ServiceTitan (NASDAQ: TTAN) reported strong fiscal second-quarter 2027 results, with total revenue climbing 21% year over year to $292.8 million. The cloud software provider, which services trade businesses, also achieved record free cash flow, posting $50.5 million for the quarter, a 47% increase from a year ago. The companys focus on its AI-driven Max platform is accelerating, though its success is projected to create a near-term revenue headwind.
ServiceTitan’s Max Platform Exceeds Expectations
Chief Executive Officer Ara Mahdessian highlighted an increased investment in the Max platform, which ServiceTitan describes as an agentic operating system for trade businesses. Max combines over 30 AI-enabled capabilities designed to automate critical workflows like demand generation, appointment booking, field sales, and payroll. President Vahe Kuzoyan noted that Max adoption more than doubled the number of enrolled locations in Q2, surpassing internal targets. ServiceTitan now expects to end fiscal 2027 with over 700 Max locations, up from just over 100 after the first quarter.
ServiceTitan has begun offering Max to new customers, with early signs suggesting some are willing to adopt the AI platform directly rather than starting with the companys core offerings. Management also plans to introduce smaller Max packages to appeal to customers not ready for a full business transformation. As an example of Max’s impact, Delponte Plumbing & Heating reportedly saw its revenue rise over 35% in Q1 2026 and over 45% in Q2 2026, launching a recurring-service business for 400 customers in three months without increasing back-office staff.
AI-Driven Success Creates Near-Term Revenue Headwind
Despite the strong adoption, ServiceTitan expects a short-term revenue recognition impact from its growing mix of Max sales. Core subscription revenue is typically recognized ratably over contract terms, while upsell products like Max are recognized as billed. Since Max customers often receive an initial period without billing and then ramp up over the first year, ServiceTitan anticipates a $2 million to $3 million subscription-revenue headwind for the remainder of fiscal 2027. Additionally, the company expects approximately $2 million less in professional-services revenue because it is not charging existing customers onboarding fees to transition to Max. CFO Dave Sherry stated that the combined near-term impact from this Max mix shift is approximately $4 million to $5 million.
Financial Performance and GTV Moderation
Beyond the Max platform, subscription revenue grew 22% to $212.4 million, and usage revenue increased 24% to $72.1 million. The combined platform revenue rose 22% to $284.5 million. Gross transaction volume (GTV) reached $26.8 billion, a 17% increase year over year. However, GTV growth moderated by about 200 basis points compared to recent quarters, adjusted for business days and weather, primarily due to lower job growth among existing customers. Lead volume growth was more moderate than seasonal patterns in May and June before stabilizing in July, a trend seen across various trades, particularly HVAC. ServiceTitan has incorporated this moderation into its fiscal year outlook.
The company expanded its margins, with platform gross margin at 81.1%, up 40 basis points, and total gross margin at 74.6%, up 20 basis points. Operating income stood at $44.4 million, resulting in a 15.2% operating margin, a 310 basis point improvement. Net dollar retention exceeded 110%. CFO Sherry indicated that the company now views 25% incremental margins as a floor rather than a target, expecting fiscal 2027 incremental margins of 33%.
Strategic Focus and Leadership Change
To support increased spending on Max and its internal Software Factory initiatives which use AI to speed up product development and improve software delivery ServiceTitan is narrowing its near-term expansion plans. The company will now focus on existing commercial trades, including mechanical, electrical, plumbing, landscaping, and residential roofing, instead of pursuing new commercial trades or broader residential exterior categories. ServiceTitan’s Virtual Agents, another AI monetization component, also showed strong growth, with revenue and call volume more than doubling sequentially.
In a leadership change, Chief Revenue Officer Ross Biestman will transition from his operating role after the companys Pantheon event in Q3 and serve as an adviser until the end of the fiscal year. Rikus Pretorius, currently Senior Vice President of Worldwide Sales, will become the new CRO in Q4.
ServiceTitan’s Outlook for Fiscal Q3 and FY27
For the fiscal third quarter, ServiceTitan projects revenue between $285 million and $287 million and operating income of $29 million to $30 million. For the full fiscal year 2027, the company forecasts revenue of $1.139 billion to $1.144 billion and operating income ranging from $152 million to $154 million.
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