Summary
Tyler Technologies reported second quarter fiscal 2026 revenue of $645.1 million, up 8.2% from the prior-year quarter. Recurring revenues were $559.5 million, up 8.2%, and accounted for 86.7% of total revenues. SaaS revenues grew 21.7% to $230.6 million, marking a 22nd consecutive quarter of at least 20% SaaS growth. Annualized recurring revenue reached $2.24 billion, up 8.2%. The mix continued to move toward subscriptions and SaaS, which helped gross margin improve 1.8 percentage points to 47.6%.
Operating leverage did not follow the same path. Operating margin fell 1.3 percentage points to 14.7%, and operating income was $95.1 million, down 0.5%. Net income rose 10.5% to $93.5 million, while diluted EPS increased 15.5% to $2.23. Gross profit rose 12.4% to $307.1 million. The MD&A pointed to higher litigation-related professional fees, acquisition and restructuring costs, and a write-off of previously capitalized software projects as pressures on operating margin. Non-GAAP operating income was $165.7 million, up 4.8%, and adjusted EBITDA was $176.4 million, up 4.3%. Non-GAAP net income was $129.0 million, or $3.08 per diluted share, up 0.9%.
Cash flow stood out. Operating cash flow was $124.4 million in the quarter, up 26.5%, and free cash flow was $118.5 million, up 34.7%, which management called a record for a second quarter. First half operating cash flow was $231.7 million, up 50.0%. Capital expenditures were $5.1 million in the quarter, down 7.9%. Deferred revenue was $816.9 million, up 9.9%. The company ended the quarter with more than $1 billion in cash and investments, according to management.
Tyler also reshaped its balance sheet and returned capital. It completed the $212.7 million cash acquisition of For The Record in April. In May it issued $1.4 billion of 0.50% convertible senior notes due in 2031 and entered capped call transactions. It replaced its $700 million revolving credit facility with a new $1.0 billion facility. During the quarter Tyler repurchased 1,622,762 shares for about $505 million. Year to date it has repurchased 5.6% of outstanding shares. On July 24, 2026, the board approved a new $1.5 billion share repurchase authorization. As of July 29, 2026, remaining authorization was about $1.745 billion.
Guidance for the full fiscal year 2026 calls for non-GAAP diluted earnings per share of $12.95 to $13.20 and a free cash flow margin of 26% to 28%. The outlook also covers full-year revenue, research and development expense, capital expenditures, capitalized software development costs, and net interest income. Management said public sector demand remains healthy and pointed to record SaaS and total bookings. Risks include changes in government budgets that could slow IT spending, cyberattacks and AI-related security threats, integration risk from acquisitions such as For The Record, project delays, competition, pressure to attract and retain talent, and compliance costs. A specific headwind is the wind-down of one state's payment processing contract, which reduced transaction-based revenues by approximately $12.5 million in the quarter and $24.8 million in the first half. Tyler ended June 30, 2026 with 7,879 employees, including 237 who joined through acquisitions since June 30, 2025.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q2 FY2026 | Q1 FY2026 | QoQ | Q2 FY2025 | YoY |
|---|---|---|---|---|---|
| Revenue | $645.1M | $613.5M | +5.1% | $596.1M | +8.2% |
| Gross profit | $307.1M | $296.4M | +3.6% | $273.2M | +12.4% |
| Gross margin | 47.6% | 48.3% | -0.7 pp | 45.8% | +1.8 pp |
| Sales & marketing | $39.9M | $38.8M | +2.7% | $36.3M | +9.7% |
| General & administrative | $93.7M | $84.0M | +11.6% | $76.6M | +22.4% |
| Operating income (loss) | $95.1M | $99.8M | -4.7% | $95.6M | -0.5% |
| Operating margin | 14.7% | 16.3% | -1.5 pp | 16.0% | -1.3 pp |
| Net income (loss) | $93.5M | $81.2M | +15.2% | $84.6M | +10.5% |
| Net margin | 14.5% | 13.2% | +1.3 pp | 14.2% | +0.3 pp |
| Diluted EPS | $2.23 | $1.88 | +$0.35 | $1.93 | +$0.30 |
Risks
G&A expense rose 22% for the quarter ended June 30, 2026 versus the prior-year quarter, driven in part by a $7.1 million increase in professional fees primarily from litigation-related expenses (and $6.9 million for the six months). Legal costs are consuming a growing share of operating expense and are pushing operating margin down 1.3 pp for the quarter.
The wind-down in the fourth quarter of 2025 of one state's payment processing contract reduced transaction-based fees by approximately $12.5 million and $24.8 million for the three and six months ended June 30, 2026. This single client loss contributed to a 9% decrease in Platform Technologies segment operating income for the six months.
Interest expense increased 136% and 61% for the three and six months ended June 30, 2026 compared to the prior period as a result of the $1.44 billion 0.50% Convertible Senior Notes due 2031 issued on May 14, 2026. The added leverage also carries conversion and repurchase features that could dilute shareholders or require cash settlement.
Cost of subscriptions, maintenance, and professional services increased 5% for both the three and six months ended June 30, 2026, including a $19.0 million rise in merchant fees from higher activity and an increase in interchange fee rates and a $5.5 million rise in hosting costs from the SaaS and public cloud transition. These cost pressures partially offset the gross margin gain of 1.8 pp in the quarter.
The ongoing shift from on-premises licensing to SaaS drove maintenance revenue down 6% and 5% for the three and six months ended June 30, 2026 and continued declines in software license revenue, even as SaaS fees grew 22% and 23%. Research and development expense increased 24% in both periods largely from redeploying resources to support the migration and version consolidation.
The effective income tax rate rose to 22.5% for the quarter and 23.1% for the six months ended June 30, 2026, compared to 17.4% and 16.2% in the prior-year periods, primarily due to decreases in excess tax benefits related to share-based compensation and partly offset by a nontaxable gain on remeasurement of equity investment.
The company completed the BFTR, LLC acquisition on April 14, 2026 for a cash purchase price net of cash acquired of approximately $212.7 million, adding to a series of deals including Edulink, CloudGavel, EN, and MyGov. Investing activities used cash of $202.4 million in the six months ended June 30, 2026 versus $108.9 million used in the prior-year period, raising integration and capital deployment risk.
SaaS KPIs
All quarters →Non-GAAP Operating Margin
Free Cash Flow
Adjusted EBITDA
Annualized Recurring Revenue (ARR)
Free Cash Flow Margin
Non-GAAP Operating Income
Recurring Revenue
SaaS Revenue
Subscription Revenue
Recurring Revenue as % of Total Revenue
Summary, forecast, risks and KPIs are extracted from TYLER TECHNOLOGIES INC's SEC filings for Q2 FY2026 (10-Q / 10-K and the 8-K earnings release); GAAP figures in the summary are checked against the reported XBRL data. They can contain errors; the filings are authoritative. Processed Oct 6, 2026.