Tyler Technologies Q3 Revenue Rises 8.7% as SaaS Grows 21.2%

Tyler Technologies (NYSE: TYL) reported an 8.7% increase in third-quarter 2026 revenue, supported by double-digit recurring revenue growth and continued demand for its cloud software. SaaS revenue climbed 21.2%, while quarterly free cash flow reached a record $277.0 million and non-GAAP operating margin expanded by 150 basis points.

Total revenue was $647.6 million for the quarter. Excluding the impact of the Texas payments contract, revenue grew 10.2%. Annualized recurring revenue rose 11% to $2.28 billion, reflecting Tyler’s continued shift toward subscription-based services for public-sector clients.

Recurring revenue increased 11% to $568.8 million and represented 87.8% of total revenue. Excluding the Texas contract impact, recurring revenue grew 12.8%. Subscription revenue advanced 15.3%, including SaaS revenue of $242.2 million, while transaction revenue rose 9.5% to $220.4 million. Transaction revenue growth was 14.2% without the Texas contract impact.

Maintenance revenue declined 4.6% to $106.2 million as Tyler continued migrating on-premises customers to SaaS offerings. The company’s non-GAAP operating margin reached 28.1%, up from the prior-year period. Free cash flow increased 11.9%, producing a quarterly margin of 42.8%.

Cloud bookings and public-sector demand

Tyler said public-sector demand remained healthy, with elevated request-for-proposal activity and product demonstrations indicating continued investment in modernization, efficiency and workforce capacity. SaaS bookings increased 14%, and total bookings grew 7.3%. New SaaS annual contract value bookings rose 75%, while annual contract value from cloud migrations, or “flips,” increased 2%.

Third-quarter SaaS wins covered several of Tyler’s main public-sector markets, including enterprise resource planning, assessment and tax, justice, corrections and public safety. The company also reported state and federal contracts involving regulatory licensing, workforce case management, data and insights, and outdoor recreation. Transaction-funded contracts are not included in SaaS bookings or revenue.

Tyler continued to expand its use of artificial intelligence in products designed for government workflows. The company closed about 130 deals containing AI in the third quarter and approximately 300 during the first nine months of 2026. Disclosed use cases included resident assistants, document automation and vehicle identification number validation.

Management views Tyler’s installed base of more than 16,000 client relationships as a channel for distributing AI features through its cloud products. The company is developing its AI capabilities internally and through partnerships with Microsoft, OpenAI, Amazon Web Services and Anthropic. Tyler said its approach is intended to address practical public-sector applications, though adoption and monetization remain subject to execution and market risks.

2026 guidance

For full-year 2026, Tyler expects revenue of $2.535 billion to $2.565 billion. The midpoint represents growth of approximately 9.3% from 2025, or 11% when excluding the Texas payments contract impact.

The company projects subscription revenue growth of 13% to 16%, including SaaS growth of 21.5% to 22.5%. Transaction revenue is expected to increase 6% to 8%, or 11% to 13% excluding the Texas contract. Maintenance revenue is expected to decline 3% to 5%, consistent with the cloud migration, while professional services revenue is forecast to grow as much as 2% and other revenue by 15% to 17%.

Tyler expects a full-year free cash flow margin of 26% to 28% and non-GAAP diluted earnings of $12.95 to $13.20 per share. Research and development expense is projected at $245 million to $250 million, compared with $204.6 million in 2025. The company did not provide a reconciliation of its forward-looking non-GAAP measures to comparable GAAP figures, citing the difficulty of estimating items including stock-based compensation, acquisition-related costs and tax adjustments.

Capital deployment and risks

During the quarter, Tyler completed its $27.7 million acquisition of CODY Systems and repurchased $379 million of its shares, representing 1.1 million shares. Year to date, it has repurchased 3.6 million shares, equal to 8.5% of shares outstanding, with approximately $1.4 billion remaining under its authorization.

The company identified government budget and regulatory changes, project delays, lower transaction volumes, competitive pressure, labor costs and client renewal rates among the factors that could affect its forecasts. It also highlighted cybersecurity, data protection, reliance on internet and third-party infrastructure, acquisition integration and evolving AI regulation as material uncertainties. AI-specific risks include development costs, competition, commercialization challenges and the possibility that clients may not adopt or pay for new capabilities at expected levels.