Tyler Technologies offers durable public-sector software compounding as cloud conversions, buybacks, and 98% retention outweigh near-term margin investment.
Overview
Tyler Technologies is the leading pure-play provider of integrated software and technology services for local, state, federal, and K-12 public-sector organizations. Its diversified platform spans ERP and finance, state and federal administration, courts, public safety, education, civic services, and appraisal and tax, supported by more than 50,000 installations across 16,000 client locations. **The central investment thesis is the accretive migration from legacy maintenance to cloud subscriptions:** SaaS revenue rose 21.7% year over year to $230.6M in Q2 2026, marking the 22nd consecutive quarter above 20% SaaS growth, while converted customers generate approximately 1.7x prior maintenance ARR. Q2 revenue increased 8.2% to $645.1M, organic growth excluding the Texas payments wind-down was 10.5%, and free cash flow rose 34.7% to a record $118.5M. Near-term margins remain pressured by R&D and G&A investment, but management expects approximately 100 bps of organic margin expansion in the second half of 2026. The report’s base case values shares at $676.31 in FY2031 versus $309.60 currently, with a probability-weighted target of $674.31.