Investor sentiment surrounding artificial intelligence (AI) has recently cast a shadow over many software-as-a-service (SaaS) stocks, but ServiceTitan may hold considerable promise amid this uncertainty. While shares of both BigBear.ai and ServiceTitan have experienced significant declines, the causes diverge considerably. Over the past six months, ServiceTitan has tumbled by 23.6%, contrasting sharply with the broader market, where the S&P 500 has gained 9.8% and the tech-heavy Nasdaq-100 has risen by 10.6%. BigBear.ai, meanwhile, has seen a 21.4% drop.
BigBear.ai specializes in AI decision-intelligence tools and should theoretically benefit from the ongoing AI trend. However, it faces intense competition in its niche market, compounded by declining revenues. ServiceTitan, on the other hand, provides a business management platform designed specifically for skilled trades, and while its sales continue to grow, investor skepticism primarily revolves around the broader implications of AI for the SaaS sector.
Despite the prevailing uncertainty, ServiceTitan is demonstrating robust growth. In its fiscal 2026 third quarter, which concluded on October 31, the company reported a remarkable 25% revenue increase, reaching $249 million. Its adjusted operating margin also improved significantly, climbing to 8.6% from just 0.8% in the prior year. This growth trajectory places its annual revenue run rate near $1 billion. Although the stock surged by approximately 10% following the earnings announcement on December 5, it has since retreated by about 16% from those peak levels.
Although still unprofitable, ServiceTitan has consistently surpassed analysts’ earnings expectations for the past four quarters, leading some to argue that the stock is undervalued. In contrast, BigBear.ai has struggled to maintain profitability, recording a 20% revenue decline year over year in the third quarter, alongside a 3.5 percentage point drop in gross margin, bringing it to 22.4%. The company has not posted a profit in the past four years and has missed earnings estimates in three of its last four reported quarters, resulting in a nearly 40% drop from its public debut in December 2021.
ServiceTitan’s Sustainable Business Model
BigBear.ai’s reliance on government contracts and defense spending adds to its challenges, as it grapples with fierce competition and stagnating growth. Conversely, ServiceTitan caters specifically to an underserved market—contractors in commercial and residential trades—offering a streamlined platform for back-office operations. By simplifying administrative tasks for professionals like plumbers and electricians, ServiceTitan has positioned itself as a valuable resource in a traditionally analog industry.
Despite its growth, the skepticism surrounding ServiceTitan can be attributed to broader narratives suggesting that AI technologies may render many SaaS solutions obsolete. This perception has also affected larger SaaS firms, notably Salesforce, which has experienced a 32% decline over the past year. Critics argue that businesses may increasingly turn to AI tools to create their own software solutions, potentially undermining subscription-based models.
However, the reality may diverge from this narrative. Many skilled tradespeople, often preoccupied with their core responsibilities, are unlikely to invest time in developing their own software solutions. ServiceTitan’s platform is tailored to meet the unique needs of these contractors, suggesting that the demand for dedicated SaaS solutions in this sector may remain intact.
From a financial perspective, ServiceTitan’s price-to-sales ratio stands at 9.0, positioning it more favorably than BigBear.ai’s ratio of 12.3. While the future remains uncertain for BigBear.ai, whose prospects for recovery appear dim, ServiceTitan is poised for continued growth. As such, it represents a more attractive investment opportunity for those willing to navigate the current tech landscape.
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