EQUIFAX (EFX)·Q4 2025 Earnings Summary

Equifax Stock Drops 12% Despite Q4 Beat as Margin Compression Spooks Investors

February 4, 2026 · by Fintool AI Agent

Equifax delivered a solid Q4 2025 with revenue $30 million above the midpoint of guidance and EPS exceeding consensus by 7.7%. Revenue was up 9% on a reported and organic constant currency basis, driven by strong U.S. mortgage outperformance and better-than-expected government revenue. However, the stock tumbled 12% as investors focused on margin pressure from higher incentive compensation and a $30 million legal settlement for inquiry dispute claims.

Did Equifax Beat Earnings?

Equifax beat on both revenue and adjusted EPS:

Revenue came in $30 million above guidance midpoint ($15M above top end), driven by stronger mortgage markets and above-expectation government revenue. On an organic constant currency basis, revenue growth of 9% was 200+ bps above the midpoint of October framework.

However, EBITDA margin came in slightly below guidance:

What Drove Segment Performance?

All three segments delivered growth, with USIS leading at +12% on surging mortgage demand:

Workforce Solutions ($652.2M, +9% YoY)

• Verification Services: $557M (+10%) — Government revenue up LDD, Talent up HSD, Consumer Lending up MDD
• Verifier Mortgage: +10% growth
• Employer Services: $95.2M (+2%) — weak I-9 and onboarding from soft hiring market
• Talent Solutions outperforming weak BLS hiring market (down LSD) with products in education and incarceration data
• Operating margin: 51.3% (driven by operating leverage from higher revenue)
• 209M Active Records (+11% YoY), 120M current records on 105M unique SSNs, 800M+ total records
• 5 new data partners signed in Q4, 16 total in 2025

USIS ($526.9M, +12% YoY)

• Mortgage revenue +33% despite hard credit inquiries down -1% (better than expected down HSD)
• Diversified Markets +5%: Auto up very strong HDD (pre-approval products + pricing), FI up LSD
• Consumer Solutions (B2C) up HSD from strong customer acquisition in consumer direct channel and expanded Gen Digital partnership
• Financial Marketing Services up LSD
• EBITDA margin 36.3% — up 100+ bps sequentially, above guidance from operating leverage

International ($371.5M, +7% YoY, +5% local currency)

• Latin America +6%: HSD growth in Brazil (Boa Vista gaining share) and Argentina
• Canada, Europe, APAC +4%: UK CRA strong but debt management weak; Canada impacted by tariff uncertainty
• EBITDA margin 31.6%, slightly above October guidance
• Cloud transformation expected to complete by mid-2026

What Did Management Guide?

Equifax issued full-year 2026 guidance above consensus expectations:

Key Guidance Assumptions:

• U.S. mortgage market down low single digits in 2026
• 100% of mortgage credit scores will be FICO Scores (assumes no VantageScore conversion or FICO Direct)
• U.S. GDP growth of 2-3%, weaker economic growth in Canada, UK, Brazil
• FX ~50 bps tailwind to revenue, ~$0.02 to EPS

Q1 2026 guidance:

• Revenue: $1.597B-$1.627B (+11.8% at midpoint)
• Adjusted EPS: $1.63-$1.73 (+10% at midpoint)
• Total US Mortgage Revenue: +30%+ (or +7-9% ex-FICO)
• Diversified Markets C$ Revenue: Up mid-single-digits
• EBITDA margins ~28% at midpoint (lower than full year due to LTI/equity plan timing)

What Is the VantageScore Opportunity?

One of the most significant margin catalysts for 2026+ is the potential conversion from FICO to VantageScore in mortgage lending:

Current Status:

• 200+ mortgage lenders testing or in production with VantageScore 4.0
• 40+ non-GSE lenders already in production with only VantageScore
• Equifax providing Vantage historical data back to 2008-2009 via Ignite for Mortgage platform
• Offering free VantageScore with any paid FICO score across all segments (mortgage, auto, card, personal loans, insurance)

Key Hurdle: FHFA, Fannie Mae, and Freddie Mac must complete technical/planning work to formally accept Vantage for agency mortgage originations. Management intel suggests this is "imminent" but timing remains uncertain.

Note: FICO pass-through adds ~340 bps to 2026 revenue growth but compresses margins. Excluding FICO impact, revenue growth is ~7% and margins expand 75 bps.

What Is the Government Growth Opportunity?

EWS Government represents a $5B+ TAM with significant penetration upside. At ~$700M+ run-rate revenue vs. a $5B TAM, there is a long runway for growth.

Value Proposition:

1. Speed — Instant income verification vs. manual processes
2. Productivity — Caseworkers can cover more individuals
3. Integrity — Current data from last week's paycheck reduces fraud

OB3 Tailwind: The One Burden, Three Benefits (OB3) bill passed July 2025 puts teeth into social service requirements:

• States with error rates above 6% face cost sharing (80%+ of states exceed this threshold)
• Redeterminations moving from 12 months to 6 months in 2027
• New work/community engagement requirements

New Products:

• Continuous Evaluation for SNAP (launched Q4 2025) — Identifies changes in recipients' incomes above program levels; already contracted with several states in Q1 2026
• Consumer Consented Solution — Captures gig income for individuals with W-2 jobs
• More state-level penetration driving above-expectation revenue in Q3 and Q4

Management expects government to be "our fastest growing business across Equifax going forward" given the unique TWN data assets addressing the $160B+ in annual improper payments.

How Did the Stock React?

Despite the double beat, Equifax shares plunged 12.1% on earnings day:

The selloff erased approximately $2.6 billion in market cap, pushing EFX to its 52-week low of $173.86 intraday.

Why the decline despite beats?

1. Margin compression — EBITDA margin down 260 bps YoY signals cost headwinds
2. $30M legal settlement — Charge for "inquiry disputes related claims"
3. Antitrust overhang — $5.4M in litigation costs for Workforce Solutions
4. Mortgage market weakness — 2026 assumes declining market despite strong Q4

What Changed From Last Quarter?

Improved:

• EWS exited the year with strong 9% Q4 revenue growth (vs 6% FY25) — accelerating momentum
• Vitality Index hit 17% in Q4, record 15% for FY25 (above 10% LTFF target)
• Free cash flow up 40% to $1.13B for the full year, 120% cash conversion
• Share repurchases: $500M in Q4 (2.3M shares, ~2% of shares outstanding)
• 400+ AI patents total, added 40+ in 2025
• Revenue $30M above midpoint and $15M above top end of October guidance

Deteriorated:

• EBITDA margin slightly below October guidance due to higher incentive compensation (impacts corporate expenses)
• Employer Services growth slowed to +2% on weak hiring and I-9/onboarding softness
• International slightly weaker than expected due to Canada and European debt management weakness

Full Year 2025 Summary:

Capital Allocation Highlights

Equifax is pivoting to returning cash to shareholders post-cloud transformation:

2026 Capital Capacity: With EBITDA increasing to ~$2.12B at midpoint and 100%+ free cash conversion expected, Equifax will generate ~$1.5B available for bolt-on M&A and shareholder returns.

How Is EFX.AI Driving Growth?

Equifax is applying an AI-first approach powered by its $3B cloud transformation:

AI Performance:

• All new models built in 2025 using EFX.AI — generating nearly 30% lift vs legacy models
• 400+ AI patents total, 40+ added in 2025
• ~90% of EFX team leveraging Google Gemini AI tools
• ~1,900 software developers using AI coding tools, over 1M lines of code generated using AI

New Products Launched in Q4:

• Credit Abuse Risk Model — AI-powered adverse actionable model identifying first-party fraud and credit abuse behaviors (loan stacking) in prime consumers, with delinquency rates 29x higher than overall prime rate
• Ignite AI Advisor — Conversational analytics for deeper customer insights and personalized recommendations (rolling out globally in 2026)

TWN Indicator Momentum:

• Mortgage: 1,400+ customers accessing products, major mortgage lenders signed
• Auto: ~100 customers piloting
• Card: Early stage, customer wins expected in 1H 2026
• Personal Loan: Launching early 2026

AI for Equifax Initiative: Over next 3 years, targeting $75M in cost savings from AI-enabled operations including call center transformation and paper processing automation.

How Does 2026 Align with Long-Term Framework?

Management reiterated their EFX2028 Long-Term Financial Framework (LTFF):

~$1.2-$2B Mortgage Revenue Upside: With full mortgage market recovery and full VantageScore adoption at 2026 pricing, Equifax mortgage revenue could increase by $1.2-$2B, delivering incremental EBITDA of over $950M and adjusted EPS of over $5.75 per share.

Refinance Pool: Equifax data shows over 13 million mortgages with rates above 5%, including ~11M over 6% and ~8M over 6.5% — a substantial pool available to refinance as rates decline.

~90% Revenue from Proprietary Data: Equifax's moat is built on regulated, scaled data that only EFX can access — including income/employment (TWN), core credit, commercial credit, and alternative data assets (NC Plus, DataX, Teletrack, IXI Wealth).

What Did Analysts Focus On?

Key Q&A themes from the earnings call:

On AI Disruption Risk (Jeff Meuler, Baird): CEO Mark Begor addressed concerns about Agentic AI and data disintermediation head-on: "The Equifax moat around data is very high... our data is proprietary, and over 90% of our revenue comes from proprietary data. What that means is no one else can access it."

On the DeepSeek selloff: "We've been swept into a neighborhood that we don't think we live in... the scaled data assets we have are unmatched. You can't get credit data in the public market... it's just that those kind of data sets are proprietary."

On VantageScore Timeline (Toni Kaplan, Morgan Stanley): Begor clarified the key hurdle: "The significant hurdle that's left is the FHFA, as well as Fannie and Freddie, completing their work... Our intel is that it's underway, meaning it's gonna be imminent."

On Government Growth (Toni Kaplan, Morgan Stanley): Begor highlighted accelerating state engagement: "We've seen an uptick in commercial activity... because the states know that there's these new requirements coming later in the year and in 2027. We expect this government vertical to be our fastest growing business across Equifax going forward."

On FICO Direct (Multiple Analysts): CFO John Gamble reiterated P&L neutrality: "If the score is sold by the CRA or if the score is sold by Equifax, our EBITDA, EPS, and cash flow are unchanged. Doesn't matter." No CRA reseller score calculations have occurred so far in January 2026.

On Credit File Pricing (Craig Huber, Huber Research): Begor pushed back on misconceptions: "We never had a margin on the FICO score... We sell a credit file, and that credit file cost is what we've been delivering to our customers, and then we pass through a FICO score." Price increases on the credit file were described as "modest" with Twin Indicator and NCTUE data added for free.

Forward Catalysts & Risks

Catalysts:

• VantageScore conversion → $160M EBITDA opportunity at current volumes, ~$300M at normalized volumes
• Government expansion → $5B TAM with new products; OB3 requirements drive state urgency
• Cloud transformation 90% complete, approaching 100% by mid-2026 → lower capex, higher FCF
• AI for Equifax driving $75M cost savings over next 3 years
• ~$1.2-$2B mortgage revenue upside as market normalizes + full VantageScore adoption
• Mortgage trigger legislation (March 2026) may shift soft pulls to hard pulls, benefiting USIS

Risks:

• Antitrust litigation in Workforce Solutions
• Continued margin pressure from SG&A growth
• Mortgage market weakness extending into 2026
• Canada economic uncertainty from tariff discussions
• CFPB regulatory scrutiny (prior $15M settlement)

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Data sourced from Equifax Q4 2025 8-K filing, Q4 2025 earnings call transcript, and S&P Global.