FactSet Research Systems Inc. Q3 FY2026 earnings call

• Core Quarterly Performance

  • Delivered fifth consecutive quarter of accelerating organic ASV growth, with broad-based growth across all regions and client types
  • All major client wins in the quarter were expansions of existing client relationships, demonstrating significant untapped growth within the current client base
  • Over 90% of FactSet's top 50 clients now use four or more FactSet AI solutions, and ASV growth among AI-using clients is 50% higher than non-AI clients, driving improved retention and expansion

• Commercial Excellence Initiative

  • Improvements across the full sales lifecycle: the new website improved bounce rates by 8%, increased engagement by 8%, and grew qualified leads by double digits
  • Pipeline conversion from marketing activity increased 15% year-over-year, win rates improved 27%, with 76% of resulting ASV coming from new business
  • Majority of renewed ASV in Q3 was structured as flexible enterprise agreements with terms of 3+ years; average contract term extended 30% while maintaining pricing, reflecting the value clients place on FactSet amid AI adoption

• Productivity Improvement

  • AI tools are driving structural efficiency gains across the three largest cost centers: engineering, data operations, and client service
  • In engineering: AI-coded committed volume grew nearly 10x quarter-over-quarter, with 27% of committed code now authored by AI; enabled a ~10% reduction in the technology workforce to reallocate capacity to strategic product development
  • In data operations: AI tools cut manual operator touch time for data extraction by over 50%, consolidated redundant data pipelines, and enabled a 5% reduction in the FactSet Fundamentals team size
  • In client service: digital onboarding tools unlocked consultant capacity, increasing live client interactions by 22% quarter-over-quarter and driving a 5-point Net Promoter Score increase among junior bankers

• AI Strategy: FactSet Intelligence

  • Launched FactSet Intelligence, a three-layer AI platform built on FactSet's core strengths of connected data, embedded workflows, and trusted service
  • 1. Trusted Data Ecosystem: FactSet's Model Context Protocol (MCP) server had over 450 active clients in Q3, with Q3 API call volume 13x Q2 levels; MCP is available across all major frontier AI platforms, and new capabilities like Portfolio Analytics MCP extend core FactSet functionality to agentic workflows
  • 1. Governed Agentic Infrastructure: FactSet's existing platform already supports 250,000 daily users with required security, auditing, and entitlement controls, and clients are increasingly consolidating fragmented AI experimental deployments on FactSet's infrastructure
  • 1. Intelligent Workflows for Hybrid Teams: Launched capital markets intelligence agents for investment banking, with active trials at over 30 of the top 100 banking clients; similar agent suites for buy-side and wealth clients will launch in the coming weeks
  • Announced a new strategic partnership with Google Cloud to expand distribution, add Google AI capabilities to FactSet's workstation, and build new agent applications on the Gemini Enterprise platform

By geography (organic Annual Subscription Value, ASV, year-over-year growth): Americas grew 7%, EMEA grew 5%, and Asia Pacific grew 10% (fastest growing region). By client type (organic ASV growth, with contribution share):

1. Institutional Buy Side (global asset managers, asset owners, hedge funds): 6% organic ASV growth, representing slightly less than half of total ASV
2. Wealth: 10% organic ASV growth, the fastest growing client category
3. Dealmakers (investment banks, sell-side research, corporates, private capital firms): 9% organic ASV growth, represents nearly 40% of clients and less than 20% of total ASV
4. Market Infrastructure: 7% organic ASV growth

Overall consolidated financial performance: Total ASV reached $2.48 billion, with 7.1% year-over-year organic growth (an acceleration of 250 basis points versus the prior year comparable quarter). Total revenue was $622.9 million, up 6.4% year-over-year (7% on a like-for-like basis). Adjusted operating income was $211.8 million with an adjusted operating margin of 34%, down 300 basis points year-over-year due to targeted investments. Adjusted diluted EPS was $4.53, up 6.1% year-over-year. Free cash flow grew 11% year-over-year to $254 million.

• Management reaffirms the full-year guidance ranges previously provided for ASV, revenue, adjusted operating margin, and adjusted EPS
  • The company is tracking toward the high end of the full-year guidance ranges for revenue and EPS based on current business momentum
  • Management remains focused on hitting the midpoint of the full-year adjusted operating margin guidance range
• The guidance reflects intentional conservatism given the large number of large pending deals, where closing timing can impact full-year results; current momentum entering Q4 is strong, with bookings already ahead of last year's pace and a robust pipeline, and AI acts as a clear tailwind for growth
• Longer-term, management expects operating margins to improve in coming quarters as productivity initiatives deliver operating leverage and the impact of temporary one-time investments this year fades in fiscal 2027

• AI adoption creates evolving client consumption patterns, creating uncertainty around near-term revenue forecasting as the mix shifts toward more consumption-based pricing for new AI offerings
• Contract extension trend, while positive, introduces uncertainty around whether long-term contracts will need to be renegotiated as the AI market evolves; management mitigates this by including flexibility for new consumption patterns and volume tiers within current long-term agreements
• AI-related investments (particularly token spending) are new, near-term expenses that temporarily compress operating margins; management maintains operational controls to track ROI on these investments
• FX hedging created a 60 basis point drag on Q3 operating margin this quarter, after delivering a gain in the year-ago quarter, creating quarterly margin volatility
• The company is actively reviewing its product portfolio to align with required hurdle rates, and additional non-strategic products may be discontinued as the company reallocates resources to AI-focused initiatives

Q: Guidance implies Q4 growth moderation after a strong Q3. Is this conservatism, tougher comps, or are there underlying headwinds?

A: Management confirms momentum has continued into the first month of Q4, with bookings already ahead of last year's pace and a broad, robust pipeline across regions and client types. Q4 2025 was FactSet's largest ever quarter, creating a difficult year-over-year comparison, and guidance is maintained rather than updated to reflect that closing timing for multiple large seven-figure deals over the next eight weeks could impact full-year results. AI is a clear tailwind supporting ongoing growth, and management remains confident in meeting the reaffirmed guidance.

Q: Can you provide more detail on AI monetization, and how it works with your open ecosystem approach?

A: Over 10% of Q3 ASV growth came directly from AI SKUs, up from virtually zero last year, with many clients expanding contract size significantly to access AI capabilities: one top 10 global bank doubled its data subscription, and a top hedge fund grew six times its prior spend due to MCP access. Over 20% of the top 100 clients currently use MCP on a paid basis, and 90% of deals with an MCP component see increased contract value. AI monetization is currently driving broader ASV acceleration, improved retention, and larger enterprise agreements that combine a stable base subscription with flexible consumption-based upside for future AI usage.

Q: What is the strategy behind your multiple recent AI ecosystem partnerships, and how does this tie to your capital allocation approach?

A: The diverse set of partnerships is a deliberate open architecture strategy designed to accelerate product development across all three layers of the FactSet Intelligence stack, while remaining prudent with capital. Partnerships with cloud and data platform providers like Snowflake and Google help clients build enterprise knowledge graphs, while partnerships with specialized AI firms like Tiffin AI accelerate development of agentic workflows for specific client segments like wealth management. The Google partnership delivers additional benefits including access to cutting-edge frontier models, preferential token pricing, and joint innovation. Capital allocation prioritizes high-return organic AI investments, followed by surgical, de-risked inorganic opportunities that grow out of existing ecosystem relationships, with excess capital returned to shareholders.

Q: Average contract terms extended 30% in Q3 renewals. Are you giving up price to get longer terms, and is there risk of locking in unfavorable terms as AI evolves?

A: No price compression is being offered in exchange for longer contract terms; all contracts are value-based, with increased value from new functionality and multi-channel data delivery supporting stable pricing. Contracts are structured with significant flexibility for clients to adopt new consumption patterns, including provisions for new data sets and expanded volume tiers as clients experiment with different AI workloads. Both FactSet and clients value long-term agreements in the current uncertain AI environment, reflecting the high level of trust between FactSet and its client base.