"In the second quarter, we grew organic ASV 4.1% year-over-year, delivering adjusted operating margin of 37.3% and adjusted diluted EPS of $4.28." - Philip Snow (CEO)
FactSet Research Systems Inc (FDS) QQ2 2025 Results Analysis: Gen AI Leadership, 4.1% Organic ASV Growth, and a Reaffirmed 5% Midpoint Guiding a Path to Margin Resilience
Executive Summary
FactSet delivered a resilient QQ2 2025 performance characterized by core growth across multiple firm types and geographies, underpinned by ongoing investments in Generative AI (Gen AI) and data-centric solutions. Organic ASV (annualized subscription value) rose 4.1% year-over-year to support a GAAP revenue of $571 million and adjusted EPS of $4.28, with an adjusted operating margin of 37.3%. Management reaffirmed the 5% midpoint of organic ASV growth for the back-half of fiscal 2025 and narrowed the ASV growth guidance to a range roughly 4.4%â5.8% (top- and bottom-end adjustments of $10 million to $130 million). The quarter featured several strategic wins and product expansions, notably UBSâs wealth-management deal, and rapid progression of Gen AI products (Pitch Creator, Conversational API, and Portfolio Commentary), complemented by recent acquisitions Irwin and LiquidityBook that are driving cross-sell opportunities and shorter sales cycles. Net income amounted to $144.9 million, and free cash flow was $150.2 million, underscoring FactSetâs ability to translate pipeline momentum into cash generation while maintaining investment in its growth agenda. However, the company acknowledged FX price-inflation headwinds tied to CPI dynamics, ongoing integration costs from acquisitions, and a cautious macro backdrop that could introduce near-term variability in banking-related renewals. Overall, FactSetâs blend of market-leading data quality, enterprise-scale workflow solutions, and AI-enabled product suite positions it to sustain a mid-to-high single-digit revenue growth trajectory and expanding margin profile over the next 12â24 months.
Key Performance Indicators
Revenue
570.66M
QoQ: 0.35% | YoY:4.53%
Gross Profit
301.06M
52.76% margin
QoQ: -2.85% | YoY:3.53%
Operating Income
185.49M
QoQ: -3.05% | YoY:-3.77%
Net Income
144.86M
QoQ: -3.44% | YoY:2.78%
EPS
3.81
QoQ: -3.54% | YoY:2.97%
Revenue Trend
Margin Analysis
Key Insights
Revenue: $570.7m; GAAP revenue growth +4.5% YoY; Organic revenue growth +4.0% YoY to $568m. - Gross margin: 52.8%; Gross profit $301.1m; - Operating performance: GAAP operating margin 32.5%; Adjusted operating margin 37.3%; EBITDA $232.2m; - Net income and earnings: Net income $144.86m; GAAP EPS $3.76; Adjusted EPS $4.28. - Cash flow: Operating cash flow $173.96m; Free cash flow $150.22m; Capex $23.74m; - Balance sheet: Cash and equivalents $278.55m; Total assets $4.241B; Net debt $1.385B; Leverage ~1.7x. - Customer and mix: Client base >8,600; users >219,000; Americas ASV +4%, EMEA +3%, APAC +7%; Wealth-led growth remains a key driver.
Financial Highlights
Overview of QQ2 2025 performance and core metrics. - Revenue: $570.7m; GAAP revenue growth +4.5% YoY; Organic revenue growth +4.0% YoY to $568m. - Gross margin: 52.8%; Gross profit $301.1m; - Operating performance: GAAP operating margin 32.5%; Adjusted operating margin 37.3%; EBITDA $232.2m; - Net income and earnings: Net income $144.86m; GAAP EPS $3.76; Adjusted EPS $4.28. - Cash flow: Operating cash flow $173.96m; Free cash flow $150.22m; Capex $23.74m; - Balance sheet: Cash and equivalents $278.55m; Total assets $4.241B; Net debt $1.385B; Leverage ~1.7x. - Customer and mix: Client base >8,600; users >219,000; Americas ASV +4%, EMEA +3%, APAC +7%; Wealth-led growth remains a key driver.
Income Statement
Metric
Value
YoY Change
QoQ Change
Revenue
570.66M
4.53%
0.35%
Gross Profit
301.06M
3.53%
-2.85%
Operating Income
185.49M
-3.77%
-3.05%
Net Income
144.86M
2.78%
-3.44%
EPS
3.81
2.97%
-3.54%
Key Financial Ratios
currentRatio
1.47
grossProfitMargin
52.8%
operatingProfitMargin
32.5%
netProfitMargin
25.4%
returnOnAssets
3.42%
returnOnEquity
7.04%
debtEquityRatio
0.81
operatingCashFlowPerShare
$4.58
freeCashFlowPerShare
$3.95
dividendPayoutRatio
27.3%
priceToBookRatio
8.53
priceEarningsRatio
30.29
Net Income vs. Revenue
Expense Breakdown
Management Commentary
Key insights from management call (themes and quotes): - Strategy and AI momentum: Phil Snow highlighted the monetization path for Gen AI products with six SKUs sold to date, including Pitch Creator, and noted expectation to monetize more meaningfully in Q3âQ4. He stated: âweâve got six SKUs now that weâve sold and are out there... on the cusp of monetizing that more seriously as we get into Q3 and Q4.â - Banking and wealth ecosystem: UBSâs selection of FactSet to power advisor desktops and client-facing portal underscores the enterprise-strength of FactSetâs Wealth solution and its cross-sell potential. Snow emphasized that FactSet is âthe primary market data partner to half of the world's Top 20 wealth management firms.â - Pipeline and confidence in H2: Yet He and Helen Shan articulated improved visibility into the remainder of the year and reiterated the 5% midpoint organic ASV guidance with a narrowed range, reflecting a robust, differentiated pipeline across Wealth, PEVC, and Banking adjacencies. - Cost management and investments: Helen Shan detailed continued investments in technology (cloud, AI-related amortization) and the expectation of higher second-half spend for Gen AI and infrastructure, balanced by cost discipline and vendor renegotiations. - M&A and cross-sell dynamics: The LiquidityBook acquisition is positioned to accelerate cross-sell opportunities and strengthen front-office workflow integration, with management signaling immediate accretion to growth.
In the second quarter, we grew organic ASV 4.1% year-over-year, delivering adjusted operating margin of 37.3% and adjusted diluted EPS of $4.28.
â Philip Snow (CEO)
Pitch Creator midway through the quarter and already have a robust pipeline with more than 50 opportunities, almost two dozen of our largest banking clients actively trialing a product.
â Philip Snow (CEO)
Forward Guidance
Outlook and assessment of achievability: - Organic ASV growth: 5% midpoint maintained, with a narrowed range of approximately 4.4% to 5.8% (ASV growth range adjusted by about $10 million to $130 million). This implies a prospective annualized growth trajectory supported by a stronger pipeline and higher enterprise penetration in wealth and buy-side workflows. - Revenue and margins: Revenue guidance raised to $2.305Bâ$2.325B (roughly $20M above prior guidance). Adjusted operating margin targeted at 36%â37% for the year; GAAP operating margin projected at 32%â33%; Adjusted EPS of $16.80â$17.40. - Profitability and expense mix: The company expects higher second-half expenses from planned Gen AI and infrastructure investments but will offset through expense rationalization and productivity gains. - Tax: Effective tax rate guidance maintained at 17%â18%. - Key growth levers: Continued cross-sell across Irwin, LiquidityBook, LogoIntern; expansion in Wealth, PEVC and banking plugins; Gen AI products (Pitch Creator, Conversational API) with monetization potential of 30â50 bps in new revenue this year. - Risks and monitoring: Macro volatility and CPI-driven price realization could press ASV if CPI dynamics worsen; banking cycle renewals remain a potential swing factor; FX headwinds could affect international pricing; execution risk around integration of acquisitions and realization of pipeline. Key monitoring metrics for investors: pipeline maturity (large seven-figure deals vs. mid-market), conversion of trials to multi-year contracts, retention trends by firm type, and the realized contribution from Gen AI SKUs.
Competitive Position
Company
Gross Margin
Operating Margin
Return on Equity
P/E Ratio
FDS Focus
52.76%
32.50%
7.04%
30.29%
DNB
37.30%
9.79%
-0.49%
-60.29%
MCO
68.10%
43.50%
14.60%
34.80%
MSCI
75.50%
54.40%
-36.30%
35.52%
ICE
70.10%
39.10%
2.37%
31.04%
Gross Profit Margin
Operating Profit Margin
Return on Equity
P/E Ratio Comparison
Investment Outlook
FactSetâs QQ2 2025 results depict a stable, multi-faceted growth story anchored by a high-quality data platform, diversified revenue streams, and a rapidly expanding Gen AI product suite. The companyâs 4.1% organic ASV growth, strong gross and operating margins, and robust cash flow generation create a solid foundation for investors. The reaffirmed 5% organic ASV growth midpoint, coupled with a narrowed guidance range and elevated pipeline, indicates managementâs confidence in executing in the second half of fiscal 2025. The UBS wealth win and the ramp in Pitch Creator and related AI offerings should support higher cross-sell opportunities across wealth, corporate, and buy-side segments, while acquisitions (Irwin, LiquidityBook, LogoIntern) expand the addressable market and shorten sales cycles through integrated workflows. On the downside, macro sensitivity, CPI-driven price dynamics, and the integration costs of recent acquisitions present near-term risks to margin and earnings progression. Overall, the investment thesis remains constructive: FactSet is transitioning toward a more AI-enabled, enterprise-wide data and analytics platform with a clear path to mid-to-high single-digit revenue growth, expanding margins, and meaningful cash returns. For risk-aware investors, the stock warrants a modestly constructive stance given continued execution in AI monetization, cross-sell expansion, and disciplined capital allocation, with monitoring focused on pipeline progression, renewal stability, and the realized benefits from Gen AI and data solutions across all regions.
Key Investment Factors
Growth Potential
Substantial growth runway from Gen AI product monetization (Pitch Creator, Conversational API, Portfolio Commentary) and cross-sell opportunities from Irwin and LiquidityBook. Wealth and PEVC workflows show sustained, expanding addressable markets; Asia-Pacific and Europe remain meaningful expansion opportunities with potential to replicate US/Canada success.
Profitability Risk
Near-term macro sensitivity (banking/asset management cycles), CPI-driven price realization pressure, and integration risk from recent acquisitions. Competitive intensity from established data providers and potential pricing pressure in enterprise deals. FX headwinds could temper international pricing and ASV growth realization.
Financial Position
Solid liquidity and cash generation with operating cash flow of $173.96m and free cash flow of $150.22m; cash at period-end $291.59m; total debt $1.663B with net debt $1.385B and gross leverage around 1.7x. Acquisitions funded via revolver draw; term loan paid off for CGS; ongoing buyback program ($64.0m repurchased in the quarter). The balance sheet supports continued share repurchase and strategic acquisitions while maintaining investment-grade credit metrics.
SWOT Analysis
Strengths
Large, diverse client base (>8,600) and expanding user base (>219,000) supports recurring revenue and cross-sell opportunities.
Leading banking product with strong data/content quality and deep industry verticals (wealth, PEVC, hedge funds) enhancing stickiness.
Significant strategic wins (e.g., UBS wealth deal) and global diversification across Americas, EMEA, APAC.
Robust data and analytics capabilities with proprietary data and high-quality feeds; accelerated monetization via Gen AI products (Pitch Creator, Conversational API).
Acquisitions (Irwin, LiquidityBook, LogoIntern) enabling cross-sell and lifecycle workflow integration; improved renewal management and multi-year contracts in banking.
Weaknesses
Near-term margin dilution from acquisitions (GM/SG&A mix, higher tech spend) and integration costs.
Revenue sensitivity to CPI-driven price increases and potential international pricing pressure.
Banking sector renewals remain a swing factor in the second half; macro uncertainty could affect deal timing.
opportunities':['Strong pipeline in Wealth, PEVC and banking; potential to expand in Switzerland, UK and Asia-Pacific regions; expanding use of FactSet in wealth home offices and adjacent workflows.','Expansion of data solutions and Data Management Services; monetization of Portfolio Commentary and API/AI offerings across enterprise clients.','Cross-sell opportunities from Irwin and LiquidityBook across hedge funds and buy-side clients; bi-directional cross-sell with Cobalt and other assets.'],
threats':['Macro headwinds, policy/regulatory changes, and continued volatility in capital markets could affect renewal rates and deal cycles.','Competition from other large data providers (e.g., SPGI, Bloomberg) and potential pricing pressure in enterprise deals.','Execution risk related to integrating recent acquisitions and maintaining product leadership in AI-enabled solutions.']},
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