Powerfleet Inc. (NASDAQ:AIOT) shares dropped 17.69% in pre-market trading on Monday after the company reported mixed fiscal first-quarter 2027 results, with earnings coming in ahead of expectations but revenue falling short of Wall Street forecasts.
The connected-operations technology company posted an adjusted loss of $0.01 per share, slightly better than the analyst consensus for a loss of $0.02 per share.
Revenue reached $110.8 million, below the $115.73 million expected by analysts. However, sales still increased 6.4% year-on-year from $104.1 million in the corresponding quarter.
Services revenue grows as Powerfleet shifts business mix
Services remained the largest contributor to Powerfleet’s business, with revenue from the segment increasing 9.1% year-on-year to $94.3 million. Services accounted for approximately 85% of total quarterly revenue.
Chief Executive Steve Towe said the overall revenue shortfall was partly connected to the company’s decision to reprioritise resources around its South African National Treasury contract.
“Near-term demand under our South African National Treasury contract has accelerated significantly faster than anticipated, with vehicles ready for near-term installation now approximately seven times our original expectation,” Towe said.
Powerfleet is redirecting resources towards the accelerated deployment and sacrificing some previously projected non-strategic revenue in South Africa to support the larger opportunity.
The change in priorities reduced South African revenue by approximately $1.6 million during the quarter.
Powerfleet also experienced a $3.2 million delay in product revenue because of a production constraint affecting a single product line. Management said the issue has since been resolved.
Margins and cash flow improve despite revenue shortfall
Although revenue missed expectations, several profitability and cash-flow measures improved during the quarter.
Gross margin expanded to 55.2% from 54.2% a year earlier, supported by the continued shift towards higher-margin services revenue.
Adjusted EBITDA increased 6.9% year-on-year to $21.5 million, while operating cash flow climbed 79% to $8.4 million from $4.7 million in the comparable period.
The figures showed improving operating efficiency even as the company dealt with revenue timing issues and redirected resources towards the South African contract.
Powerfleet cuts fiscal 2027 revenue outlook
Powerfleet also updated its full-year fiscal 2027 guidance, forecasting revenue of between $468 million and $473 million.
That range sits below the analyst consensus estimate of $487.2 million. At the midpoint of $470.5 million, Powerfleet expects annual revenue growth of approximately 6%.
Adjusted EBITDA is forecast at between $111 million and $114 million, with the midpoint representing growth of approximately 16% compared with the previous year.
The lower revenue forecast added to the pressure on Powerfleet shares following the quarterly report, despite management continuing to anticipate stronger EBITDA growth.
South African contract provides significant recurring revenue opportunity
Powerfleet highlighted its South African National Treasury contract as an important growth opportunity, with more than $27 million in annual recurring revenue expected to be activated in the near term.
The number of vehicles mandated for immediate deployment has increased to more than 70,000, significantly expanding the scale of the rollout and prompting the company to redirect resources towards the programme.
While the first-quarter earnings beat, improving margins and stronger cash generation provided positive signals, investors focused on the revenue miss and below-consensus full-year sales guidance, sending Powerfleet (NASDAQ:AIOT) shares sharply lower before Monday’s opening bell.
PowerFleet stock price
