Digital Turbine Shares Fall 23% as Margins Narrow Despite 27% Revenue Growth
Key Facts
Digital Turbine shares fell 23.01% to $8.70 in after-hours trading following the November 9 close, after the company reported second-quarter fiscal 2027 results for the three months ended September 30. The decline followed a regular session in which the stock rose 8.86% to finish at $11.30. The company reported revenue of $178.7 million, up 27% year over year and above analysts’ average estimate of $166.8 million. The drop also followed a decline in adjusted gross margin to 43% from 47% a year earlier. The market response focused on that contraction despite growth in revenue and adjusted earnings.
Revenue in the comparable quarter of the prior fiscal year was $140.4 million, putting growth in the current period at 27% year over year, according to the company’s statement. In its results coverage, the company said adjusted earnings per share of $0.18 matched analysts’ expectations, while revenue exceeded their average estimate. The divergence between revenue beating expectations and adjusted earnings per share matching them highlights two different aspects of quarterly performance. Revenue growth also coincided with revenue-sharing expenses rising to $87.7 million from $63.1 million a year earlier. Investing.com linked the increase to pressure on margins, with adjusted gross margin at 43% versus 47% in the comparable period.
By business segment, revenue from On-Device Solutions was $115.6 million before intersegment eliminations, up 20% from the comparable period. Revenue from the App Growth Platform was $63.5 million before eliminations, up 42% year over year. That put the platform at the forefront of growth across the two segments during the quarter, while both posted growth exceeding 20%, according to the company. Chief Executive Bill Stone said revenue growth in both segments, together with operating leverage efficiency, enabled the company to increase adjusted EBITDA. He added that “data- and AI-driven performance improvements are sustainably enhancing overall platform performance.”
The company reported net income of $10.3 million under U.S. generally accepted accounting principles, or $0.06 per diluted share, compared with a net loss of $21.4 million, or $0.20 per share, in the second quarter of fiscal 2026. Operating income under the same standards rose to $20.307 million from $6.534 million in the three months ended September 30 of the prior year. On an adjusted basis, net income was $23.4 million, or $0.18 per share, compared with $16.5 million, or $0.15 per share, a year earlier. Adjusted free cash flow was $10.5 million for the quarter. The figures show improved operating and net profitability alongside revenue growth, while the decline in gross margin remained a focus in the stock’s reaction.
Adjusted EBITDA was $39.8 million, up 46% from $27.2 million in the comparable period of the prior fiscal year. The company said revenue growth in On-Device Solutions and the App Growth Platform, together with operating leverage efficiency, helped drive the increase. That improvement contrasts with a four-percentage-point contraction in adjusted gross margin from a year earlier. Revenue-sharing expenses rose from $63.1 million to $87.7 million over the same period. Investing.com said partner payments pressured margins, in its explanation of the stock’s decline after revenue topped expectations.
The results also included an adjustment to prior-period figures after the company said it had identified an immaterial $3.5 million understatement in revenue-sharing expenses for the three months ended June 30, 2026. It said related accrued liabilities for the same expenses were understated by a similar amount. The adjustment concerns a period before the quarter ended September 30 and does not represent expenses for the current quarter alone. The disclosure was included in the second-quarter results statement. It coincided with recorded revenue-sharing expenses for the current quarter rising to $87.7 million from $63.1 million a year earlier, according to results coverage.
For fiscal 2027, the company set a revenue range of $670 million to $690 million and kept its adjusted EBITDA outlook at $145 million to $155 million. The announcement provides annual ranges for revenue and adjusted earnings, but the statement does not compare them with the amount of change from previous guidance. The announced revenue figure therefore stands apart from any conclusion about the size of an increase over prior expectations. The adjusted earnings range remained at $145–155 million, according to the company. The company made a replay of the results conference available through November 16, 2026.