PowerFleet (NASDAQ:AIOT) reported first-quarter fiscal 2027 revenue growth and higher adjusted EBITDA, while lowering its full-year outlook as it reallocates resources toward a rapidly expanding South African government contract.
Total first-quarter revenue rose 6.4% year over year to $110.8 million. Adjusted EBITDA increased to $21.5 million from $20.1 million in the prior-year quarter, producing a 19.4% margin. The company reported GAAP operating income of $300,000, compared with a $2 million operating loss a year earlier.
Services Growth Supports Margin Expansion
Services revenue increased 9.1% year over year to $94.3 million and represented about 85% of total revenue. Services gross margin expanded by nearly one percentage point to 61.1%, while adjusted EBITDA services gross margin rose 40 basis points to 75.9%.
Product revenue declined 6.7% to $16.5 million after a compatibility issue involving a new component delayed about $3.2 million of product revenue late in the quarter. Steve Towe said the issue affected a single product line after an end-of-life Wi-Fi chip was replaced with a component that did not perform as expected.
The company said it identified a solution and is restoring production. Management said customer orders remain intact and the issue does not affect deployments under the major South African contract. Some related second-quarter revenue could shift into the third quarter, though PowerFleet expects the full amount to be captured during the fiscal year.
Despite pressure on product margins, total GAAP gross margin expanded about one percentage point year over year to 55.2%, while adjusted EBITDA gross margin increased to 67.8%, reflecting a greater mix of recurring services revenue.
South African Opportunity Expands Beyond Initial Expectations
Management emphasized the accelerating scale of a South African National Treasury contract. The company had initially expected $20 million to $30 million in annual recurring revenue to ramp over 18 to 24 months. It now has more than $27 million in ARR required for near-term activation, with additional pipeline building.
PowerFleet originally expected to have approximately 10,000 assets ready for installation at this point in the program. Towe said the company now has more than 70,000 vehicle installations to deploy in the near term and expects that number to increase to between 80,000 and 90,000 assets over the next several quarters.
The company sees a total addressable opportunity of roughly 150,000 vehicles under the program, within an overall fleet of 180,000 vehicles. Towe said successful execution on the first installations could improve PowerFleet’s opportunity to win more vehicle deployments and sell additional services to the customer base.
To support the accelerated rollout, PowerFleet is exiting or reducing certain non-strategic South African activities and redirecting capacity, working capital and management attention to the larger contract. Management described the action as a decision to prioritize higher-quality revenue, cash collection and long-term growth rather than a reduction in underlying demand.
Bookings and Enterprise Expansion
The company cited continued enterprise demand across its platform. During the quarter, a European-headquartered construction company operating in 26 countries selected PowerFleet as a vendor of choice to expand deployments of AI premium video across on-road and yard operations. Management characterized the engagement as a multimillion-dollar ARR opportunity.
PowerFleet also reported several onsite expansion wins in North America, including:
- A $2 million expansion with a Fortune 500 manufacturing company.
- A $1.3 million deployment with a national transportation and logistics enterprise.
- A $1 million win with a national automotive technology company.
The company said 12 Fortune 500 companies expanded their onsite footprints during the quarter, while 10 global Fortune 500 customers broadened adoption of AI Video. AI Video bookings rose 20% sequentially, and 16 industries produced enterprise wins exceeding $100,000 in total contract value.
Guidance Reduced on Timing and Reprioritization
PowerFleet reduced its fiscal 2027 revenue guidance to a range of $468 million to $473 million from a prior range of $485 million to $490 million. It lowered adjusted EBITDA guidance to $111 million to $114 million from $122 million to $125 million.
Wilson said the revised outlook reflects an approximately $17 million reduction in projected revenue relative to the midpoint of prior guidance, stemming from the South African reprioritization. The company expects an approximately $11 million adjusted EBITDA impact, including about $6 million of flow-through from lower revenue and $5 million of one-time costs.
The company now expects a fiscal 2027 net loss of $6 million to $8 million, compared with its prior expectation for net income of $4 million to $8 million. Free cash flow is projected at $20 million to $23 million, down from prior guidance of $30 million to $35 million.
Management said the revised forecast represents a timing gap rather than a change in its longer-term trajectory. PowerFleet expects to exit the fourth quarter with annualized revenue of approximately $495 million and an adjusted EBITDA margin of approximately 27%. It also expects services revenue growth to accelerate to comfortably above 10% in fiscal 2028 as the South African contract ramps.
Leadership Changes
PowerFleet said Paul Lalljie joined the company as president and CFO after serving as a strategic adviser in recent months. Lalljie previously held CFO and CEO roles at 2U and served as CFO of Neustar. Wilson will remain in a consulting role for several months to support the transition.
The company also appointed Vishal Vallabha as chief AI officer. Vallabha has held technology and AI leadership roles at Freeman Company, Lumen Technologies and TomTom Telematics, according to PowerFleet. Towe said Vallabha will help advance the company’s AI-first platform strategy.
About PowerFleet (NASDAQ:AIOT)
PowerFleet, Inc (NASDAQ: AIOT) develops and delivers Internet of Things (IoT)–based telematics and asset-tracking solutions designed to help businesses monitor, manage and optimize fleets of vehicles and industrial equipment. Its core offerings include wireless sensors, GPS tracking devices and cloud-hosted software platforms that provide real-time visibility into vehicle whereabouts, usage patterns, fuel consumption and maintenance needs. The company’s systems also support regulatory compliance and safety monitoring, enabling customers to reduce operational costs, minimize theft and improve overall asset utilization.
The company’s hardware portfolio features RFID readers, active and passive tags, onboard diagnostics (OBD) adapters and temperature or motion sensors that can be deployed on trucks, trailers, forklifts, containers and other high-value assets.
