FactSet Calls 2026 Margins the ‘Floor’ As It Targets Profitability Improvement

FactSet Research Systems Inc. (NYSE:FDS) stock gained nearly 3% Wednesday after the financial data provider reported better-than-expected fourth-quarter earnings and revenue.The company reported better-than-expected fiscal 2026 fourth-quarter results, although its fiscal 2027 guidance came in below analysts’ expectations.Revenue rose 6.3% year over year to $634.7 million, beating the $629.8 million consensus estimate. Adjusted earnings were $4.52 per share, beating the $4.33 estimate.Record ASV Growth, Longer Enterprise ContractsFactSet ended the year with organic annual subscription value, or ASV, of about $2.56 billion, up 7% and above the high end of its guidance.The company reported ASV growth across institutional buy-side, dealmakers, wealth and market infrastructure clients. Annual ASV retention remained above 95%.Most renewed ASV in the fourth quarter came through enterprise agreements or contracts lasting at least three years. The average renewal contract length increased nearly 30%, while pricing remained broadly intact.AI Becomes a Bigger Growth DriverManagement said ASV generated from artificial intelligence solutions more than doubled from a year earlier. AI-related products accounted for more than 10% of new ASV added during the fourth quarter.FactSet also launched its MCP server and FactSet AI for Banking. In addition, the company announced a strategic partnership with Google Cloud to support AI innovation and agentic workflows.More than 650 clients were using contracts or trials to access FactSet data through MCP at fiscal year-end.AI-enabled projects across FactSet’s product and engineering teams increased about 40% during the fourth quarter. Meanwhile, AI-assisted processes reduced processing times for private-markets data by more than 75%.CEO Sanoke Viswanathan said frontier AI lab marketplaces could become a powerful marketing channel for FactSet data, giving the company access to users beyond its traditional workstations and data feeds. See More: Top Value Stocks Competitive Wins, Partnerships ExpandFactSet said it secured competitive wins across banking, asset management, quantitative investing and wealth management.Management said its connected data, analytics and embedded workflows helped deepen enterprise relationships and expand client adoption.The company also expanded strategic partnerships with J.P. Morgan and Barclays and strengthened its private-markets offering through its Valutico partnership.FactSet said its acquisition of BCC Group strengthens its real-time data distribution and entitlement-management capabilities.Productivity Measures Support MarginsFactSet ended fiscal 2026 with fewer employees and made another workforce reduction in September. Management said it is redirecting savings toward product development and growth initiatives.The company said fiscal 2026 operating margins represented a “floor” and expects profitability to improve in fiscal 2027, with adjusted operating margin expansion of 25 to 75 basis points as productivity initiatives and AI-driven efficiencies boost operating leverage.FactSet also expects high-single-digit earnings-per-share growth despite an estimated 2% headwind from higher taxes and incremental interest expense.For fiscal 2027, FactSet expects revenue of $2.60 billion to $2.625 billion, representing growth of about 5% to 6%. Organic ASV growth is expected at 5% to 6.5%.Strong Cash Flow, Shareholder ReturnsFactSet returned nearly $808 million to shareholders during fiscal 2026, including $644 million through share repurchases and $164 million in dividends.Free cash flow rose 14.6% year over year to $707.5 million.FDS Price Action: FactSet Research Systems shares were up 2.78% at $267.20 at the time of publication on Wednesday, according to Benzinga Pro data.Image via Shutterstock Read Also: Robinhood to Let Traders Buy Stocks on Weekends: 'The Market Never Sleeps'