ServiceTitan (NASDAQ: TTAN) shares plunged 20.25% in after-hours trading Tuesday, falling to $65.06 from the regular session close of $81.58. The steep decline occurred despite the company reporting fiscal second-quarter results that beat analyst estimates for adjusted earnings per share.

The stock had already closed regular trading down 7.21%. CEO Ara Mahdessian highlighted that the company’s agentic operating system contributed $50 million of non-GAAP free cash flow in the quarter, underscoring AI as a major opportunity.

Financial Performance

ServiceTitan delivered a strong second quarter for fiscal 2027, with adjusted earnings per share of $0.40 beating the analyst consensus estimate of $0.35 by 14.29%. The company also raised its full-year revenue guidance to $1.139 billion to $1.144 billion, exceeding the prior consensus of $1.138 billion.

Revenue reached $292.8 million, a 21% year-over-year increase, surpassing the specific analyst estimate of $285.957 million by 2.38%. GAAP operating loss narrowed to $27.6 million from $34.8 million in the year-ago quarter. Non-GAAP income from operations increased to $44.4 million from $29.2 million, while non-GAAP free cash flow rose to $50.5 million from $34.3 million.

Subscription revenue grew 22% year-over-year to $212.4 million, while usage revenue, including fintech and virtual agent fees, rose 24% to $72.1 million. Total platform revenue reached $284.5 million, expanding 22% annually.

Gross transaction volume (GTV) on the platform totaled $26.8 billion, up 17% year-over-year. Management noted that normalized GTV growth was roughly 200 basis points below recent quarters due to softer lead volumes, particularly in HVAC trades.

Platform gross margin improved by 40 basis points to 81.1%, while total gross margin rose 20 basis points to 74.6%. Operating income reached $44.4 million, resulting in an operating margin of 15.2%, an improvement of 310 basis points year-over-year.

Strategic Shift to MAX

ServiceTitan doubled the number of locations enrolled in MAX, its AI-driven operating system, during the quarter. The company now expects to end the fiscal year with over 700 enrolled locations, exceeding prior expectations. Management stated that customers using MAX are generating more leads, converting at higher booking rates, and achieving higher average ticket sizes.

To support this transition, ServiceTitan is tightening its focus on existing residential trades—such as plumbing, HVAC, electrical, and garage services—while delaying expansion into new commercial trades and broader residential exteriors. This strategic reallocation aims to accelerate the shift toward MAX and internal AI capabilities.

What the Numbers Show

The divergence between moderate GTV growth (17%) and robust operating margin expansion (+310 bps) highlights increasing operating leverage within ServiceTitan’s business model. While top-line growth slowed slightly due to external lead volume pressures, the company’s ability to maintain high profitability suggests that its core platform economics remain resilient even during periods of softer demand generation.

Forward Outlook

For the third quarter of fiscal 2027, ServiceTitan expects revenue of $285 million to $287 million. The company expects full fiscal 2027 revenue of $1.139 billion to $1.144 billion.

Management highlighted that the shift toward MAX will create a near-term headwind of approximately $4 million to $5 million in subscription and professional services revenue due to differences in revenue recognition timing. However, they expect incremental margins of 33% for FY27, viewing this as a floor rather than a target going forward.

Virtual agent revenue more than doubled sequentially in Q2, driven by both new adoption and displacement of competing solutions. ServiceTitan plans to roll out further innovations at its upcoming Pantheon event in October.

Trading Metrics

ServiceTitan has a market capitalization of $7.78 billion. The stock has a 52-week high of $119.99 and a 52-week low of $54.17. Shares are down 31.80% over the past year.

ServiceTitan (NASDAQ: TTAN) projected third-quarter revenue between $285.000 million and $287.000 million, missing the consensus analyst estimate of $287.874 million.

The guidance indicates that top-line performance is expected to fall below market expectations for the period.

What the Numbers Show

The upper bound of the revenue guidance ($287.000 million) falls $0.874 million short of the estimate, while the lower bound represents a wider miss of $2.874 million.