Rollins Says AI Search Shift Is Driving Volatile Residential Lead Trends

Key Points

• AI-powered search changes are driving volatile residential leads: Rollins reported double-digit lead declines after May, with management estimating that 50%–60% of the shift may be linked to AI search and Google’s AI Overviews. The company is revising attribution systems, website content and marketing channels.
• 2026 outlook remains unchanged but is weighted toward the fourth quarter: Rollins reiterated approximately 6% organic revenue growth and 10% incremental margins, while citing difficult third-quarter comparisons, medical-cost pressures and ongoing lead volatility.
• Rollins is cutting costs and returning capital: The company is right-sizing staffing, reallocating marketing spending, managing higher fuel and medical expenses, and repurchased $100 million of stock in the third quarter. Management continues to prioritize acquisitions, dividend growth and share buybacks.

Rollins NYSE: ROL executives said the pest-control company is working to adapt its marketing and customer-acquisition strategy after an unusually volatile period in residential lead generation, which management believes was driven largely by changes in AI-powered search.

Speaking at the JPMorgan U.S. All Stars Conference in London, President and CEO Jerry Gahlhoff said the company had seen mid-single-digit lead declines beginning around March or April 2025, though it continued to grow as lead quality, conversion rates and starts remained strong. An early winter in November and operational disruptions from January ice storms also affected results, he said.

Rollins exited the first quarter with 8% organic growth, according to Gahlhoff, and April was solid. However, lead trends worsened in the second half of May and remained soft through the second quarter. The company has experienced double-digit lead declines, compared with prior declines of roughly 4% to 5%, he said.

AI Search Seen as Major Driver of Lead Volatility

Gahlhoff said Rollins examined consumer health, income bands, pest pressure, weather patterns and geographic trends to understand the decline in leads. The company found that lower-income consumers were not disproportionately affected, while certain “bellwether” pests such as mosquitoes were down by single digits.

Management also observed that Google made AI Overviews its default search experience on May 19, coinciding with the period when the gap in lead trends began to widen. Gahlhoff estimated that “at least 50%-60%” of the changes Rollins experienced were probably related to the shift in large language models, or LLMs, with other factors contributing at lower levels.

“The customer journey is shifting a lot,” Gahlhoff said, noting that the company must update its lead-attribution systems to determine how consumers are discovering its brands and how marketing resources should be deployed.

He said the shift has expanded the number of platforms the company must manage. Traditional Google search had emphasized paid keywords, advertising and reviews, while generative AI tools can draw information from other sources. For example, he said ChatGPT may rely on Yelp, the Better Business Bureau or Reddit rather than Google reviews.

Rollins is adjusting website content, emphasizing local branch pages, considering greater pricing transparency and highlighting service features such as same-day or next-day appointments. Gahlhoff said the company has engaged outside help and is testing changes, although many efforts undertaken in June and July did not produce results.

“The faster we learn, the faster we adapt, the faster we’ll get through this,” he said.

Outlook Remains Weighted Toward Fourth Quarter

Management reiterated its 2026 framework of approximately 6% organic revenue growth and 10% incremental margins. Gahlhoff said the company generated 6.1% organic revenue growth in the first half and does not expect a meaningful decline or improvement in the second half.

However, Rollins expects the year’s performance to be weighted more heavily toward the fourth quarter. The third quarter faces difficult comparisons with the prior-year period, when “all the stars aligned,” according to Chief Financial Officer Will Harkins. The company also expects ongoing medical-cost headwinds and will lap favorable fleet-related and auto-liability items recorded in the third quarter of 2025.

Harkins said brief signs of improvement in late June and early July did not continue consistently through July and August. While certain days and weeks have performed better than others, he said lead trends remain volatile.

Capital Allocation and Cost Actions

Harkins said Rollins’ capital-allocation priorities remain strategic acquisitions, dividend growth and share repurchases. The company has board authorization to repurchase up to 11 million shares and repurchased $100 million of stock during the third quarter. Rollins previously discussed buying $40 million of stock to offset dilution from its stock-compensation program.

“We absolutely believe that the company is undervalued at the moment,” Harkins said, adding that the company’s balance sheet remains healthy at roughly one times leverage.

On expenses, Harkins cited medical claims and higher fuel costs as headwinds. Fuel remains below 2% of sales, though it has increased by about 30 basis points from the prior year, he said. The company has added hybrid vehicles and sought more favorable fleet costs through a vendor request-for-proposals process.

Rollins had staffed for 7% to 8% growth but began right-sizing its workforce in late May and June as demand failed to materialize as expected. The company is not planning to increase its total marketing spend, Harkins said, but is reallocating marketing dollars toward channels it considers more advantageous.

Service Relationships Central to Strategy

Gahlhoff said competition remains fragmented and has not changed significantly, with market conditions varying by city and state. He emphasized that the company’s long-term defense against pricing pressure and potential consumer use of AI personal assistants is service quality and relationships between technicians and customers.

He also highlighted Rollins’ leadership-development program, Co-lab, which focuses on servant leadership and cross-brand collaboration. About 2,200 leaders are expected to complete the program by the fourth quarter, he said.

“At the end of the day, it’s about how we serve, what our customer relationships are like,” Gahlhoff said. “That determines the longevity of Rollins.”

About Rollins (NYSE:ROL)

Rollins, Inc is a global provider of pest and termite control services for residential and commercial customers. The company helps protect homes, businesses, and other properties from insects, rodents, termites, wildlife, and other pests through inspection, prevention, treatment, and ongoing monitoring programs.

Rollins operates through a portfolio of recognized pest control brands, including Orkin, Terminix, HomeTeam Pest Defense, Western Exterminator, and Critter Control. Its services include general pest management, termite protection, mosquito and bed bug control, wildlife management, and specialized commercial pest control programs.

Founded in 1948 and headquartered in Atlanta, Georgia, Rollins serves customers across the United States and internationally.

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