TechnologyOne Falls Despite Record Profit
TechnologyOne (ASX:TNE) slipped almost 4% today, even after handing in its 17th record first-half profit in a row. Annual recurring revenue, the lifeblood of any software business, grew 17%, and the UK business, TNE’s biggest growth engine, jumped 23%. On paper, that sounds like a result worth celebrating. So why are shareholders selling? The short answer is that TechnologyOne was priced for perfection going into today, and the market decided a very good result wasn’t quite good enough.
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A Record Half That Was Actually Better Than It Looks
On the surface, today’s numbers are solid but not spectacular. Profit before tax rose 9%, revenue lifted 11%, and TNE kept investing heavily in AI and new products.
The reported figures actually understate what’s happening underneath. A stronger Australian dollar hurt the UK earnings when they were converted back home, and TNE spent big on a one-off customer event during the half. Strip those two things out, and recurring revenue grew 19%, and profit before tax was up 21%.
The UK is the part of the story investors should focus on. Growth there is speeding up, not slowing down. TNE is also shifting customers to a new model called SaaS+, which bundles the software, setup and ongoing support into a single subscription. In plain English, the company is swapping lumpy one-off fees for steady, predictable income, which is exactly the kind of shift that justifies a premium price tag over time.
When You’re Priced for Perfection, Even Good News Hurts
This is where the story gets uncomfortable. Before today, TNE was trading at around 67 times earnings. The average ASX 200 stock trades at about 18 times, and TNE itself has historically traded closer to 45 to 55 times. At that kind of price, even a strong result struggles to impress.
We saw the same trap back in November. TechnologyOne delivered a record FY25 result, and the shares still fell 17% in a single day. The reason was the same. Investors were paying so much for the stock that anything short of perfect felt disappointing. Other expensive names like Xero and WiseTech have been getting the same treatment. The selling today is less about TechnologyOne specifically and more about the whole premium tech corner of the market being reset.
Buy the Dip or Wait? The Investor’s Takeaway for TechnologyOne
TechnologyOne remains one of the best businesses on the ASX. It has no debt, generates strong cash flow, and management is targeting A$1 billion of recurring revenue by 2030, with profit before tax set to grow between 18% and 20% this year.
In our view, the business case is fully intact, but the price is still demanding even after today’s fall. Existing holders have no reason to panic. For new investors, we would rather wait for the multiple to settle lower, or for clear evidence that UK growth keeps accelerating, before stepping in. The full-year FY26 result this November is the next real test. Quality is not the issue here. Price is.
