TechnologyOne has reaffirmed its FY26 guidance with targets of 18-20% profit before tax growth and 16-18% annual recurring revenue growth, with the company aiming for the top end of both ranges. This signal of management confidence in the underlying business trajectory comes despite competitive pressures in the software market and broader macroeconomic uncertainties.
The H1 results support this positioning. ARR reached $598.0m, representing 114% growth on a comparable basis, while profit before tax grew to $89.1m. Net revenue retention stood at 116%, indicating existing customers are expanding their usage and the company is successfully retaining its customer base. Management noted that performance aligns with the phasing flagged at the recent annual general meeting, suggesting execution remains on track.
The company’s approach to artificial intelligence investment and profitability targets stands out. All FY26 AI investment remains within the existing R&D investment profile, meaning no significant step-up in capital allocation is required to execute the AI strategy. Simultaneously, the company targets a two percentage point margin improvement in FY26, driven by benefits of the SaaS+ strategic initiative, AI advances, and operational leverage from H1’s strong performance. Showcase investment and the SaaS+ strategy investment each impacted H1 PBT margin by approximately two percentage points. Forex headwinds also weighed on reported PBT by 0.5%, though the underlying operational performance was solid on a constant-currency basis.
The company is targeting cash conversion of 100% of profit after tax, demonstrating the quality of earnings and the cash-generative nature of the SaaS business model. This matters because it indicates TechnologyOne can fund growth and shareholder returns from operating cash flow rather than external financing.
The reaffirmed guidance combined with on-plan H1 performance suggests limited downside risk to FY26 earnings forecasts for existing estimate holders. The company’s ability to invest meaningfully in AI without requiring additional capital expenditure indicates it has already built sufficient scale and margin into the business. Investors should monitor whether the company achieves its targeted margin improvement despite continued AI investment, and whether customer churn remains controlled as it invests in longer-term capabilities. The realization of top-end guidance and the trajectory of NRR in H2 will be critical indicators of whether the SaaS+ transformation and AI investments are driving sustainable competitive advantage. This announcement has been declared price sensitive and material by the ASX.
View the full ASX announcement (PDF)
About Technology One Limited (ASX: TNE)
Technology One is a major Australian software company that develops, markets, and sells integrated enterprise resource planning software solutions. The company primarily serves government, education, and healthcare organizations across Australia, New Zealand, and the United Kingdom. With annual customer retention rates exceeding 99%, it is one of the largest publicly listed software companies in Australia.
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