Sign in
FR

FACTSET RESEARCH SYSTEMS INC (FDS)·Q2 2025 Earnings Summary

Executive Summary

  • Q2 FY2025 delivered steady top-line growth and durable cash generation: GAAP revenue $570.7M (+4.5% YoY), GAAP diluted EPS $3.76 (+3.0% YoY), adjusted diluted EPS $4.28 (+1.4% YoY); free cash flow $150.2M (+23.3% YoY) .
  • Guidance was tightened: revenue raised to $2.305–$2.325B, organic ASV narrowed to $100–$130M (midpoint reaffirmed ~5%), while GAAP operating margin (32–33%) and GAAP EPS ($14.80–$15.40) were lowered, reflecting acquisition-related costs; adjusted margin (36–37%) and adjusted EPS ($16.80–$17.40) maintained .
  • Strategic execution highlights: LiquidityBook acquisition (OMS/IBOR + FIX network) to deepen front-office integration; launch of AI-powered Pitch Creator; UBS win to power adviser desktops in the Americas; continued momentum in data feeds and managed services .
  • Street consensus comparisons via S&P Global were unavailable in our session; we will update estimate benchmarks on request when access is restored (S&P Global) (see Estimates Context).

What Went Well and What Went Wrong

What Went Well

  • Wealth reaccelerated to double-digit growth, including UBS selecting FactSet to power adviser desktops and a client-facing portal in the Americas; enterprise wins expand footprint across top-tier wealth managers .
  • Strong cash generation and capital returns: Q2 operating cash flow $174.0M and free cash flow $150.2M; repurchased ~137K shares for $64.4M; quarterly dividend $1.04 per share paid Mar 20, 2025 .
  • Product-led innovation: Pitch Creator launched with ~2,000 active trials; conversational API and portfolio commentary monetization underway; momentum in enterprise data feeds and managed services as clients build GenAI and data strategies .

What Went Wrong

  • Margin pressure: GAAP operating margin 32.5% (-~80 bps YoY) and adjusted margin 37.3% (-100 bps YoY), driven by higher technology spend (+31% YoY) and acquisition-related fees; tech costs rose to >10% of revenue .
  • Sell-side/banking demand remained a headwind; management’s near-term pipeline does not rely on banking pickup to meet the guidance midpoint, indicating cautious outlook for that segment .
  • Lower CPI muted annual price increases vs last year (~$18M captured vs ~$25M prior year), creating a ~$7M ASV growth headwind in Q2; proactive retirement of a legacy bespoke solution caused a seven-figure cancellation .

Financial Results

Quarterly Financials and Margins (Q1–Q3 FY2025)

MetricQ1 2025Q2 2025Q3 2025
Revenue ($USD Millions)$568.7 $570.7 $585.5
Diluted EPS (GAAP) ($)$3.89 $3.76 $3.87
Adjusted Diluted EPS ($)$4.37 $4.28 $4.27
Operating Margin (GAAP) (%)33.6% 32.5% 33.2%
Adjusted Operating Margin (%)37.6% 37.3% 36.8%
EBITDA ($USD Millions)$229.9 $224.6 $235.9

Regional Revenue (Q2 FY2025)

RegionRevenue ($USD Millions)YoY Organic Revenue Growth (%)
Americas$369.7 4.0%
EMEA$143.4 3.1%
Asia Pacific$57.6 6.8%

ASV by Region (as of Feb 28, 2025)

RegionReported ASV ($USD Millions)Organic ASV ($USD Millions)YoY Organic ASV Growth (%)
Americas$1,501.1 $1,474.9 4.4%
EMEA$571.3 $571.4 2.6%
Asia Pacific$233.7 $229.9 6.8%

KPIs (Q2 FY2025)

KPIValue
ASV (reported) ($USD Millions)$2,306.1
Organic ASV ($USD Millions)$2,276.2
Organic ASV QoQ increase ($USD Millions)$19.6
Annual ASV retention>95%
Client retention91%
Client count8,645
User count219,141
Free Cash Flow ($USD Millions)$150.2
Dividend per share$1.04
Shares repurchased / Spend136,714 / $64.4M

Actual vs Consensus (S&P Global) – Q2 FY2025

MetricActualConsensus (S&P Global)Surprise
Revenue ($USD Millions)$570.7 UnavailableUnavailable
Diluted EPS (GAAP) ($)$3.76 UnavailableUnavailable
Adjusted Diluted EPS ($)$4.28 UnavailableUnavailable

Note: S&P Global consensus data was unavailable in our session; we can refresh and populate this table on request (S&P Global).

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Organic ASV growth ($)FY2025$90M–$140M $100M–$130M Narrowed; midpoint reaffirmed (~5%)
GAAP Revenue ($)FY2025$2.285B–$2.305B $2.305B–$2.325B Raised
GAAP Operating Margin (%)FY202532.5%–33.5% 32.0%–33.0% Lowered
Adjusted Operating Margin (%)FY202536%–37% 36%–37% Maintained
GAAP Diluted EPS ($)FY2025$15.10–$15.70 $14.80–$15.40 Lowered
Adjusted Diluted EPS ($)FY2025$16.80–$17.40 $16.80–$17.40 Maintained
Effective Tax Rate (%)FY202517%–18% 17%–18% Maintained
DividendQ2/Q3 FY2025$1.04/share (Q2) $1.10/share (Q3) Raised (Q3)

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1 FY2025 and Q3 FY2025)Current Period (Q2 FY2025)Trend
AI/technology initiativesQ1: Intelligent Platform, IRN 2.0, DaaS; elevated tech investment; adjusted margin steady . Q3: Continued margin pressure vs PY from tech costs and lapping items .Pitch Creator launched; ~2,000 trials; conversational API monetization; portfolio commentary packaging; targeting 30–50 bps monetization this year .Accelerating product monetization; tech spend ramp to support GenAI .
Banking/sell-side demandQ3: Banking remained tough; margins lower YoY; pipeline strength elsewhere .Not relying on banking pickup to hit guidance midpoint; Pitch Creator could be tailwind .Cautious near term; productivity tools (Pitch Creator/LogoIntern) may offset .
Wealth/product performanceQ1: Wealth, asset owners, asset managers drove organic revenue . Q3: Buy-side + sell-side organic ASV both ~4% .Wealth reaccelerated to double-digit growth; UBS enterprise win in Americas .Positive; market share gains and broader workflows .
Regional trendsQ1: Americas +5.2% org revenue; APAC +6.2%; EMEA +2.7% . Q3: Americas +5.0% org revenues; APAC +6.4%; EMEA +2.3% .Q2: Americas +4.0% org revenues; APAC +6.8%; EMEA +3.1% .Broad-based growth; APAC outperformance persists .
Pricing/macroQ1: Guided FY25 with 36–37% adj margin; 17–18% tax . Q3: Adj margin 36.8% (down YoY); tax 17.5% .Lower CPI reduced annual price increases (~$18M captured vs ~$25M PY); ~$7M ASV headwind .Near-term pricing headwind; offset by volume/new business .
Managed services/data feedsQ1: DaaS/Managed Services highlighted . Q3: Enterprise strategy execution; cash flows solid .Data feeds demand up (real-time/reference/options); data management services growing and profitable .Strengthening enterprise/managed services position .
Regulatory/legalQ1: Sales tax dispute resolved (Massachusetts) adjustment in non-GAAP .No new legal items; tax rate 15.9% in Q2 .Stable tax outlook (17–18% full-year) .

Management Commentary

  • CEO tone on growth visibility: “With increased visibility into the remainder of the fiscal year, we are reaffirming the 5% midpoint of our organic ASV growth guidance and narrowing the range of anticipated top-line outcomes.” .
  • CFO on margins and investment: “We are reaffirming our guidance range for adjusted operating margin and adjusted diluted EPS, despite modest dilution from our recent acquisitions.” .
  • CEO on AI monetization: “We’re well on our way to getting to the 30 to 50 bps… Pitch Creator… very good reception from the banks… conversational API… portfolio commentary being monetized.” .
  • CFO detailing cost drivers: “Operating margin decreased… primarily driven by a 31% increase in technology related spend due to higher cloud and software expenses and greater amortization of internal use software, reflecting our ongoing investment in generative AI.” .

Q&A Highlights

  • AI products commercialization: ~2,000 active Pitch Creator trials; 6 SKUs sold; conversational API traction across firm types; pricing well received as clients see productivity gains .
  • Banking outlook and guidance sensitivity: Pipeline for banking hiring baked conservatively; midpoint does not rely on banking; upside could push to high end of range .
  • Pricing dynamics: Lower CPI compressed annual price increases (~$18M vs ~$25M PY) across regions; global rate card actions improved price realization in corporates/hedge funds; new business volume up ~25% YoY .
  • Data feeds and managed services: Demand from hedge funds and AI-focused fintechs; wins in complex exchange feeds (options); data management services expanding, profitable .
  • Renewals discipline: Proactive renewal playbooks; dispersion across the year; dozen large banking renewals flat-to-up in aggregate; strengthened with best-in-class banking product and deeper sector/private data .

Estimates Context

  • S&P Global consensus estimates for Q2 FY2025 revenue and EPS were unavailable in our session due to access limits; we will populate actual vs consensus and surprise metrics upon refresh (S&P Global).
  • Given the narrowed guidance and stronger pipeline into H2, Street models may need to account for: higher technology costs, modest acquisition-related dilution to GAAP metrics, and acceleration in organic ASV from wealth, hedge funds, corporates, and managed services .

Key Takeaways for Investors

  • Near-term margin headwinds stem from deliberate GenAI/infrastructure investment and acquisition-related costs; adjusted margin framework (36–37%) is intact even as GAAP margin/GAAP EPS guide down—focus remains on durable growth and platform build-out .
  • Top-line is broad-based: Americas and APAC lead; wealth momentum and enterprise wins (UBS) plus hedge funds/corporates/PE-VC offset banking softness; managed services and data feeds deepen enterprise relevance and resiliency .
  • AI monetization is advancing from trials to commercialization (Pitch Creator, conversational API, portfolio commentary); expect incremental ASV uplift with shorter cycle deals as SKUs roll through Q3–Q4 .
  • LiquidityBook enhances end-to-end portfolio life cycle capabilities (OMS/IBOR + FIX network), creating cross-sell synergies across buy-side and select sell-side workflows; modest near-term dilution but accretive to growth longer term .
  • Cash generation supports continued capital returns; dividend increased to $1.10 in Q3 and buybacks continue alongside disciplined leverage (~1.7x gross) .
  • Watch catalysts: H2 ASV acceleration, enterprise wins, AI SKU monetization pace, banking activity stabilization, and ability to keep adjusted margin within guided range despite tech spend ramp .
  • Actionable: Position for steady compounding with optionality from AI/product-led cross-sell; near-term stock reactions likely tied to evidence of AI monetization and pipeline conversion, not banking recovery alone .