TYL: Durable SaaS Recurring Revenue Will Drive Future Upside Despite Lowered Expectations

Analysts have modestly reduced their price targets for Tyler Technologies, with the blended fair value estimate easing by about $1.57 to approximately $648. This reflects slightly lower long term revenue growth assumptions and a more conservative terminal multiple, despite continued confidence in durable SaaS driven recurring revenue and profit expansion.

Analyst Commentary

Street research following the latest quarterly update shows a cluster of price target reductions between roughly $540 and $675. However, the tone of the commentary remains broadly supportive of Tyler Technologies' long term growth and margin expansion profile. The lower targets primarily reflect recalibrated growth assumptions and valuation multiples rather than a fundamental shift in confidence around execution.

Bullish Takeaways

Bullish analysts highlight solid Q3 performance, with results viewed as supportive of the thesis that Tyler can sustain healthy top line growth while expanding margins and cash flow.
Commentary emphasizes durable SaaS and subscription momentum, with recurring revenue expected to remain the key driver of longer term value creation and earnings visibility.
Early 2026 guidance is seen as constructive. This helps reinforce the view that management can navigate macro and sector volatility while maintaining double digit revenue growth.
Some bullish analysts see the evolving narrative into 2026 as a potential catalyst for sentiment improvement across application software, which could support Tyler's valuation multiples over time.

Bearish Takeaways

Bearish analysts are trimming long term revenue CAGR assumptions, with some moving from mid teens expectations closer to the low teens. This shift pressures fair value estimates despite steady execution.
Several price target cuts are tied to more conservative terminal multiples, reflecting broader sector de rating and concerns that prior valuation levels may not be sustainable.
Modest reductions to FY26 and FY27 revenue forecasts signal caution around the pace of SaaS growth and the timing of potential re acceleration, even as the core thesis remains intact.
Lingering investor concern around the trajectory of software as a service growth keeps some analysts on the sidelines. This contributes to more neutral ratings and a narrower upside skew in target prices.

What's in the News

Truist lowered its price target on Tyler Technologies to $675 from $775, citing a more conservative long term revenue CAGR assumption of 12 percent versus 14 percent prior, while maintaining a Buy rating and highlighting confidence in durable SaaS and recurring revenue growth (Periodicals).
The city of Homestead, Florida, went live on Tyler's Enterprise Permitting and Licensing cloud platform on AWS, replacing a legacy system and unifying permitting, licensing, code enforcement, and payments across departments through an integrated, guided community portal (Key Developments).
Tyler issued 2025 guidance calling for total revenue between $2.335 billion and $2.360 billion, implying roughly 10 percent growth at the midpoint, and GAAP diluted EPS between $7.28 and $7.48, with potential variability from discrete tax items (Key Developments).
Between July 1, 2025 and October 29, 2025, Tyler repurchased 300,000 shares for $173 million, bringing total buybacks under its long standing repurchase program to 20,888,432 shares for approximately $830 million, or about 51.95 percent of shares targeted (Key Developments).

Valuation Changes

The fair value estimate has edged down slightly, from approximately $649.83 to $648.26 per share, reflecting modestly more conservative assumptions.
The discount rate has risen slightly, from about 8.49 percent to 8.53 percent, implying a marginally higher required return on equity.
Revenue growth has increased modestly, with the long-term annual growth assumption moving from around 8.81 percent to 8.91 percent.
The net profit margin has slipped very slightly, from roughly 16.84 percent to 16.81 percent, indicating a nearly unchanged long-term profitability outlook.
The future P/E multiple has declined marginally, from about 71.57x to 71.40x, signaling a slightly more conservative terminal valuation assumption.

Strong demand for cloud-based, secure, and integrated solutions is driving recurring revenue, market leadership, and higher contract values amid digital transformation and regulatory tailwinds.
Strategic acquisitions, unified client experience, and AI-powered offerings are boosting customer penetration, premium pricing, and scalable margin improvements across Tyler's expanding addressable market.
Heavy reliance on government spending, unpredictable deal cycles, segment declines, acquisition risks, and intensifying competition all threaten Tyler's growth, margins, and long-term earnings stability.

Catalysts

About Tyler Technologies

Provides integrated software and technology management solutions for the public sector.What are the underlying business or industry changes driving this perspective?

The accelerating digital transformation initiatives across state and local governments are intensifying demand for cloud-based, integrated solutions, which directly support Tyler's ongoing success in SaaS client migrations (cloud flips) and recurring revenue growth; this secular momentum is reflected in a pipeline of large deals and an expected 25% annual increase in cloud flips, translating to sustained double-digit top-line revenue expansion.
Increased cybersecurity and regulatory requirements, including new standards (e.g., NERIS for emergency services), are compelling agencies to modernize legacy systems, positioning Tyler's secure, compliant cloud offerings as a preferred choice and solidifying its market leadership, which supports higher average contract values and customer retention-positively impacting long-term recurring revenue and margin improvement.
Tyler's strategic expansion of integrated product suites through acquisitions (such as Emergency Networking) and coordinated cross-sell/upsell initiatives, amplified by the One Tyler unified client experience, are increasing both contract size and product penetration per customer, which is expected to boost average revenue per account and drive robust top-line and earnings growth.
Ongoing investment in AI-powered tools and automation-evident in product launches like the AI-driven Resident Assistant and enhanced budgeting solutions-caters to public sector labor challenges and the need for data-driven decision-making, enabling premium pricing, reducing customer churn, and unlocking scalable margin improvements over time.
The increasing push for remote work and self-service government services is accelerating SaaS and transaction-based adoption, broadening Tyler's total addressable market and fueling strong payment volumes and high-margin transaction revenues, as evidenced by outperformance in this segment and expectations for sustained double-digit transaction revenue growth-benefiting both revenue predictability and net margin expansion.

Tyler Technologies Earnings and Revenue Growth

Tyler Technologies Future Earnings and Revenue Growth

Assumptions

How have these above catalysts been quantified?

Analysts are assuming Tyler Technologies's revenue will grow by 9.4% annually over the next 3 years.
Analysts assume that profit margins will increase from 13.7% today to 16.3% in 3 years time.
Analysts expect earnings to reach $480.4 million (and earnings per share of $10.81) by about September 2028, up from $306.8 million today. However, there is some disagreement amongst the analysts with the more bearish ones expecting earnings as low as $370.2 million.
In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 79.3x on those 2028 earnings, up from 78.7x today. This future PE is greater than the current PE for the US Software industry at 36.2x.
Analysts expect the number of shares outstanding to grow by 1.08% per year for the next 3 years.
To value all of this in today's terms, we will use a discount rate of 8.47%, as per the Simply Wall St company report.

Tyler Technologies Future Earnings Per Share Growth

Risks

What could happen that would invalidate this narrative?

Tyler Technologies' business remains highly dependent on government budgets, and any long-term stagnation or cuts in state, local, or federal spending-especially if driven by macroeconomic slowdowns or shifting priorities-could slow new contracts and delay procurement cycles, potentially impacting revenue growth and creating sustained earnings volatility.
The company notes pronounced lumpiness and unpredictability in large deal bookings and cloud migrations (flips), which, if persistent as their customer base shifts to larger governments and more complex implementations, could result in lower year-to-year revenue visibility and pressure on net margins due to increased implementation and support costs.
The professional services and traditional maintenance/license segments are experiencing ongoing revenue declines (guided to continue), and if recurring SaaS and transaction revenue growth slows (from full client penetration or competitive pressure), the company's overall revenue base could shrink or stagnate, hurting earnings and margins over time.
Expanding via acquisitions (e.g., Emergency Networking) introduces meaningful integration risks; failure to successfully scale new tuck-in products or meet compliance standards (such as NERIS for emergency services) may lead to missed cross-sell/upsell targets and margin dilution if synergies are not realized as anticipated, negatively impacting long-term net margins.
Competitive threats from emerging GovTech startups (with innovative, cloud-native, or open-source solutions) and increasing demand by public agencies for open, interoperable, or best-of-breed ecosystems raise the risk that Tyler's integrated suite becomes less differentiated; this may force Tyler to increase R&D and discounting, eroding pricing power and pressuring future revenue and profitability.

Valuation

How have all the factors above been brought together to estimate a fair value?

The analysts have a consensus price target of $678.778 for Tyler Technologies based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $800.0, and the most bearish reporting a price target of just $585.0.
In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $2.9 billion, earnings will come to $480.4 million, and it would be trading on a PE ratio of 79.3x, assuming you use a discount rate of 8.5%.
Given the current share price of $558.41, the analyst price target of $678.78 is 17.7% higher.
We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.

Have other thoughts on Tyler Technologies?

Create your own narrative on this stock, and estimate its Fair Value using our Valuator tool.

Create Narrative

How well do narratives help inform your perspective?

Disclaimer

AnalystConsensusTarget is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by AnalystConsensusTarget are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that AnalystConsensusTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.

TYL: Cloud Solutions Expansion Will Drive Continued Outperformance Into 2026