FactSet Research Systems Inc. - 10-Q Summary (Q2 FY2026)
Business Context and Reporting Period
This report covers the quarterly period ended February 28, 2026 (Q2 of Fiscal Year 2026). FactSet is a global financial digital platform providing data, analytics, and AI-powered solutions to investment professionals. As of the period end, the company served over 9,100 clients and 241,000 users across three geographic segments: Americas, EMEA, and Asia Pacific.
Key Financial Metrics
| Metric | Q2 2026 | Q2 2025 | YTD 6 Months 2026 | YTD 6 Months 2025 |
|---|---|---|---|---|
| Revenues | $611.0 million | $570.7 million | $1,218.6 million | $1,139.3 million |
| Operating Income | $185.0 million | $185.5 million | $377.0 million | $376.8 million |
| Net Income | $133.1 million | $144.9 million | $285.6 million | $294.9 million |
| Diluted EPS | $3.59 | $3.76 | $7.65 | $7.66 |
| Operating Margin | 30.3% | 32.5% | 30.9% | 33.1% |
| Free Cash Flow (6mo) | $276.1 million | |||
| Cash & Equivalents | $268.3 million (as of Feb 28, 2026) | |||
| Long-Term Debt | $1.37 billion (as of Feb 28, 2026) |
Material Changes vs. Prior Period
- Revenue Growth: Q2 revenue increased 7.1% year-over-year, driven by a 6.8% increase in organic revenue. Growth was observed across all segments, led by the Americas.
- Profitability Pressure: Operating margin declined to 30.3% from 32.5% in the prior year. This was primarily due to higher employee compensation costs (including merit increases and CEO awards), increased technology/cloud hosting expenses, and higher amortization of intangible assets.
- Net Income Decline: Net income decreased 8.1% to $133.1 million. This was driven by higher operating expenses and an impairment charge within "Other assets," partially offset by revenue growth and a lower share count.
- Capital Allocation: The company returned $204.0 million to shareholders in Q2 via share repurchases ($163.0 million) and dividends ($40.3 million). Over the six-month period, $385.3 million was returned.
Guidance, Outlook, and Risks
- Organic ASV: Organic Annual Subscription Value (ASV) totaled $2,449.1 million, representing a 6.7% increase year-over-year, indicating strong recurring revenue growth.
- Material Weakness in Internal Controls: Management concluded that disclosure controls and procedures were not effective as of February 28, 2026, due to a material weakness in IT general controls (specifically regarding program change management and user access). Remediation efforts are ongoing with the assistance of a third-party advisory firm.
- Regulatory & Tax: The company noted the impact of the "One Big Beautiful Bill Act" signed in July 2025, though it did not materially impact the current period. The effective tax rate increased to 17.4% (Q2) and 18.7% (YTD) compared to the prior year, largely due to executive compensation deductibility limitations and stock-based compensation tax shortfalls.
- Acquisitions: The company finalized purchase accounting for the LiquidityBook acquisition ($243.2 million) and Irwin acquisition ($120.2 million), which contributed to revenue growth.
Investor Verification Checklist
- Remediation Timeline: Verify the specific timeline and progress reports regarding the remediation of the material weakness in IT general controls.
- Compensation Trends: Monitor the trajectory of employee compensation costs and cloud hosting expenses to assess if margin compression is a temporary or structural issue.
- Share Repurchase Capacity: Confirm the remaining authorization under the share repurchase program ($697.1 million as of Feb 28, 2026) and future buyback cadence.
- Organic Growth Sustainability: Track the 6.7% Organic ASV growth rate to ensure it aligns with long-term strategic goals amidst competitive AI market dynamics.
- Debt Covenants: Review compliance with the 2025 Credit Agreement leverage ratio covenants (max 3.75:1.00), though the company reported compliance as of the period end.