ServiceTitan (TTAN) Q2 2026: Operating Margin Jumps 510bps as AI Automation Scales Across Trades
ServiceTitan’s Q2 marked a structural margin leap and showcased the tangible impact of AI-driven automation in the trades. The company’s integrated platform continues to drive customer ROI and win major enterprise deals, with the new Roto-Rooter partnership underscoring its expanding reach. Management’s guidance signals confidence in compounding growth and margin expansion, as AI and pro product adoption accelerate across both residential and commercial segments.
Summary
- Margin Expansion Surges: Operating leverage and high-margin usage revenue drove a step-change in profitability.
- AI Automation Proves Out: Customer case studies and attach rates validate ServiceTitan’s automation thesis.
- Enterprise and Commercial Traction: New wins and product depth reinforce the long-term platform runway.
Performance Analysis
ServiceTitan delivered a quarter of broad-based outperformance, with total revenue rising 25% year-over-year and subscription revenue up 27%, both outpacing expectations. The company’s gross transaction volume (GTV) reached $22.9 billion, a 19% increase, fueled by strength in commercial and non-HVAC residential trades. Notably, usage revenue growth of 23% was driven by both higher GTV and increased adoption of on-platform payments, highlighting the platform’s growing role as the system of record for the trades.
Profitability took a decisive step forward, as operating margin expanded by 510 basis points to a record 12.1%. This was attributed to a combination of high-margin usage revenue, disciplined hiring, and improved gross margin from cost reallocation and infrastructure leverage. Free cash flow nearly doubled year-over-year, and net dollar retention remained robust above 110%, reflecting both customer expansion and low churn. While residential HVAC growth moderated due to a tough comparison with last year’s extreme weather, other segments compensated, demonstrating the platform’s resilience.
- Commercial and Enterprise Outperformance: Large customer wins and construction-focused product enhancements drove above-plan growth in the commercial segment.
- Pro Product Momentum: Attach rates for advanced modules (e.g., Scheduling Pro, Dispatch Pro) rose as customers pursued deeper automation.
- Usage Revenue Leverage: Increased payment adoption and higher transaction volumes amplified platform margins and cash generation.
Overall, the quarter evidences ServiceTitan’s ability to drive durable growth, margin expansion, and platform stickiness, while scaling new enterprise and commercial opportunities.
Executive Commentary
"This quarter, ServiceTitan’s AI, Titan Intelligence, enabled the customer to organically book, schedule, dispatch, and perform the first fully automated job in our history... This is a turning point for the trades. Leveraging the foundation of workflow that already happens in ServiceTitan, we now have an opportunity to democratize automation across the industry."
Aram Adessian, Co-Founder and Chief Executive Officer
"Q2 total revenue of $242.1 million grew 25% year over year. Subscription revenue of $174.8 million grew 27% year-over-year, led by faster-than-expected growth from new customers and healthy expansion trends. Usage revenue grew 23% year-over-year to $58 million, outpacing our prior guidance driven by two factors. First, as noted above, GTV grew more than expected. Second, this was compounded by a higher mix of on-platform payment solutions, leading to strong usage take rates."
Dave Sherry, Chief Financial Officer
Strategic Positioning
1. AI-Driven Automation as Competitive Moat
ServiceTitan’s investment in Titan Intelligence, its proprietary AI suite, is enabling end-to-end workflow automation for customers, as demonstrated by the Gulf Shore case study. By integrating AI across scheduling, dispatch, marketing, and contact center operations, the platform is driving measurable improvements in close rates, average ticket size, and after-hours job capture. This positions ServiceTitan as the default operating system for the trades, with automation as a key differentiator versus point solutions.
2. Enterprise and Commercial Expansion
Large enterprise wins, notably Roto-Rooter, validate ServiceTitan’s dual strength in residential and commercial workflows. The Roto-Rooter partnership, spanning both segments, underscores the company’s ability to serve complex, hybrid businesses. Leadership emphasized that success in commercial is now driven by investments in project management and construction-specific features, with upcoming enhancements (e.g., crews, daily logs, RFIs) expected to further unlock this market.
3. Pro Product Attach and Ecosystem Integration
Pro product adoption is accelerating, as customers seek advanced automation and efficiency gains. Modules such as Scheduling Pro, Dispatch Pro, and Contact Center Pro are increasingly viewed as essential for scaling operations. The company’s closed-loop system of record and growing partner ecosystem (e.g., ABC Supply in roofing) reinforce switching costs and cross-sell potential, supporting higher retention and expansion rates.
4. Monetization and Packaging Evolution
Management acknowledged that current packaging is not fully optimized, with customers often navigating a la carte offerings. There is clear intent to refine monetization and streamline the buying experience, which could unlock additional revenue and margin upside as automation value becomes more tangible and widely adopted.
Key Considerations
This quarter’s results highlight ServiceTitan’s ability to compound growth and margin through platform leverage and customer value creation, but also surface several strategic themes for investors to monitor.
Key Considerations:
- AI Automation as a Growth Flywheel: Customer success stories and attach rates suggest AI-driven automation is moving from pilot to platform-wide adoption.
- Commercial Construction Opportunity: Recent product launches and traction in project management are opening a large adjacent market, with early wins already materializing.
- Margin Structure and Hiring Pace: Operating margin outperformance was aided by slower hiring; management expects to catch up, which could moderate incremental margin gains near-term.
- Monetization Flexibility: Ongoing evolution in packaging and pricing for pro products may introduce variability but also provides levers for future revenue optimization.
- Resilience Across Segments: Diversification into non-HVAC trades and commercial customers is mitigating weather-driven volatility in core residential HVAC.
Risks
Potential risks include: execution challenges in scaling large enterprise and commercial implementations, slower-than-expected adoption of new modules, and macro-driven softness in residential end markets (as seen in HVAC’s weather-driven moderation). AI-driven search changes could also impact organic lead generation, though management views its brand leadership as a buffer. Ongoing evolution in product packaging and monetization could introduce short-term friction or customer confusion.
Forward Outlook
For Q3 2026, ServiceTitan guided to:
- Total revenue of $237 to $239 million
- Operating income of $14 to $15 million
For full-year 2026, management raised guidance to:
- Total revenue of $935 to $940 million
- Operating income of $74 to $76 million
Management highlighted several factors that underpin the outlook:
- Continued strength in high-margin usage revenue and pro product adoption
- Planned acceleration in hiring and increased sales and marketing investment, particularly around user conferences and product launches
Takeaways
ServiceTitan’s Q2 results reinforce its status as the platform of record for the trades, with AI automation and pro product adoption driving measurable customer and financial outcomes.
- Margin Expansion Is Structural: High-margin usage revenue and disciplined cost management are creating durable operating leverage, though future hiring may temper near-term gains.
- Enterprise and Commercial Momentum Is Accelerating: Product depth and implementation track record are winning large, complex customers, expanding the TAM and platform moat.
- Watch for Evolving Monetization: The company’s shift toward streamlined packaging and pricing will be a key lever for future growth and margin improvement, especially as AI automation becomes ubiquitous.
Conclusion
ServiceTitan delivered a high-quality quarter, with broad-based growth, margin expansion, and clear evidence that AI automation is driving real-world results for customers. The company’s strategic focus on commercial, enterprise, and pro product adoption positions it for durable, compounding growth as it builds the operating system for the trades.
Industry Read-Through
ServiceTitan’s performance signals a secular shift toward end-to-end automation in field services and the broader contractor ecosystem. The platform’s ability to deliver measurable ROI through AI-driven workflow is raising the bar for software providers in adjacent verticals, from construction management to payments and CRM. Competitors focused on point solutions or lacking deep vertical integration will face mounting pressure as customers demand unified, data-driven platforms. The Roto-Rooter win and commercial traction also suggest that industry consolidation and professionalization are accelerating, with technology adoption as a key enabler. Investors in field service, vertical SaaS, and automation should watch for rising attach rates, margin leverage, and the emergence of platform standards.