- Price
- $360.41
- Fair value
- $500.00
- Discount
- 27.9%
- Uncertainty
- High
- LSEG rating
- 1.83
- Moat
- Wide
- Next earnings
- 2026-10-29
- Next earnings is estimate
- Yes
- Company name
- Tyler Technologies
- Sector
- Government software
- About
- Tyler Technologies sells software only to the public sector: cities, counties, schools, courts and state and federal agencies. Its products run court cases, public safety and 911 centers, tax and property records, permits, budgets and accounting. It has more than 50,000 installations across about 16,000 client locations in all 50 US states and some other countries. Most revenue is recurring: SaaS subscriptions, transaction fees for online government payments and filings, and maintenance of software that clients run on their own servers. In Q2 2026, recurring revenue was $559.5 million, or 86.7% of total revenue. Tyler wants to move about 85% of its on-premises clients to its cloud by 2030, because a client that moves pays about 1.7 times more.
- Thesis
- The market fears that AI will reduce the value of Tyler's software. The belief is that governments can use large language models to build their own tools, or buy cheaper AI tools, in place of Tyler's court, tax and finance systems. This fear hit most software stocks from 2025, and Tyler's price fell by about half from its February 2025 high. Slower reported growth adds to the doubt. Tyler lost the Texas payments contract in Q4 2025, so transaction revenue grew only 3.5% in Q2 2026, and total revenue grew 8.2%. For the gap to close, four things must be true. SaaS revenue must keep growing about 20% or more a year; it grew 21.7% in Q2 2026, the 22nd quarter in a row above 20%. Clients must keep moving to the cloud at the planned pace, with peak volumes in 2027 to 2029. Transaction revenue must return to growth near 10% after the Texas contract leaves the comparisons. The new AI products, such as document automation and the resident AI assistant, must add revenue to existing contracts. The first check is the Q3 2026 report, expected at the end of October 2026. The 2027 guidance in February 2027 is the second check, because it is the first full year without the Texas contract in the base. Tyler set 2030 targets of $3.35 billion of recurring revenue and $1.15 billion of free cash flow, so the full evidence comes over several years. If SaaS growth holds and clients do not leave for AI tools, the gap can close slowly through 2027 and 2028.
- Risks
- AI tools can lower the value of Tyler's software. If governments build their own tools with large language models, or buy cheaper AI products, Tyler can lose new deals, renewals or pricing power. Tyler's stock fell by about half from its February 2025 high because of this fear.
The cloud plan must work on a large scale. Tyler wants to move 85% of about 16,000 client locations to the cloud by 2030, with peak volumes in 2027 to 2029. Delays, cost overruns or client losses during the move can lower revenue and margins. Maintenance revenue fell 5.6% in Q2 2026 as clients moved.
Transaction revenue depends on large state contracts and on volumes of online payments and filings. The end of the Texas payments contract in Q4 2025 cut reported transaction growth to 3.5% in Q2 2026. The loss of another large contract can slow growth again.
Public sector budgets can tighten when tax revenue falls or federal funds stop. Government buying is slow, so a weaker budget can delay new deals for several quarters.
Tyler uses debt and cash for buybacks. In 2026 it issued $1.4375 billion of convertible notes and bought back 5.6% of its shares by July. If the stock price rises above the capped call price of $655.77, conversion of the notes can dilute shareholders.
- Balance sheet
- Cash: $970M
Debt: $1.4B
Net debt: $468M
Interest cover: 48×
Undrawn credit line: $1.0B, to May 2031
Debt due within 12 months: $0.0M
Last debt due: 2031
Tyler has one debt issue: $1.4375 billion of 0.50% convertible senior notes due July 2031, issued on May 14, 2026. The notes are unsecured, and their carrying value was $1.409 billion at June 30, 2026. Capped call trades lower the dilution from conversion up to a share price of $655.77. In March 2026, Tyler repaid its $600 million of 0.25% convertible notes at maturity. Cash is cash and cash equivalents of $895 million and short-term investments of $75 million at June 30, 2026. Interest cover is GAAP operating income divided by interest expense for the first half of 2026. The $1.0 billion unsecured revolving credit facility, signed on May 28, 2026, runs to May 2031 and had no borrowings. Tyler uses its cash and this facility for buybacks and acquisitions. In the first half of 2026, it paid about $212.7 million for For The Record and bought back 5.6% of its shares. Free cash flow was $118.5 million in Q2 2026, and the 2026 guidance is a free cash flow margin of 26% to 28%.
As of 2026-06-30.
- Checkpoints
- Oct 29, 2026 (estimate): Q3 2026 results: SaaS growth and bookings. Pending. Watch: SaaS revenue growth near 20% or more and bookings that keep growing pass; slower SaaS growth or weaker bookings with no clear cause fail.
Feb 2027 (estimate): Full-year 2026 results and 2027 guidance. Pending. Watch: 2027 guidance with transaction revenue growth near 10% and higher margins on the path to the 2030 targets passes; guidance below the pace of those targets fails.
2027 (estimate): Cloud moves and AI revenue. Pending. Watch: Rising cloud moves into the 2027 peak and AI add-ons sold to existing clients pass; lost clients or price cuts linked to AI tools fail.
- Recent events
- 2026-10-12: Wells Fargo raised its rating on Tyler to Overweight from Equal Weight, with a $400 price target. It said that recent execution problems look temporary and that the fear of AI disruption may be too high. The stock rose 3.2% that day.
2026-09-15: Tyler started a trading plan to buy back up to $260 million of its stock from September 16 to October 29, 2026. It had $1.416 billion of buyback authorization left.
2026-07-29: Tyler reported Q2 2026 results. Revenue was $645.1 million, up 8.2%, and slightly below analyst estimates. SaaS revenue grew 21.7%, and SaaS and total bookings reached quarterly records. Transaction revenue grew 3.5%, or 9.9% without the ended Texas payments contract. Non-GAAP EPS was $3.08, and free cash flow was $118.5 million, up 34.7%. Tyler kept its 2026 revenue guidance of $2.535 billion to $2.575 billion and added a $1.5 billion buyback authorization.
2026-06-09: At its Investor Day, Tyler raised its 2030 targets to $3.35 billion of annual recurring revenue and $1.15 billion of free cash flow. It plans to move 85% of its on-premises clients to the cloud by 2030.
2026-05-28: Tyler signed a new five-year $1.0 billion unsecured revolving credit facility, to May 2031. It replaced the $700 million facility. Tyler had no borrowings under either facility.
2026-05-14: Tyler issued $1.4375 billion of 0.50% convertible senior notes due 2031. It used about $320.7 million of the proceeds to buy back 1,026,900 of its shares. Capped call trades raised the effective conversion price to $655.77.
2026-04-29: Tyler reported Q1 2026 results. Revenue was $613.5 million, up 8.6%, and SaaS revenue grew 23.5%. Free cash flow was $102.8 million, more than double a year earlier. On April 14, it completed the purchase of For The Record, an AI speech-to-text company for courts, for about $212.7 million in cash.