TechnologyOne (ASX:TNE) Defying the AI Doom Trade With 18% to 20% PBT Growth

SaaS Plus AI Momentum Drives a FY26 Upgrade

TechnologyOne is defying the market’s AI shock narrative.

For readers who came across our article on AI and SaaS disruption, you will remember our core point: we believe the market has overstated the impact AI will have on high quality SaaS businesses, especially those with embedded workflows, sticky customer relationships, and defensible product ecosystems.

Now TechnologyOne is providing a timely real world datapoint that supports that thesis.

The company has upgraded its FY26 guidance, and management tied the upgrade directly to AI product momentum and its SaaS+ model. That matters, because it frames AI as a commercial enabler rather than a structural threat.

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Spending Now to Grow Later, The 2H FY26 Setup

TechnologyOne has lifted its FY26 profit before tax growth guidance to 18% to 20%, up from 13% to 17%. On top of that, it has set ARRA guidance at 16% to 18%.

Management is effectively saying demand is tracking strongly, conversion is improving, and they have confidence they can deliver higher profit expectations. It also suggests profitability is improving faster than the topline, which is exactly what you want to see from a, high quality SaaS model.

Management attributed the upgrade to confidence in the customer pipeline across Australia, New Zealand, and the UK, supported by its SaaS execution. This is not being framed as a one off deal win. It is being framed as multiple pipeline conversions, which is a much higher quality driver of guidance upgrades.

There is also a very deliberate investment call being made here.

TechnologyOne is spending $8m to $9m in 1H FY26 on AI Showcase product launch events across Australia, New Zealand, and the UK. Because of that upfront spend, management expects 1H FY26 PBT growth to be high single digit %.

Management is then expecting 2H FY26 PBT to be strong, delivering the full year step up consistent with the upgraded 18% to 20% guidance. So near term profit growth is intentionally softer because they are investing now, but the message is that this investment should translate into a stronger second half and a better full year outcome.

Fair Multiple, Strong Guidance, The Risk Reward Improves

On valuation, TechnologyOne is trading around its five year average P/E. The stock’s forward P/E is roughly 41, while the broader software and IT peer group is closer to 64. That puts the stock in a more “fair value” zone rather than a frothy one.

And when you combine that with the confidence embedded in this guidance upgrade, it looks like management is allocating capital into AI in a disciplined way, with a clear line of sight to long term earnings improvement.

The key risks to watch in TechnologyOne’s delivery are straightforward, but important.

First, customers may like the AI story but not pay meaningfully more for it, or they may treat AI as “table stakes” that should be included at the same price. If that happens, AI becomes a cost line rather than a monetisation lever.

So what we want to see is ARR growth stay strong, and evidence that TechnologyOne can monetise AI into ARR without margin leakage. That means pricing and packaging discipline, plus clear customer willingness to pay for incremental value.

Second, as AI usage scales, cost control matters. Management needs to prove it can grow AI capability without letting compute, development, and support costs expand faster than revenue.

Finally, there is execution risk in the product itself. TechnologyOne operates in high trust ERP workflows, where accuracy, auditability, and reliability are non negotiable. AI needs to be deployed safely and transparently, with strong governance, so there is no reputational damage or compliance fallout from errors or misuse.