Summary
Tyler Technologies closed the fiscal year with fourth-quarter revenue of $575.2 million, up 6.3% from the prior-year quarter. Recurring revenue was $514.4 million, up 10.9%, and represented 89.4% of total revenue, up from 85.7%. Subscription revenue reached $405.0 million, up 16.1%, while SaaS revenue grew 20.2% to $208.3 million. Transaction-based revenue grew 12.1% to $196.7 million. Annualized recurring revenue stood at $2.1 billion, up 10.9%. For the full year, revenue was $2.3 billion, up 9.1%. GAAP operating income for the quarter was $75.0 million, up 4.6%, and GAAP net income was $65.5 million, flat compared with the prior-year quarter. Full-year diluted EPS was $7.20, up 19.0%.
Margins told a mixed story. Gross margin for the quarter expanded to 45.5%, helped by a revenue mix shift toward higher-margin SaaS. Operating margin for the quarter slipped to 13.0%, as higher costs offset revenue growth. On a non-GAAP basis, operating income was $138.5 million, up 5.1%, and non-GAAP net income was $115.1 million, or $2.64 per diluted share, up 7.8%. Adjusted EBITDA was $149.0 million, up 4.4%. Management pointed to research and development investments and cloud migration as drivers of the expense base. The company also recorded a non-cash loss reserve of approximately $9.7 million tied to a previously disclosed contract dispute, which reduced non-recurring revenues and operating income in the quarter.
Cash generation remained a strength. Fourth-quarter operating cash flow was $243.9 million, up 8.5%. Free cash flow was $236.9 million, up 9.7%, which management described as a new high for a fourth quarter. For the full year, operating cash flow was $653.5 million, up 4.6%, and free cash flow was $620.8 million, up 8.0%. Deferred revenue ended the year at $801.8 million, up 10.8% from the prior-year quarter. Tyler completed the acquisitions of CloudGavel and Edulink in the fourth quarter for approximately $54 million in cash, net of cash acquired. During the year, the company repurchased 303,067 shares for approximately $175 million and later authorized a new $1 billion share repurchase program.
Guidance for the full fiscal year ahead covers subscription growth of 12% to 15%, with SaaS revenue expected to grow 20.5% to 22.5%. Transaction revenue is guided to grow 5% to 7%, or 10% to 12% excluding the termination of the Texas payments contract. Maintenance revenue is expected to decline 5% to 7%, while professional services grow 3% to 5%. Software licenses and royalties are expected to grow 15% to 17%, and hardware and other revenue is expected to decline 17% to 19%. GAAP diluted EPS is guided to $8.36 to $8.61, and non-GAAP diluted EPS to $12.40 to $12.65. Free cash flow margin is expected to be 26% to 28%. Research and development expense is guided to $242 million to $247 million, and capital expenditures to $24 million to $26 million, including approximately $10 million of capitalized software development. Net interest income is expected to be $25 million to $27 million. The Platform Technologies segment recorded approximately $10.7 million in loss reserves for two state contracts, adding pressure on professional services revenue and merchant fees. Management flagged the usual public sector risks: client budget changes, cyber and AI security threats, acquisition integration, AI regulation, project delays, economic conditions, competition, personnel retention, and compliance costs. The balance sheet remains strong, but the mix shift away from perpetual licenses and maintenance will keep pressure on some revenue lines.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q4 FY2025 | Q3 FY2025 | QoQ | Q4 FY2024 | YoY |
|---|---|---|---|---|---|
| Revenue | $575.2M | $595.9M | -3.5% | $541.1M | +6.3% |
| Gross profit | $262.0M | $281.5M | -6.9% | $236.8M | +10.6% |
| Gross margin | 45.5% | 47.2% | -1.7 pp | 43.8% | +1.8 pp |
| Sales & marketing | $38.2M | $37.6M | +1.8% | $41.5M | -8.0% |
| General & administrative | $80.4M | $80.0M | +0.6% | $80.3M | +0.1% |
| Operating income (loss) | $75.0M | $97.9M | -23.4% | $71.7M | +4.6% |
| Operating margin | 13.0% | 16.4% | -3.4 pp | 13.3% | -0.2 pp |
| Net income (loss) | $65.5M | $84.4M | -22.4% | $65.2M | +0.5% |
| Net margin | 11.4% | 14.2% | -2.8 pp | 12.1% | -0.7 pp |
| Diluted EPS | $1.50 | $1.93 | -$0.43 | $1.50 | ±$0.00 |
Risks
Substantially all revenues come from state, county, and city governments and other public entities, exposing Tyler to budget constraints that can terminate executed contracts due to lack of future funding, long and complex sales cycles, and political resistance to cloud adoption. The company reported total revenues up 9.1% for FY2025 year to date, but public sector budget shortfalls could still reduce demand.
As Tyler incorporates AI into products and services, failure to enhance offerings in alignment with market demands, timing, or industry expectations could render offerings less competitive or obsolete. MD&A says research and development expense increased 73% for the twelve months ended December 31, 2025, partly from increased investments in AI across product suites.
The risk factors state that evolving AI use increases cyberattack and data breach risk, and vulnerabilities in clients' on-premises infrastructure have in the past and may in the future be exploited and attributed to Tyler even if its software was not the cause. AWS service outages are also cited as a potential disruption.
A material portion of the business is hosted through third-party providers including AWS, and the risk factors note that AWS has experienced significant service outages and may do so again. Providers have no obligation to renew on commercially reasonable terms, and cloud migration may add cybersecurity and AI threats.
As of December 31, 2025, $600.0 million principal of the 0.25% Convertible Senior Notes due March 15, 2026 remained outstanding, and Tyler entered the Free Convertibility Period on September 15, 2025. Net-share settlement could dilute existing shareholders or require cash the company may not have at conversion or repurchase.
Open bidding, long and complex public sector sales cycles, and milestone-based payment terms create uncertainty in predicting contract awards and revenue timing. MD&A reports professional services revenue decreased 8% and software licenses and royalties revenue decreased 51% for the twelve months ended December 31, 2025, partly due to loss reserves for agencies within two state governments and a contract dispute.
Evolving privacy and data protection laws may apply to AI technologies, and intellectual property rights in AI are not fully addressed by courts or regulators. Implementing generative AI could expose Tyler to copyright infringement or misappropriation claims.
Tyler cites a tightening U.S. labor market, wage rate increases, and intense competition for qualified software development, sales, and other personnel. MD&A reports R&D employee count increased to 1,368 from 870 at December 31, 2025, while total employee count in cost of revenues declined to 5,073 from 5,250.
A material portion of historical growth has come from strategic acquisitions, and Tyler completed Edulink, CloudGavel, Emergency Networking, and MyGov during 2025. On February 2, 2026, it agreed to acquire the remaining equity interest of a privately held company for about $212.5 million, creating integration, retention, and unforeseen liability risks.
Tyler's public sector market is highly fragmented with competitors that may have greater technical, marketing, and financial resources, and clients may use internal IT departments instead. Next-generation AI and machine learning offerings require significant resources before the company knows whether the public sector market will adopt them.
SaaS KPIs
All quarters →Non-GAAP Operating Margin
Free Cash Flow
Adjusted EBITDA
Recurring Revenues
Free Cash Flow Margin
Non-GAAP Gross Margin
Non-GAAP Operating Income
SaaS Revenues
Subscription Revenues
Annualized Recurring Revenue
Transaction-based Revenues
Summary, forecast, risks and KPIs are extracted from TYLER TECHNOLOGIES INC's SEC filings for Q4 FY2025 (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.