TechnologyOne's AI Narrative Wins Over Fund Managers Despite a Rich Price
A results-day stumble gave way to renewed conviction as the government software provider positions itself as an AI beneficiary rather than a casualty.
7 Oct 2026 · 3 min read
In short
TechnologyOne fell 14% on FY25 results day in November despite beating guidance, as an already high bar and sector rotation outweighed strong underlying growth of 18% ARR and 19% profit growth.
The stock has since re-rated as fund managers including Ten Cap and Wilson Asset Management view it as an AI beneficiary, delivering record profit, revenue and ARR for the 17th consecutive year in its first-half FY26 result.
TechnologyOne trades on a high-20s EBITDA multiple, which Pendal Group says reflects the market's willingness to pay up for a business compounding earnings per share around 20% a year.
TechnologyOne fell 14 percent on results day in November despite delivering a genuinely strong FY25 result, as an already high bar and moderating growth metrics collided with a rotation into cheaper sectors, before the government software provider re-established itself as one of the ASX's clearest AI-driven winners through 2026, even at a stretched premium multiple.
A great result meets an already-high bar
Pendal Group described a solid, in-line FY25 result with annual recurring revenue up 18 percent, upfront investment in the company's new SaaS+ offering keeping margins flat while still delivering 19 percent profit before tax growth, a strong free cash flow beat, and a lifted dividend payout ratio of 65 to 75 percent. Selector Funds Management said revenue reached $610 million, up 18 percent, with ARR of $555 million surpassing the company's own $500 million target 18 months ahead of schedule, backed by 99 percent customer retention and an ambition to double ARR every five years. Ten Cap explained the share price fall anyway: the result beat guidance and drove upgrades to consensus earnings, but an already high bar, some moderation in key revenue growth metrics, and investor rotation into cheaper sectors combined to push the stock down regardless.
An already high bar and a moderation in some key revenue growth metrics, coupled with investor rotation into cheaper sectors, resulted in a share price decline.
— Ten Cap, Monthly Report, November 2025
AI narrative turns the stock into a clear winner
By June, Ten Cap rated the stock a buy, arguing it had become clear TechnologyOne is emerging as one of the winners from AI-driven change, already at the forefront and monetising AI-enabled product features rather than being disrupted by them. Market Partners, holding at hold after what it called a strong buy a couple of months earlier in hindsight, made a related point about trust: councils and governments rolling out AI initiatives need a trusted platform overseeing the process, a role TechnologyOne is well placed to fill. LHC Capital reported record first-half profit, revenue and ARR for the 17th consecutive year, supported by SaaS+ adoption, new AI products and zero customer churn, with ARR up 17 percent to $598 million and shares up 10.1 percent over the period.
TechnologyOne reported record first-half profit, total revenue and annual recurring revenue for the 17th consecutive year.
— LHC Capital, Quarterly Report, June 2026
Paradice Investment Management, initiating a new position as the stock returned to the ASX Mid Cap 50 Index, said the company's AI initiatives, branded Plus and Guide, are only just starting to contribute to growth rates. DS Capital and Endeavor Asset Management both initiated positions during periods of broader market weakness in 2026, with Endeavor noting TechnologyOne was bought well below where it traded a year earlier despite delivering 17 percent ARR growth at its half year.
Expensive, but the market keeps paying up for quality
Wilson Asset Management rated the stock a buy in July, arguing management has done a great job crafting the narrative around being an AI beneficiary and is now putting real evidence on the board, a combination it expects will keep the stock on a premium multiple. Pendal Group, which has followed the company for a long time, said it remains consistently impressed by TechnologyOne's ability to deliver 16 to 18 percent ARR growth translating into around 20 percent compounding earnings per share growth, enough to more than double the size of the business roughly every five years, even while acknowledging the stock trades on a high-20s EBITDA multiple.
It is trading on high 20s EBITDA multiples. So it's certainly expensive, but the market does typically pay up for quality.
— Pendal Group, Article, July 2026
What fund managers say they are watching next is whether the 17 to 18 percent ARR growth trajectory continues its 17-year streak of record results, how quickly the Plus and Guide AI products begin materially contributing to growth as Paradice expects, further market share gains from Oracle and Workday in the UK, and whether the premium multiple holds up if AI-driven earnings momentum ever slows.
Questions
Why did TechnologyOne's share price fall despite a strong FY25 result?
TechnologyOne fell 14% on results day in November 2025 because an already high valuation bar and some moderation in key revenue growth metrics, combined with a broader rotation into cheaper sectors, outweighed a result that actually beat guidance.
Why do fund managers see TechnologyOne as an AI beneficiary?
Fund managers including Ten Cap and Wilson Asset Management argue TechnologyOne is monetising AI through new product features and its AI initiatives Plus and Guide, positioning it as a winner rather than a business at risk of AI disruption.
Why does TechnologyOne trade at such a high valuation multiple?
TechnologyOne trades on a high-20s EBITDA multiple because it has delivered 16-18% annual recurring revenue growth and around 20% compounding earnings per share growth for 17 consecutive years, a consistency Pendal Group says the market is willing to pay a premium for.
33 managers, 55 comments, with each manager's latest recorded position.
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