Powerfleet Q2 2027: Record Revenue, a 300% EPS Beat, and a Cash Flow Catch

Powerfleet posted adjusted EPS of $0.04 for its fiscal second quarter, tripling the consensus estimate of $0.01. Revenue of $115.7 million edged past the $114.9 million estimate and grew 11.7% year over year, which management called a record for the period. The outperformance lands after a rough Q1 2027 in which the company reported a loss of $0.01 against an expected $0.02 gain, missing expectations.

The revenue mix is shifting meaningfully toward services, which climbed 7% to $95.2 million and now represent 82% of total revenue, up from 80% a year ago. Product revenue moved in the opposite direction, declining 8% to $20.5 million. Gross margin narrowed to 53% from 56%, a compression partly linked to the ramp of the South African National Treasury contract, which CEO Steve Towe said is "progressing ahead of our original expectations."

That South African deployment is the biggest swing factor in the near-term story. The scale-up of upfront device investment pushed free cash flow to negative $17.4 million for the first half of the fiscal year. To manage that pressure, Powerfleet has agreed in principle to a device financing facility with Rand Merchant Bank, though the arrangement still awaits definitive documentation.

Powerfleet affirmed its full-year fiscal 2027 guidance: revenue of $468 million to $473 million, adjusted EBITDA of $111 million to $114 million, and free cash flow of approximately $20 million. Management expects profitability and revenue to strengthen in the second half as the South African rollout scales, targeting a Q4 annualized revenue exit rate of roughly $495 million at an adjusted EBITDA margin of about 27%.

On the product side, Powerfleet launched two new offerings during the quarter: Unity Foresight, an AI predictive analytics solution, and Unity Asset Intelligence, which extends tracking capabilities to pallets, containers, and non-powered assets. The company spent $9.8 million on research and development in the quarter, capitalizing $5.1 million of that total. Total debt stood at $291.5 million with net leverage of 2.65x, a figure worth watching as the South African deployment continues to consume capital ahead of the revenue it is expected to unlock.