FACTSET RESEARCH SYSTEMS Q3 FY26 earnings call FDS

Organic ASV accelerated to 7.1% YoY, a $35M in-quarter increase to $2.48B and the fifth consecutive quarter of acceleration — the highest growth rate since Q1 2024 and more than 250 bps above the comparable FY25 rate. Growth was evident across all geographies (Americas +7%, EMEA +5%, Asia Pacific +10% as the fastest-growing region) and all client types. Wealth remained the fastest category at +10%; deal makers grew 9% (nearly 40% of clients but under 20% of ASV); the institutional buy side, slightly less than half of total ASV, accelerated to 6%; and market infrastructure grew 7%. Five headline client wins — a global sovereign wealth fund, a large OCIO, a major global bank 5-year renewal, LPL Financial's real-time data platform selection, and a top-20 client displacing an incumbent — were all existing-client expansions.

Management framed AI as a leapfrog moment on a stable subscription base and launched its AI portfolio under the FactSet Intelligence banner across three layers: a trusted data ecosystem, governed and optimized agentic infrastructure, and intelligent workflows for hybrid human-agent workforces. Over 10% of ASV growth this quarter came directly from AI SKUs (from virtually zero a year ago), and clients using AI solutions grew ASV 50% faster QoQ than the rest of the book. The MCP server has 450+ clients engaged under contracts and trials, with Q3 API call volume at 13x the Q2 level, over 20% of top-100 clients using MCP on a paid basis, and roughly 20% of endpoint users being net-new. Data is now accessible through Anthropic, OpenAI, Google and Microsoft platforms. Portfolio Analytics MCP launched the prior week, and Capital Markets Intelligence agents are in active/pipeline trials at over 30 of the top 100 banking clients.

The commercial-excellence program drove double-digit growth in marketing-qualified and sales-qualified leads, an 8% improvement in bounce (pound) rates and engagement, a 15% YoY rise in pipeline conversion, and a 27% improvement in win rates, with 76% of resulting ASV from new business; corporates, asset owners and institutional asset management were particularly strong. On productivity, coding agents now author 27% of committed code in adopting engineering teams (token use +5x QoQ, AI-written committed lines nearly +10x QoQ), enabling a ~10% technology-workforce reduction. Data-operations automation cut operator touch time for data-table extraction by more than 50%, and a Fundamentals pipeline consolidation reduced that team by 5%. About 4,000 bankers used digital onboarding tools, unlocking a 22% QoQ increase in consultant live-user interactions and a 5-point junior-banker NPS gain.

Adjusted operating margin was 34%, down ~300 bps YoY (vs 35% in Q2 and ~37% a year ago) and adjusted operating income was $211.8M. Compensation-related expenses (~60% of total cost base) rose 7% YoY driven by ASV-linked performance incentives rather than headcount, which fell ~1% after being roughly flat in H1. Because new-ASV revenue is recognized over time^⏳, faster ASV acceleration temporarily compresses margin. Non-compensation items — more than a third of which was technology spend including core-infrastructure/cybersecurity and net-new token costs — drove the majority of the operating-expense increase, alongside higher marketing and professional-services engagements. A swing in the FX hedging program from a Q3 FY25 gain to a Q3 FY26 loss added a ~60 bps drag.

Free cash flow grew 11% to $254M. FactSet repurchased ~926,000 shares for $203M in Q3 (over $500M FYTD) and raised its dividend for the 27th consecutive year, returning over $625M to shareholders FYTD — roughly double the prior-year period. Gross debt leverage stood at 1.5x and net at 1.2x, and Fitch reaffirmed the investment-grade rating with a stable outlook. Management is reviewing the product portfolio against hurdle rates: it discontinued the Signals attribution service (from the 2020 TrueValue Labs acquisition) and entered an arrangement with RepRisk to support those client needs.

The majority of ASV renewed in Q3 took the form of enterprise agreements, all for durations of 3+ years, with average contract term extended roughly 30% while broadly preserving pricing. Management is moving away from seat-linked contracts toward value-based enterprise agreements with a large stable subscription base, minimum commitments, and flexible consumption-oriented constructs for emerging AI offerings. ASV no longer includes one-time^📎/non-recurring^📎 revenue such as professional services. Management signaled it will review its reporting approach as consumption-based, activity-driven revenue grows; user count (+12% YoY, to be shown in the 10-Q) was characterized as a long-tail metric less tied to revenue/profitability. FactSet will share its medium-term business plan at an upcoming Investor Day.

FactSet announced a strategic Google Cloud partnership focused on three areas: infusing Gemini/enterprise search, deep-research API and grounding into the FactSet workstation; bringing FactSet financial intelligence into Gemini Enterprise with MCP/agent interoperability; and building a new generation of agents on the Gemini Enterprise Agent platform — including preferential token pricing. It also cited data-layer partnerships with Snowflake, Databricks, Google and AWS for enterprise knowledge graphs, and agent-development partnerships with InSync Analytics, Genius AI and Tiffin (for Adviser Intelligence). Management described inorganic activity as surgical and derisked, flowing from existing technology/client integrations within its open-architecture ecosystem.