Tyler's SaaS revenue grew 21.7% and total revenue 8.2% to $645.1M, but operating income was flat and GAAP EPS growth of 15.5% came from a $25M non-cash acquisition gain and a 4.7% lower share count funded partly by $1.44B of new convertible debt.
Revenue
$645M
+8.2% YoY
Net income
$94M
+10.5% YoY
Diluted EPS
$2.23
+15.5% YoY
Operating margin
14.7%
How TYL compares with Information Technology peers
Figure
TYL
Peer median
Rank
Revenue growth (YoY)
+8.2%
+22.1%
53rd of 63
Operating margin
14.7%
21.9%
45th of 63
EPS growth (YoY)
+15.5%
+35.5%
41st of 56
Rank 1 = fastest revenue growth, highest operating margin, fastest EPS growth. Peers are the other Information Technology companies with a 2026 report on this site, each at its latest period we've analyzed; fiscal calendars differ, so periods are not always the same months.
Tyler Technologies, which sells software to US courts, counties, cities and school districts, grew second-quarter 2026 revenue 8.2% to $645.1 million. Cloud software (SaaS) revenue grew 21.7%. The profit line looks better than the business did, though. GAAP net income rose 10.5% to $93.5 million and diluted EPS rose 15.5% to $2.23, but $25.0 million of that profit was a one-time, non-cash accounting gain on the For The Record acquisition. Operating income, the profit from running the business, was flat at $95.1 million. Most of the per-share growth came from Tyler buying back 5.6% of its shares this year, not from higher operating profit.
At a glance
SaaS revenue $230.6M, +21.7%: customers keep moving from installed software to Tyler's hosted versions. Stripping out $8.1M from acquisitions, SaaS still grew about 17%.
GAAP operating margin 14.7%, down from 16.0%: general & administrative costs rose 22% and R&D 24%, faster than revenue. Operating margin is the share of revenue left after running the business, before interest and tax.
Diluted shares down 4.7% year on year: Tyler spent $505M on buybacks in the quarter. That is why non-GAAP EPS rose 5.8% while non-GAAP net income rose only 0.9%.
The quarter in numbers
Metric
Q2 2026
Q2 2025
YoY Change
Total revenue
$645.1M
$596.1M
+8.2%
Recurring revenue (subscriptions + maintenance)
$559.5M
$517.2M
+8.2%
Recurring revenue share of total
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ARR (annualized recurring revenue) is this quarter's subscription and maintenance revenue multiplied by four, a rough annual run-rate. Q2 is Tyler's seasonally strongest quarter for transaction revenue, so Q2 ARR runs high.
Where the growth came from
Tyler earns revenue in three main ways. It charges subscription fees for hosted software (SaaS). It takes transaction fees when residents pay a fine, file a court document or renew a permit online. And it charges maintenance fees to clients who still run its software on their own servers. The quarter's pattern:
SaaS (+$41.1M). The 10-Q credits "sales to new clients and expansions with existing clients, along with new SaaS revenues from existing on-premises clients converting to our SaaS offerings", plus annual price increases. Acquisitions (MyGov, Emergency Networking, CloudGavel, Edulink and For The Record) contributed $8.1M of the gain.
Maintenance (-$6.3M, -5.6%). This is the other side of the same shift. When a client moves to SaaS, its maintenance contract ends. The decline is deliberate and sits alongside the SaaS gains.
Transaction fees (+3.5% only). The weak headline hides a one-time drag. One state's payment-processing contract wound down in Q4 2025, which cut about $12.5M of revenue from the quarter. Without it, transaction fees would have grown about 9%. Transaction fees rose 12% in the Enterprise Software segment and fell 3% in Platform Technologies, where that contract sat. Because merchant fees fell by $11.0M along with that revenue, the lost contract cost little profit.
Acquisitions added $11.4M in total. Organic revenue growth, meaning growth from businesses Tyler already owned a year ago, was therefore about 6.3%.
Why margins went down while gross margin went up
Gross margin, the share of revenue left after the direct cost of delivering the product, rose 1.8 points to 47.6%. The filing attributes this to "a shift in our revenue mix toward higher-margin SaaS revenues." Two expense lines below gross profit more than used up that gain:
R&D +24% to $62.8M. Most of this is a reclassification of work, not new hiring. As clients leave installed software, Tyler is "redeploy[ing] resources to research and development" from supporting old software versions, and it is also funding new product initiatives. Total headcount rose only 4.5% to 7,879, and 237 of the new employees came with acquisitions.
G&A +22% to $93.7M. The 10-Q names a $7.1M increase in professional fees "primarily from litigation-related expenses", $3.3M more share-based compensation, $2.3M of acquisition and restructuring costs, and $2.4M from acquired businesses. The same 10-Q lists no material legal proceedings, so the litigation costs are real spending but are not disclosed as a material liability.
By segment, Enterprise Software (the core back-office software) grew revenue 9.8% to $476.3M. Its operating income rose only 3% to $178.0M, and its segment margin fell from 39.8% to 37.4%. Higher merchant fees (+$16.2M), personnel (+$9.1M), litigation-related fees (+$5.3M) and hosting (+$4.8M) absorbed most of the $50.5M subscription gain. Platform Technologies grew operating income 31% to $32.4M. That came from the timing of professional-services projects and reserves taken in the prior year, and for the first half its operating income was down 9%.
What the headline numbers hide
The GAAP profit rise comes from a one-time gain. Tyler already owned part of For The Record. When it bought the rest in April, it had to revalue its existing stake at the purchase price, producing a $25.0M gain that brought in no cash. The filing says this gain is nontaxable. Without it, pre-tax income fell to about $95.6M from $102.5M, and net income would have been about $68.5M, down roughly 19% rather than up 10.5%. A higher tax rate added to the decline: excluding the gain, the tax rate rose because stock-based pay brought smaller tax benefits (22.5% reported, 17.4% a year ago).
What "non-GAAP" leaves out. Tyler's adjusted figures exclude share-based compensation ($43.7M, up 14%), amortization of acquired intangibles ($24.1M in total), acquisition and restructuring costs ($2.4M) and the $25.0M gain. Non-GAAP operating income was $165.7M against $95.1M GAAP. Stock compensation is the largest item in that $70.6M gap, and it is a recurring cost of paying employees.
Buybacks, not operations, drove per-share growth. Non-GAAP net income rose 0.9%, while non-GAAP EPS rose 5.8%. The difference is the 4.7% drop in diluted shares (41.9M vs 43.9M). Tyler bought back about 2.4M shares for $761.2M (including excise tax) in the first half. Non-GAAP pre-tax profit rose only about 1.5%, because interest income from cash fell and interest expense on the new convertible notes rose.
Cash conversion is strong, but helped by lower tax payments. Year to date, operating cash flow was $231.7M against net income of $174.7M (1.33x), or about 1.55x if the non-cash gain is excluded. Part of the $77.2M improvement is timing: cash tax payments fell to $16.5M from $46.3M. Capitalized software spending also dropped to $2.1M from $10.4M, which lifts free cash flow directly.
Receivables are seasonal. Accounts receivable rose to $724.9M from $638.8M at year-end. The 10-Q says this is because the annual maintenance billing cycle peaks in the second quarter. Deferred revenue (cash billed ahead of the service being delivered) edged up to $797.4M from $780.8M.
The balance sheet moved from net cash to net debt. In one half-year Tyler repaid $600M of maturing convertible notes, issued $1.44B of new 0.50% notes due 2031 (plus $187M for capped calls that limit share dilution up to $655.77), paid $214M for For The Record and spent $755M on buybacks. Cash and investments are about $1.02B against $1.44B of convertible debt, which leaves roughly $0.4B of net debt, compared with net cash of roughly $0.56B at December 31. Shareholders' equity fell to $3.04B from $3.70B.
Guidance: higher EPS, same revenue
2026 guidance
April 29
July 29
Total revenue
$2.535B–$2.575B
$2.535B–$2.575B (unchanged)
Non-GAAP diluted EPS
$12.50–$12.75
$12.95–$13.20
Free cash flow margin
26%–28%
26%–28% (unchanged)
Net interest income
$8M–$10M
$19M–$21M
R&D expense
$245M–$250M
$245M–$250M (unchanged)
Tyler raised its EPS guidance by $0.45 but kept revenue unchanged. Our own rough estimate: the $11M increase in expected net interest income is worth about $0.20 per share after the 23% non-GAAP tax rate. Most of the remaining increase fits with the smaller share count. The guidance therefore reflects financing and buyback choices more than a stronger operating outlook. The full-year FCF margin target of 26%–28% compares with 17.6% in the first half, which assumes a strong second half. Tyler's collections are usually weighted toward the second half, but that makes the target a real test. In June, at its Investor Day, the company also raised its 2030 financial targets. Management describes demand as healthy and says Q2 set records for both SaaS and total bookings, but the filing gives no bookings figure.
Takeaway: Tyler's move to cloud software is working: SaaS is up 22%, gross margin is up 1.8 points, and the decline in maintenance revenue is planned. Per-share profit, however, is now driven by the balance sheet. Operating income was flat and GAAP net income excluding the one-time gain fell about 19%. EPS growth came from a share count cut by 4.7% with money raised through convertible debt.
What to watch next
Whether operating margin recovers. If G&A stays above 14% of revenue after the litigation costs and acquisition integration pass, the SaaS mix gains will not reach operating income.
Transaction fees from Q4 2026 onward. The lost state contract drops out of the year-over-year comparison in Q4, so reported transaction growth should rise toward the roughly 9% underlying rate. If it does not, the weakness is not only that contract.
Second-half free cash flow against the 26%–28% target, now that the benefit from lower cash taxes in the first half is in the base.
Buyback pace. Tyler has about $1.745B of authorization left and now carries net debt. Further buybacks at the first-half pace would have to come from free cash flow and the revolving credit line, not from surplus cash.
Our view: the recurring-revenue base (ARR $2.24B, +8%) is predictable, and SaaS conversion should keep lifting gross margin. But Tyler grew revenue organically at about 6% while holding operating income flat, and the gap between GAAP and non-GAAP profit is widening. Until operating expenses grow more slowly than revenue, EPS growth depends on buybacks funded by debt, which cannot continue indefinitely.
Figures from Tyler's Form 10-Q for the quarter ended June 30, 2026 and its July 29, 2026 earnings release (Exhibit 99.1). Prior guidance is from the April 29, 2026 earnings release.