Fidelity National Information Services, Inc. Q1 FY2026 earnings call

Q1 was a strong quarter for FIS with strong financial performance. Hosted annual client conference, announced agreement with Anthropic, unveiled new solutions like data and AI platform, digital asset platform Lyric, and Project Keystone. Innovation runs through FIS, with AI, digital currency, data all running through FIS. Anthropic Agreement is a deeply collaborative model focusing on financial crimes agent. Project Keystone is a first-of-its-kind digital asset collaborative bank network. Orchestrated intelligence architecture is a durable advantage.

Banking solutions: Pro forma revenue increased 7.7%, with banking advancing 10% and payments growing 5.9%. Recurring revenue grew 5.2%, accounting for 85% of segment revenue. Non-recurring revenue grew 58%, led by strong license activity. Adjusted EBITDA advanced 15%, with margins expanding 240 basis points. Capital markets: Revenue increased 2.9% above the top end of the outlook, thanks to a 125 basis point timing benefit from a license sale. Recurring revenue increased 3.6% with some softness in lending related to macro volatility. Non-recurring revenue grew 2.8% and professional services declined by 1%. Capital markets EBITDA advanced 7.9% with margin expansion of 160 basis points to 51.6%.

Reiterates full-year outlook: targets pro forma revenue growth of 5.1 to 5.7%, with banking at 5 to 5.5% and capital markets at 5.5 to 6.5%. Banking is tracking closer to the upper end of its full year range, capital markets closer to the lower end. Expect pro forma margin expansion of 95 to 110 basis points and adjusted EPS growth of 8 to 10 percent. First quarter free cash flow $474 million, already 23% of full year guide of $2.1 billion. Expect second quarter adjusted revenue and adjusted EBITDA to grow by more than 30% year-on-year, with EBITDA margins increasing by around 170 basis points. Confident in full-year cash flow target of $2.1 billion and free cash flow to double by 2028 to more than $3 billion.

Q: On the Anthropic deal, is there anything that makes this partnership unique? And concern about AI players disintermediating.

A: Partnership is unique as Anthropic puts forward deployed engineers with FIS engineers, agents are owned by FIS, Anthropic gets paid based on token usage. No concern about disintermediation as FIS owns IP and distribution.

Q: Any revenue contribution from the engagement contemplated in outlook?

A: Expect agent in market in back half of 2026, nothing in 2026 guide, revenue to take shape in 2027.

Q: About capital markets recurring revenue pressured by macro volatility and lending.

A: Pressure in loan syndication part of market due to macro things, ACV strong in lending.

Q: Changes related to PISMA in competitive environment.

A: PISMA isn't a full end-to-end core, no impact on Wells Fargo for FIS, FIS is largest credit card processor in US with good competitive positioning.

Q: Client conference, client demand for platforms and bank budget.

A: Banking industry fundamentals strong, technology budgets strong, demand for digital, payments, digital currency areas strong, community bank market key.

Q: Latest on synergies and cross-sell potential.

A: Actively in conversations about value of debiting credit together and core, revenue synergies expected in 27 and 28, cost synergies to deliver 30 - 40 million in 2026.

Q: Outlook for Project Keystone.

A: Banking industry excited about participating in digital assets, Project Keystone focuses on tokenized deposits as use case, banks interested.

Q: Competitive environment, RFPs and additional competition.

A: Competitive environment, core sticky, market looking at digital, money movement, lending capabilities which are core agnostic.

Q: Go-to-market strategy and economics behind Anthropic partnership.

A: Jointly building agents, agents are FIS's, Anthropic gets paid for token usage.

Q: Banking revenues, non-recurring revenues.

A: Banking solutions had overproportionate benefit from licenses, payments business will grow faster on recurring long term.

Q: AI in organizational structure productivity.

A: Implemented co-pilot, using forward deployed engineers from Anthropic to accelerate product development and internal processes.

Q: Bank M&A environment.

A: Elevated M&A activity, continuing to be tailwind.

Q: Banking demand and pricing power.

A: Pricing stable, focus on adding products.

Q: 1Q to 2Q pro forma bridge and recurring growth.

A: Capital markets in 2Q includes license shift and lending slowdown, recurring growing mid-single-digit, banking recurring similar.

Q: AI and core switching costs.

A: AI used to make core conversion go faster, but no full AI-enabled core yet, core switching costs still complex.