FactSet Research Systems Q4 2026 Earnings Call Transcript

FactSet Research Systems (NYSE: FDS ) held its fourth-quarter earnings conference call on Wednesday. Below is the complete transcript from the call. This transcript is brought to you APIs. For real-time access to our entire catalog, please visit for a consultation.

56 billion, exceeding guidance expectations. The company launched new products, including AI for Banking and MCP servers, enhancing its competitive edge and securing significant client deals. 01. The company emphasized strategic investments in AI, real-time data, and private markets data to boost future growth and operating leverage.

5%, with expected margin improvements of 25 to 75 basis points. Full Transcript OPERATOR Good day and thank you for standing by. Welcome to the FactSet fourth quarter and fiscal 2026 earnings call. At this time, all participants are in listen-only mode.

After the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again.

Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Kevin Toomey, Head of Investor Relations. Please go ahead. Kevin Toomey, Head of Investor Relations Thank you, and good morning everyone.

Welcome to FactSet's fourth quarter and fiscal 2026 earnings call. com. A replay of today's call will be available on our website. After our prepared remarks, we will open the call to questions.

The call is scheduled to last for one hour. To be fair to everyone, please limit yourself to one question. You may re-enter the queue for additional follow-up questions, which we will take if time permits. Before we discuss our results, I encourage all listeners to review the legal notice on slide 2.

Discussions on this call may contain forward-looking statements. Such statements are subject to risks and uncertainties that may cause actual results to differ materially from results anticipated in these forward-looking statements. Additional information concerning these risks and uncertainties can be found in our Forms 10-K and 10-Q. Our slide presentation and discussions on this call will include certain non-GAAP financial measures.

com. During this call, unless otherwise noted, relative performance metrics reflect changes as compared to the respective fiscal 2025 period. Joining me today are Sanoke Viswanathan, Chief Executive Officer, and Josh Warren, Chief Financial Officer. I will now turn the discussion over to Sanoke.

Sanoke Viswanathan, Chief Executive Officer Thank you, Kevin. Good morning everybody, and thank you for joining the call. Fiscal 2026 was strong. We achieved the highest Q4 ASV performance in FactSet history.

56 billion, exceeding the high end of our guidance with robust growth across all regions and client types. 5%, reflecting the investments we made this past year. 01, up 6% year over year. It was an important year for FactSet.

We launched several new products: trusted FactSet data through MCP servers, multi-asset class risk models, new capabilities in our quant modeling environment, and agents for banking, buy-side, and wealth management clients were just a few. We reorganized around a unified product organization, strengthened our leadership bench, and sharpened commercial execution to accelerate top-line growth while boosting workforce productivity with the help of AI to improve operating leverage and drive future margin expansion.

The more widely our clients deploy AI, the more valuable are our foundational strengths—connected data, embedded workflows, service excellence, and broad and deep distribution—as we see in this quarter's adoption, engagement, and growth trends. Our client wins this quarter demonstrate the strength of our platform as leading global financial institutions consolidate more of their data workflows and mission-critical operations with FactSet. Our strategic investments are making an impact, securing six- and seven-figure deals involving new products such as AI for banking, MCP, deep sector content, trading solutions, and real-time data.

In banking, we continue to win significant mandates by displacing major competitors. Just three months after launching FactSet AI for Banking, a bulge bracket investment bank selected our full agentic banking stack across its global footprint. We've since signed additional AI for Banking deals, indicating wider adoption. We also won a mandate to displace a long-standing incumbent at a large regional bank, a deal that includes MCP and deep sector content with a clear path for expansion.

On the buy side, we secured several significant eight-figure enterprise deals. We renewed a large global asset manager in a new enterprise deal that includes transactional services, MCP, and data feeds. Another global asset manager expanded its managed services agreement into new capabilities for end-to-end performance and holdings-based analysis for equity, multi-asset, and fixed income. We also displaced an incumbent at a European quant fund with our Data Feeds and Programmatic Environment API.

In wealth management, we secured two major competitive displacements across workstations and real-time data feeds. With these wins, we now serve Canada's five largest wealth managers and have also gained traction among independent firms. We also expanded our relationship with a leading UK wealth manager, which selected FactSet's performance reporting solution, showcasing the strength of our solutions across the end-to-end portfolio lifecycle. AI-related solutions made up a double-digit share of new ASV this quarter, exceeding fiscal 2025's total AI contribution, and we're seeing early evidence that it is complementing our existing product offerings.

Among clients with an established workstation relationship, the majority increased total ASV after adding MCP. Our client wins throughout the year demonstrate that our investments are paying off: we are attracting new clients and expanding our existing relationships. Q4 capped a year of solid execution against the three priorities guiding our business transformation: commercial excellence, productivity improvement, and long-term strategy. We are delivering stronger commercial outcomes, real productivity gains, and an AI strategy that is differentiating FactSet in the market.

The impact of our commercial excellence initiative is clear with strong new business growth, continued ASV retention of over 95%, and strong expansion. Data ASV delivered through direct feeds, APIs, MCP, or through a partner continued to grow at double digits, with AI adoption driving new logo acquisition and enterprise adoption boosting retention and expansion among our largest clients. We continue to accelerate the shift of our business model from seat-based contracts to flexible enterprise agreements.

In Q4, the majority of renewed ASV was secured as enterprise agreements or in contracts with terms of three years or longer, increasing average contract length by roughly 30% while broadly preserving pricing. This underscores how our flexible engagement model is leading to longer-duration, higher-value contracts. Second, we continue to streamline operations and reduce complexity as we scale our productivity initiative. This translated into net headcount reduction in FY26, a real sign of operating leverage inherent in our business.

We are taking the freed-up capacity, redeploying most of it into new product and growth opportunities, and returning a portion of it to the bottom line. In Q4, we continued to scale AI across our product and engineering teams, expanding AI-enabled projects by roughly 40%. The token governance and optimization measures we put in place last quarter are driving further efficiency gains. Token use related to coding assistance grew more than 80% quarter on quarter, with token spend growing at only half that pace.

A key area of investment in our data refinery is private markets data. In Q4, we re-engineered a pipeline that integrates and delivers content from dozens of providers covering millions of global private companies. Platform consolidation combined with agent-assisted engineering cut processing times in this area by more than 75%, halved the onboarding effort, and more than doubled delivery speed, freeing engineering resources for document enrichment and data labeling that further strengthen our AI foundation.

The Client Assist agent I talked about a couple of quarters ago has been fully rolled out to all clients as of Q4 and now resolves over 30% of all user-initiated requests without human interaction. These initiatives are all driving faster delivery and improved quality at a lower cost. We expect these to scale in FY27 and further enhance our operating leverage. We are rolling out a differentiated AI strategy that leverages the high quality of our connected data and the deep embedding of our analytics and software in client workflows.

Our strategy is resonating with clients and our momentum is strong. For example, MCP adoption is accelerating across clients of every size. Over 650 clients were actively engaged under contracts or trials to consume our data sets through MCP as of fiscal year end. API call volume continues to expand rapidly, with Q4 volumes at seven times the level we experienced last quarter.

We expect this to continue as we make more data sets available through MCP. In Q4, we launched our first analytics MCP, extending our market-leading portfolio analytics into agentic workflows. We believe this will unlock tremendous value for buy-side clients as they deploy agents in performance measurement, risk, and reporting. And it's not just MCP.

Clients using our AI solutions grew their ASV twice as fast as the rest of our client base. In Q4, we continued to invest in real-time data and pricing and reference data as clients prepare for 23x5 trading. Our acquisition of BCC Group, a leading platform for distributing and managing real-time feeds, significantly expands our addressable market by opening up new opportunities across the real-time data ecosystem. We'll go deeper into the strategy and how it translates into our medium-term growth and financial targets at our upcoming Investor Day on November 10th.

I'm looking forward to sharing more there. I'll now turn the call over to Josh to discuss our Q4 and fiscal 26 performance in more detail as well as our FY27 guidance. Josh Warren, Chief Financial Officer Thank you, Sanoke. As Sanoke outlined, fiscal 2026 was a transformational year for FactSet.

We accelerated growth while strengthening the firm's foundation through initiatives that sharpened our go-to-market approach and improved productivity and efficiency across the organization. I'll highlight three areas as I walk through our results for Q4, the fiscal year, and a framework for our FY27 outlook. First, our client base—its quality and breadth—form the most meaningful growth opportunities we see. Strengthening client relationships and expanding capabilities position us well entering FY27.

Next, translating that growth into durable, compounding free cash flow across market cycles, we expect to see enhanced operating leverage become more evident in improving FY27 operating margins. FactSet's margins compressed during FY26 for two primary reasons: a series of structural investments previously discussed, including modernizing our infrastructure and strengthening cybersecurity and resilience, and the output of accelerating ASV to record levels. Revenue that ASV delivers is recognized over time, while performance-based incentive compensation is expensed up front.

Finally, our flexible balance sheet and disciplined capital allocation approach support our strategy going forward. 56 billion, representing 7% organic growth and an acceleration of more than 125 basis points over the comparable rate in 2025. We generated $86 million of organic ASV during the quarter, our largest quarter ever. 52.

To review our results for fiscal 2026 overall, we generated $168 million of organic ASV, above the high end of our guidance range. In dollar terms, that represents a more than 30% increase over the organic ASV generated in FY25 and, in growth rate terms, FactSet's best results in the last three years. 7% growth over 2025, also above the high end of the guidance range. 01, also above the high end of the guidance range.

FactSet serves more than 9,200 clients in over 80 countries, with approximately three quarters of our top 100 clients having been with us for more than 20 years, including 95 of the top 100 global asset managers, 38 out of the top 40 wealth managers, and 90% of the top 50 global investment banks. Adoption of AI is at varying stages of maturity across our client base, and the boldest are partnering with FactSet to reimagine core workflows and essential processes. For Q4 '26, organic ASV accelerated to 7% year over year, an increase of $86 million during the quarter. For the full year, $160 million of organic ASV represents a record outcome.

Growth was evident across all client types and regions. By client type, Q4 results: our institutional buy side organic ASV grew 5%, an acceleration of approximately 100 basis points from Q4 2025. Across both buy side and sell side, our dealmakers category saw organic ASV grow 9%, approximately doubling its growth rate from a year ago. Wealth grew 9% organic ASV, and our market infrastructure category grew 8%.

Every region grew faster in Q4 than it did a year ago, with organic ASV accelerating to 7% in the Americas, 5% in EMEA, and over 10% in Asia Pacific, our fastest growing region. 1% on a like-for-like basis. 8% last year. As I noted earlier, periods of faster ASV growth can temporarily compress margins in any quarter since the incremental ASV is not yet reflected in revenue.

This was the case in Q4, where compensation-related expenses increased 9% year over year, driven by performance-based arrangements, not due to additional headcount. During Q4, we reduced overall headcount as part of our efforts to streamline our operating footprint, marking the first annual headcount decline following several years of growth. Earlier this month, we implemented additional headcount reductions. We recognize the impact of these decisions on those affected, but believe they position us to operate more efficiently while strengthening our business for the long term.

We remain focused on investing in product development and client service and expect these cost efficiencies to free up capital for client-facing innovation. 52 in our adjusted earnings per share. Consistent long-term free cash flow generation is a hallmark of our model and positions us to be a durable compounder across market cycles. Free cash flow was $177 million for the fourth quarter of fiscal 2026, roughly in line with the prior-year period.

For the full fiscal year, free cash flow was $707 million, an increase of over 14%. Our free cash flow during Q4 reflected the one-time restructuring costs associated with right-sizing certain teams alongside product that we expect to improve our margin and free cash flow generation over time. We expect the efficiency gained to reduce complexity and operational risk while improving overall quality, leading to a better overall outcome for clients and shareholders. We anticipate our free cash flow during Q1 '27 will reflect similar temporary impacts from productivity investments that we expect will benefit operating leverage and free cash flow over time.

Our disciplined framework prioritizes organic investments in high-growth projects as our top priority for capital allocation. We prioritize opportunities with visibility into return on capital above a demanding hurdle rate. We then consider inorganic activity that meets our strategic and financial criteria and return excess capital to shareholders. Where we do look inorganically, we often source opportunities from our own ecosystem.

Because of our reach, we are typically acquiring or investing in firms we know well—partners whose technology is running alongside ours and whose teams we've already worked with. We believe that lowers integration risk.