FactSet Research Systems Inc. (FDS) - Q3 2026 Filing Summary
Business Context and Reporting Period
This summary covers the Form 10-Q for FactSet Research Systems Inc. for the quarterly period ended May 31, 2026 (Fiscal Q3 2026). FactSet is a global financial digital platform providing data, analytics, and AI-powered solutions to investment professionals. As of the reporting date, the company served over 9,100 clients and 247,000 users across three geographic segments: Americas, EMEA, and Asia Pacific.
Key Financial Metrics
| Metric | Q3 2026 (3 Months) | Q3 2025 (3 Months) | YTD 2026 (9 Months) | YTD 2025 (9 Months) |
|---|---|---|---|---|
| Revenues | $622.9 million | $585.5 million | $1,841.6 million | $1,724.8 million |
| Operating Income | $166.3 million | $194.2 million | $543.3 million | $571.0 million |
| Operating Margin | 26.7% | 33.2% | 29.5% | 33.1% |
| Net Income | $126.7 million | $148.5 million | $412.4 million | $443.4 million |
| Diluted EPS | $3.50 | $3.87 | $11.16 | $11.53 |
| Free Cash Flow (YTD) | $530.2 million (2026) vs $439.3 million (2025) | |||
| Cash & Equivalents | $288.1 million (as of May 31, 2026) | |||
| Total Debt | $1.39 billion (Principal) / $1.39 billion (Carrying Value) |
Material Changes vs. Prior Period
- Revenue Growth: Revenues increased 6.4% in Q3 and 6.8% YTD, driven by a 7.0% increase in organic revenues. Growth was broad-based across all segments, led by the Americas.
- Margin Compression: Operating margins declined significantly (26.7% vs 33.2% in Q3) due to higher operating expenses. Key drivers included increased employee compensation (restructuring charges, CEO compensation, and merit increases), higher technology costs (cloud hosting, AI token consumption), and increased amortization of intangible assets.
- Profitability: Net income decreased 14.7% in Q3 and 7.0% YTD. Diluted EPS declined 9.6% in Q3, partially offset by a reduction in share count due to buybacks.
- Balance Sheet: Total debt increased slightly due to the drawdown on the 2025 Revolving Facility. Cash and cash equivalents decreased by approximately $49.5 million compared to the prior fiscal year-end.
Guidance, Outlook, and Risks
- Organic ASV: Organic Annual Subscription Value (ASV) totaled $2,485.6 million, a 7.1% increase year-over-year, indicating strong recurring revenue growth despite margin pressure.
- Capital Allocation: The company returned $243.4 million to shareholders in Q3 via dividends and share repurchases. As of May 31, 2026, $494.0 million remained available under the share repurchase program. The quarterly dividend was increased 5% to $1.16 per share.
- Material Weakness in Internal Controls: Management concluded that disclosure controls and procedures were not effective as of May 31, 2026, due to a material weakness in IT general controls (specifically user management and change management). Remediation efforts are ongoing, with a target completion in fiscal 2026.
- Acquisitions: The company integrated LiquidityBook and Irwin, which contributed to organic growth and expanded capabilities in trading solutions and investor relations.
Investor Verification Checklist
- Remediation Timeline: Verify the progress and specific milestones for remediating the material weakness in IT general controls to ensure future financial reporting reliability.
- Expense Trajectory: Monitor the sustainability of operating expense growth, specifically regarding restructuring charges and CEO compensation, to assess if margins can recover in future quarters.
- AI and Cloud Costs: Review the specific impact of AI token consumption and cloud hosting costs on the Cost of Services to understand the long-term cost structure of the company's AI strategy.
- Debt Covenants: Confirm continued compliance with the 2025 Credit Agreement leverage ratio covenant (max 3.75:1), especially given the recent increase in debt drawdowns.
- Organic ASV vs. Revenue: Compare the 7.1% Organic ASV growth against the 6.4% revenue growth to ensure the subscription base is translating effectively into recognized revenue.