12 million a year earlier.
AI Platform Gains Traction
Subscription revenue rose 22% to $212.4 million, while usage revenue increased 24% to $72.1 million.
ServiceTitan said customers using its MAX platform are generating more leads, improving booking rates and increasing average ticket sizes. MAX now offers more than 30 agentic capabilities, including AI coaching, scorecards and live escalations.
The company expects more than 700 locations to enroll in MAX by the end of fiscal 2027. ServiceTitan is also increasing investments in MAX and its software factory.
Meanwhile, the company is prioritizing existing commercial trades and residential roofing rather than expanding into additional markets.
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Outlook
For the third quarter, ServiceTitan expects revenue of $285 million to $287 million. The $286 million midpoint is below the $287.87 million estimate.
ServiceTitan raised its fiscal 2027 revenue outlook to $1.139 billion-$1.144 billion from $1.130 billion-$1.140 billion. The consensus estimate is $1.138 billion.
The company now expects fiscal 2027 incremental margins of 33%. It also views 25% incremental margins as an annual floor rather than a target.
Leadership Transition Adds Another Investor Focus
ServiceTitan also announced a leadership change Tuesday. The company named Rikus Pretorius as its next chief revenue officer, effective at the start of its fiscal fourth quarter.
Pretorius has served as ServiceTitan’s senior vice president of worldwide sales for more than seven years. He will succeed Ross Biestman, who plans to step back from an active operating role after the fiscal third quarter. Biestman will remain an adviser through the end of fiscal 2027 to support the transition.
Biestman has served as chief revenue officer for nearly a decade. During his tenure, ServiceTitan grew from less than $30 million in annual recurring revenue to more than $1 billion in annualized revenue run rate.
CEO Ara Mahdessian said on the earnings call that Pretorius had served as Biestman’s “right hand” for more than seven years and expressed confidence in the company’s sales leadership team. The call confirms that Pretorius will assume the CRO role beginning in the fourth quarter.
The leadership transition could be another reason for investor caution Wednesday, particularly as it comes alongside moderating transaction growth and third-quarter revenue guidance that fell short of Wall Street expectations at the midpoint.
TTAN Price Action: ServiceTitan shares were down 17.71% at $67.13 during premarket trading on Wednesday, according to Benzinga Pro data.
Photo via Shutterstock
