Tyler Technologies: A Spot of Bother, But Nothing a Chap Can’t Fix

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Now, a bit of a pickle has presented itself with Tyler Technologies (TYL 13.08%). The shares, you see, have taken a bit of a tumble – a most disconcerting 15% dip as of noon on Thursday, following the announcement of their quarterly earnings. Sales and profits did, admittedly, put on a respectable show, rising 6% and 8% respectively, but it wasn’t quite the dazzling performance Wall Street had been anticipating. A dashed shame, really.

Management is guiding for a growth rate of 8% in 2026, which, while perfectly adequate for a quiet life, is a considerable drop from the 15% they’ve been enjoying these past five years. And, adding to the general air of mild consternation, the entire software industry is currently in a bit of a flutter over this Artificial Intelligence business. The market, you see, is rather keen to determine which of these SaaS companies will be most susceptible to being, shall we say, ‘disrupted’ by the clever chaps developing these new technologies. This widespread worry, coupled with Tyler’s slightly underwhelming results, has left the stock down a considerable 55% from its peak. A spot of bother, indeed!

Tyler Technologies: A Falling Knife, or a Spot of Opportunity for the Discerning Investor?

Now, while it’s perfectly understandable that the market should be a bit jumpy about the potential impact of AI on software stocks, I suspect the reaction to Tyler Technologies has been a touch overdone. Serving a rather extensive clientele within the public sector – local and state governments, correctional facilities, schools, and the like – Tyler isn’t likely to be swept away by the latest technological fad. These are highly regulated environments, you see, demanding stringent security measures, which rather cements Tyler’s position as a leader in its niche. Furthermore, one can’t imagine government employees rushing to embrace new apps or processes that might displace the current system. A comfortable status quo, if you will.

Indeed, it appears that Tyler Technologies might be the very one doing the disrupting, rather than being disrupted. They’re planning to offer early access to some rather clever ‘agentic capabilities’ in the first quarter, and investors might soon have some concrete data on this AI front. It requires a bit of faith, naturally, that they’ll succeed with their AI ambitions, but they’re certainly not caught napping. With two-thirds of the public sector still clinging to antiquated systems, Tyler’s growth story is far from over. And, trading at a mere 21 times free cash flow – its lowest level since 2011 – Tyler Technologies strikes me as a stock one might well consider adding to the portfolio this year. A most sensible proposition, wouldn’t you agree?

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2026-02-12 20:12