Powerfleet’s Resilient Growth Trajectory: Navigating Tariff Headwinds with Strategic Leverage

Amid global macroeconomic turbulence, few companies exemplify the power of disciplined execution and strategic foresight like Powerfleet, Inc. (NASDAQ: AIOT). Despite looming tariff pressures and elongated customer decision cycles, the IoT software-as-a-service leader has positioned itself to deliver 20-25% revenue growth in FY2026, fueled by its Unity platform, cost synergies, and expanding indirect channels. While near-term risks loom, the fundamentals of Powerfleet’s model—rooted in operational efficiency and innovation—suggest this is a stock poised to outperform once macro headwinds ease.

The Case for Sustainable Growth: Synergies and Strategic Leverage

Powerfleet’s first-half FY2025 results underscore its ability to convert strategic moves into tangible financial wins. The $13.5 million in annualized cost synergies realized from the MiX Telematics combination—50% of its two-year target—highlight the precision of its integration strategy. These savings, combined with gross margin expansion to 56.1%, drove a 46% YoY surge in pro forma EBITDA to $28.2 million. This performance has already propelled the company to exceed its FY2025 EBITDA guidance, with pro forma results now projected at $76 million, exceeding the $75 million base.

But the real catalyst lies ahead. The acquisition of Fleet Complete, finalized in early FY2025, is set to amplify Powerfleet’s growth trajectory in FY2026. The integration will unlock access to North American mid-market channels and AI-driven solutions like the Unity platform, which unifies fleet operations across devices. This platform’s device-agnostic design positions it as a $1.2 billion addressable market opportunity, with cross-selling potential to existing and new customers.

Indirect Channels: The Next Growth Frontier

Powerfleet’s expansion into indirect sales channels—a strategic priority for FY2026—adds further credibility to its growth narrative. By leveraging Fleet Complete’s distribution network and partnerships, the company aims to tap into underserved markets while reducing dependency on direct sales. This shift not only diversifies revenue streams but also aligns with the $50 billion global fleet telematics market’s shift toward enterprise-wide IoT solutions.

The financials back this play: product revenue grew 13% YoY in Q2 FY2025, driven by Unity’s adoption and AI camera sales. With indirect channels accounting for a growing share of sales, Powerfleet can capitalize on economies of scale, further compressing costs and boosting margins.

Tariff Risks: Navigable, Not Catastrophic

No discussion of Powerfleet’s outlook is complete without addressing the $600 million in tariffs impacting its supply chain. These levies, coupled with delayed customer decisions, have created uncertainty around FY2026’s revenue base—now set at $352.5 million, a 3% dip from FY2025’s $362.5 million. However, this reduction is structural, driven by accounting changes (e.g., re-bundling hardware sales under U.S. GAAP) rather than declining demand.

The company’s response? Focus on high-margin solutions like the Unity platform and AI cameras, which are less susceptible to tariff volatility. CEO Steve Towe’s emphasis on “disciplined execution” and early synergy realization also suggests management is proactively mitigating risks. While tariffs may dampen short-term growth, Powerfleet’s $76 million pro forma EBITDA beat and $230 million net adjusted debt (below its $235 million target) provide ample liquidity to weather the storm.

Why Act Now: The Long-Term Value Play

Powerfleet’s FY2026 EBITDA growth of 45-55% hinges on three irreversible trends:
1. AIoT Penetration: Fleets globally are accelerating IoT adoption to cut costs and improve safety, with Powerfleet’s Unity platform uniquely positioned to dominate this shift.
2. Operational Resilience: The $27 million two-year synergy target—half already achieved—ensures a low-cost structure that competitors struggle to match.
3. Indirect Channel Scalability: The Fleet Complete network and mid-market focus create a flywheel effect, where partnerships and data-driven solutions drive recurring revenue.

Investors seeking exposure to a $50 billion market with 10% annual growth should recognize Powerfleet’s model as a compound growth machine. Even at a 3% revenue base reduction, the 20-25% growth target implies FY2026 revenue of $423-440 million, with EBITDA margins expanding toward 25%+. This trajectory justifies a valuation re-rating, especially if tariff concerns subside.

Conclusion: A Strategic Buy Amid Uncertainty

Powerfleet’s FY2026 outlook is anything but ordinary. While tariffs and macro risks warrant caution, the company’s execution to date—synergy overdelivery, margin expansion, and platform innovation—builds confidence in its ability to outperform its peers in recovery cycles. With a $2.5 billion market cap relative to its $76 million pro forma EBITDA, the stock trades at just 33x forward EBITDA, a discount to peers.

Investors should view current volatility as a buying opportunity. Powerfleet’s structural advantages—Unity’s dominance, cost discipline, and indirect channel growth—are too durable to ignore. As CEO Towe notes, this is a “milestone year”; the next phase could make it a decade-defining one.

Act now to position your portfolio for the IoT software revolution.