Tyler Technologies, Inc. (TYL) Earnings & Analysis

Latest quarter

Tyler Technologies reported Q2 FY2026 revenue of $645.1 million, below the consensus of $647.0 million. Its adjusted earnings per share were $3.08, above the consensus of $3.06.

Revenue rose from $596.1 million a year earlier, while diluted earnings per share increased to $2.23 from $1.93. CEO Lynn Moore said SaaS revenue grew 21.7% in the quarter and that Tyler recorded growth in total bookings.

Tyler’s gross margin rose to 47.6% from 45.8%, while its operating margin fell to 14.7% from 16.0%. Free cash flow increased to $118.5 million from $88.0 million a year earlier. Moore said public-sector demand remained supported by government modernization and investment in digital transformation.

CFO Brian Miller said the revenue from newly signed SaaS deals can take time to appear in the income statement, so recent bookings have less impact on the current quarter than on later periods.

Adjusted EPS is the figure the consensus estimates, not the GAAP EPS above.

What management said on the call

CEO Lynn Moore said government customers’ budgets were generally stable and that demand was consistent with recent periods. He said Tyler had seen anecdotal signs of more decisions being made in its enterprise resource planning business. CFO Brian Miller said customers facing budget pressure look at how technology can improve efficiency; for some transactions, he said, Tyler can offer a model funded by transaction fees rather than appropriated budgets.

Asked about cloud conversions, Moore said Tyler was developing incentives including cloud-only AI functionality, other cloud-only features and transitional pricing. Miller said conversion activity should grow over the next several years and that Tyler was on track for its long-term target, although the timing of larger customer conversions can shift. He added that newly signed SaaS business takes time to reach revenue, limiting the near-term impact of recent bookings.

On AI pricing, Moore described features included in existing products, subscription uplifts for bundled capabilities and pricing based on outcomes. He said Tyler was testing what customers would pay for subscription uplifts and the viability of outcome-based pricing. Miller said direct AI offerings remained a small share of new annual contract value, while Moore expected AI revenue to become more meaningful in the second half of 2027 and into 2028.

Asked about investment and margins, Miller said the spending outlook had not materially changed and that margins were expected to expand through the year. He said hiring was on plan and would be fairly limited in the second half. Moore said Tyler was examining ways to shorten implementations and improve support, but it was too early to quantify returns from those AI investments.

On competition, Moore said Tyler had made investments in its enterprise resource planning product and had won public-safety business against competitors. He also said the acquired For the Record business won an Australian opportunity during the quarter. Miller said Tyler’s full-year outlook had not meaningfully changed.

Guidance

In its October release, Tyler raised its FY2026 capital expenditure outlook to $20.0 million–$22.0 million from $18.0 million–$20.0 million. The company also expects $5.0 million of capitalized software development costs within capex, compared with $6.0 million in its July release.