FactSet (FDS) Q3 2026: Revenue Growth, Margin Compression — Mixed Results

FactSet (NYSE:FDS) reported its third quarter fiscal 2026 results, revealing a revenue increase but notable declines in profitability metrics. The company achieved GAAP revenues of $622.9 million, reflecting a growth of $37.4 million or 6.4% year-over-year compared to $585.5 million in Q3 2025. Organic revenues also rose by 7.0%, reaching $622.9 million.

Despite the revenue growth, the quarter presented challenges for shareholders. The decline in operating income by 14.3% to $166.3 million and a 14.7% drop in net income to $126.7 million indicate that while FactSet is expanding its top line, it is facing significant cost pressures that are impacting profitability. The diluted earnings per share (EPS) fell to $3.50, down 9.6% from $3.87 in the prior year.

Key Financial Metrics:

• GAAP Revenues: $622.9 million (up $37.4 million or +6.4% YoY)
• Organic Revenues: $622.9 million (up 7.0% YoY)
• Operating Income: $166.3 million (down 14.3% YoY)
• Net Income: $126.7 million (down 14.7% YoY)
• Diluted EPS: $3.50 (down 9.6% YoY)
• Adjusted Diluted EPS: $4.53 (up 6.1% YoY)

Analyst Opinion

This quarter presents a mixed bag for shareholders. While the revenue growth is a positive sign, the significant decline in operating income and net income raises concerns about the company's cost management and operational efficiency. The increase in adjusted diluted EPS to $4.53 suggests that underlying performance may be stronger than the headline figures indicate, but the overall trend of declining margins is troubling. The operating margin fell to 26.7%, down from 33.2% in the prior year, primarily due to increased employee compensation costs and other operational expenses.

Capital Returns and Guidance

FactSet returned over $243 million to shareholders in Q3, including $203.1 million in share repurchases and $40.3 million in dividends. The company also increased its quarterly dividend by $0.06 to $1.16 per share, marking its twenty-seventh consecutive year of dividend increases.

Looking ahead, FactSet reaffirmed its fiscal 2026 guidance, projecting organic ASV growth of $130 million - $160 million and GAAP revenues between $2,450 million - $2,470 million. The guidance for GAAP diluted EPS is set at $14.85 - $15.35, indicating management's confidence in achieving solid growth despite current challenges.

Forward Catalyst

Investors should closely monitor the company's ability to manage costs and improve margins in the upcoming quarters. The continued adoption of AI products among clients and the expansion of enterprise relationships are promising signs for future growth. Additionally, the impact of new partnerships with Google Cloud, Finster AI, and TIFIN.AI could enhance FactSet's competitive position in the market. The next earnings report will be crucial in assessing whether the company can translate its revenue growth into improved profitability.

Note: All amounts in the following tables are in thousands.

(In thousands, except per share data)	Three Months Ended	Nine Months Ended
	May 31, 2026	May 31, 2025	May 31, 2026	May 31, 2025
Revenues	$622,918	$585,520	$1,841,293	$1,724,141
Operating expenses
Cost of services	312,139	280,729	896,848	809,177
Selling, general and administrative	144,457	110,636	401,377	344,753
Total operating expenses	456,596	391,365	1,298,225	1,153,930
Operating income	166,322	194,155	543,333	570,211
Other income (expense), net
Interest income	642	1,509	2,622	4,483
Interest expense	(13,837)	(15,122)	(40,286)	(43,423)
Other income (expense), net	1,017	(594)	(324)	(20)
Total other income (expense), net	(12,178)	(14,207)	(37,988)	(38,960)
Income before income taxes	154,144	179,948	505,345	532,251
Provision for income taxes	27,403	31,406	92,991	88,583
Net income	$126,741	$148,542	$412,354	$443,668
Basic earnings per common share	$3.51	$3.92	$11.20	$11.68
Diluted earnings per common share	$3.50	$3.87	$11.16	$11.53
Basic weighted average common shares	36,122	37,907	36,819	37,976
Diluted weighted average common shares	36,191	38,344	36,957	38,457

(In thousands)	May 31, 2026	August 31, 2025
ASSETS
Cash and cash equivalents	$288,114	$337,651
Investments	16,122	17,445
Accounts receivable, net of reserves of $14,305 at May 31, 2026 and $13,789 at August 31, 2025	289,990	270,684
Prepaid taxes	58,325	33,600
Prepaid expenses and other current assets	74,968	70,379
Total current assets	727,519	729,759
Property, equipment and leasehold improvements, net	82,319	85,203
Goodwill	1,283,377	1,284,708
Intangible assets, net	1,868,418	1,916,102
Deferred tax assets	41,945	61,226
Lease right-of-use assets, net	119,364	121,776
Other assets	69,055	105,498
TOTAL ASSETS	$4,191,997	$4,304,272
LIABILITIES
Accounts payable and accrued expenses	$163,982	$135,262
Current debt	499,159	—
Current lease liabilities	33,963	33,145
Accrued compensation	137,431	130,596
Deferred revenues	183,494	167,852
Current taxes payable	5,182	13,041
Dividends payable	41,500	41,410
Total current liabilities	1,064,711	521,306
Long-term debt	890,542	1,368,260
Deferred tax liabilities	13,040	14,902
Taxes payable	41,315	45,095
Long-term lease liabilities	146,978	157,104
Other liabilities	3,121	11,192
TOTAL LIABILITIES	$2,159,707	$2,117,859
STOCKHOLDERS’ EQUITY
TOTAL STOCKHOLDERS’ EQUITY	$2,032,290	$2,186,413
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$4,191,997	$4,304,272

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