ServiceTitan Beat Earnings and Still Lost 30% in a Day — Because Growth, Not Margin, Is What the Market Prices

ServiceTitan beat both revenue and EPS expectations last quarter — $292.8 million in revenue, up 21% year-over-year, non-GAAP operating margin up 310 basis points to 15.2%, free cash flow up 47% to $50.5 million, and net dollar retention above 110% — and its stock still dropped 30% the next day, erasing more than $2 billion in market capitalization. Jason Lemkin’s analysis traces the drop to guidance, not the quarter itself: the back half of the year is guided to roughly 15% growth, down from about 25% a year earlier, with Q3 revenue guided below the quarter just reported. His read: “In 2026, the market pays for the growth rate and almost nothing else.”

Lemkin flags a specific mechanism behind the deceleration: ServiceTitan’s AI product, “Max,” is creating near-term revenue headwinds because its billing is deferred during customer implementation — an accounting timing effect layered on top of real softness in the HVAC vertical, where gross transaction value growth slowed from 23% to 17%.

The contrast with Snowflake’s quarter the week before is instructive for how the market is actually pricing AI investment: Snowflake intentionally cut non-GAAP product gross margin from 76.4% to 74.7% to fund AI infrastructure, and investors rewarded it, because product revenue was still accelerating for a third straight quarter (30% to 34% to 37%) with net revenue retention at 126%. Margin sacrifice for AI spend isn’t the variable the market is punishing in either case — deceleration is. For go-to-market leaders building the business case for AI product investment internally, the lesson from both earnings calls together is the same: the AI story only survives contact with public markets if it’s still compounding the top line, not just improving unit economics.