"We are off to a good start in fiscal 2025 with solid operating performance, growing organic ASV 4.5% year over year, delivering an adjusted operating margin of 37.6%, and achieving adjusted diluted EPS of $4.37." - Phil Snow
FactSet Research Systems Inc (FDS) Q1 FY2025 Earnings Analysis: Organic ASV Growth, Gen AI monetization, and Back-half Acceleration
Executive Summary
FactSet delivered a solid start to fiscal 2025 with resilient demand for its data and analytics platform and continued investment in Gen AI capabilities. The quarter showcased 4.7% organic revenue growth and 4.5% organic ASV growth (4.5% in Q1 on a seasonally weak quarter), underscored by a strong gross margin of 54.5% and an adjusted operating margin of 37.6%. GAAP revenue rose 4.9% YoY to $569 million, while net income reached $150.0 million and diluted EPS $3.89 (GAAP) / $4.37 (adjusted). The company maintained a disciplined capital program, repurchasing shares and reaffirming full-year guidance, with a clear emphasis on a second-half weighted growth profile as large opportunities progress toward closure.
Key strategic dynamics emerged in the quarter: (1) AI-enabled product momentum, including Pitch Creator and Mercury-based platform enhancements, with management signaling 30-50 basis points of annual revenue growth from Gen AI monetization; (2) a diversified, expanding client base (8,250 clients; 218,000+ wealth users) and robust retention (ASV >95%, client retention 91%), indicating steady demand and stickiness across wealth, asset management, and corporate workflows; (3) strategic growth initiatives via partnerships and acquisitions (ON acquisition to expand IR workflows; JPMorgan partnership to address total cost of ownership through a fused data management approach); (4) reaffirmed guidance, with growth expected to be more pronounced in the second half of the year as large deals close and budgets stabilize.
From a risk/return perspective, FactSet appears positioned to capitalize on secular demand for integrated data, analytics, and AI-assisted workflows, while maintaining balance-sheet strength and prudent capital allocation. However, near-term macro uncertainty and continued AI investment intensity pose potential margin headwinds if top-line acceleration remains slower than modeled. Investors should monitor ASV trajectory into H2, the pace of Gen AI monetization, and the evolution of large enterprise wins that drive the back-half acceleration thesis.
Key Performance Indicators
Revenue
568.67M
QoQ: 1.15% | YoY:4.88%
Gross Profit
309.89M
54.49% margin
QoQ: 1.94% | YoY:6.64%
Operating Income
191.34M
QoQ: 49.65% | YoY:1.21%
Net Income
150.02M
QoQ: 67.63% | YoY:0.99%
EPS
3.95
QoQ: 70.26% | YoY:1.02%
Revenue Trend
Margin Analysis
Key Insights
Revenue: $568.667 million GAAP; YoY growth 4.9%; Organic revenue: $568.0 million, up 4.7% YoY (FX and acquisitions excluded).
EBITDA: $237.428 million; EBITDA margin 41.75% (EBITDA ratio 0.4175).
Net income: $150.022 million; net income margin 26.38%.
Financial Highlights
Key quarterly metrics and drivers:
- Revenue: $568.667 million GAAP; YoY growth 4.9%; Organic revenue: $568.0 million, up 4.7% YoY (FX and acquisitions excluded).
- Gross profit: $309.888 million; gross margin 54.49% (0.5450).
- Operating income: $191.335 million; GAAP operating margin 33.6%; Adjusted operating margin 37.6% (flat YoY).
- EBITDA: $237.428 million; EBITDA margin 41.75% (EBITDA ratio 0.4175).
- Net income: $150.022 million; net income margin 26.38%.
- Diluted EPS: GAAP $3.89; adjusted EPS $4.37 (YoY delta: adjusted EPS up 6.1%, per call).
- Cash flow: Operating cash flow $86.372 million; capex $25.874 million; free cash flow $60.498 million; FCF margin ~10.6% of revenue.
- Balance sheet snapshot: cash and cash equivalents $289.168 million; total assets $4,048.585 million; total liabilities $2,057.024 million; total stockholders’ equity $1,991.561 million. Total debt $1,551.909 million; net debt $1,262.741 million; debt-to-capitalization ratio ~0.438; current ratio 1.395.
- Cash flow and capital allocation: net cash provided by operating activities $86.372 million; net change in cash year over year is negative due to acquisitions and investments; share repurchases of ~$49 million (104k+ shares) and quarterly dividend of $1.04 per share; target to repay term loan in full by end of Q2.
- Customer and product momentum: ASV retention >95%; client retention 91%; client base ~8,250; wealth user base >218,000; geographies: Americas +5%, EMEA +4%, APAC +7% organic revenue growth. Four-quarter organic ASV shows resilience despite a low-season quarter.
- Guidance and monetization: management reaffirmed fiscal 2025 guidance; expects second-half weighted ASV growth; Gen AI monetization expected to contribute 30-50 bps of growth in FY2025; pricing remains CPI + 3% with flat realized pricing and higher volume opportunities.
Income Statement
Metric
Value
YoY Change
QoQ Change
Revenue
568.67M
4.88%
1.15%
Gross Profit
309.89M
6.64%
1.94%
Operating Income
191.34M
1.21%
49.65%
Net Income
150.02M
0.99%
67.63%
EPS
3.95
1.02%
70.26%
Key Financial Ratios
currentRatio
1.4
grossProfitMargin
54.5%
operatingProfitMargin
33.6%
netProfitMargin
26.4%
returnOnAssets
3.71%
returnOnEquity
7.53%
debtEquityRatio
0.78
operatingCashFlowPerShare
$2.27
freeCashFlowPerShare
$1.59
dividendPayoutRatio
26.2%
priceToBookRatio
9.36
priceEarningsRatio
31.08
Net Income vs. Revenue
Expense Breakdown
Management Commentary
Key call themes and quotes:
- Strategy and growth trajectory: Phil Snow emphasized momentum and guidance, noting: “We are off to a good start in fiscal 2025 with solid operating performance, growing organic ASV 4.5% year over year, delivering an adjusted operating margin of 37.6%, and achieving adjusted diluted EPS of $4.37.” He also reiterated: “ASV growth in fiscal 2025 will be second-half weighted.” These statements anchor the back-half acceleration thesis and the monetization potential of Gen AI.
- AI and product innovation: Management highlighted Gen AI initiatives (Pitch Creator, intelligent platform with Mercury) as catalysts for renewal and new deals, with a seven-figure performance solutions win underscoring the enterprise value of the combined data, analytics, and managed-services approach. The leadership cited JPMorgan partnership as a core example of expanding total cost of ownership advantages and integration across platforms.
- Market dynamics and pipeline: The execs described a healthy pipeline with continued demand in wealth, hedge funds, asset owners, and corporate workflows, and acknowledged a more cautious budget environment but with “green shoots” visible in banking, hedge funds, and PEVC displacements. They emphasized improved trials, RFP activity, and a growing willingness to invest in technology and AI-enabled workflows.
- Margin and capital allocation: Helen Shan noted that GAAP operating margin declined ~120 bps versus prior year due to one-time items, while adjusted margin remained flat at 37.6%. Commentary on capex and AI-related infrastructure spending suggested an ongoing investment cycle that could pressure near-term margins but support longer-term growth. The company reaffirmed its capital-return framework with buybacks and dividends and signaled a path to reducing leverage toward investment-grade targets.
We are off to a good start in fiscal 2025 with solid operating performance, growing organic ASV 4.5% year over year, delivering an adjusted operating margin of 37.6%, and achieving adjusted diluted EPS of $4.37.
— Phil Snow
ASV growth in fiscal 2025 will be second-half weighted.
— Phil Snow
Forward Guidance
Forward-looking assessment based on management commentary:
- Revenue and ASV: The firm reaffirmed fiscal 2025 guidance, with ASV growth expected to be second-half weighted after a seasonally soft Q1. The company anticipates continued strength in wealth and asset management, with momentum in private equity/VC and hedge funds. The pipeline remains robust, supported by new Gen AI products and enterprise solutions.
- Gen AI monetization: Management expects 30-50 basis points of annual revenue growth from Gen AI monetization in FY2025, with more scale anticipated in Q2–Q4 as pilots convert to recurring revenue. Investors should monitor the contribution trajectory from Pitch Creator, conversational AI via Mercury, and data-product monetization tied to Gen AI use cases.
- Margin trajectory: Near-term margin dynamics reflect elevated AI-related tech spend and acquisitions; however, the company expects H2 to close the gap as benefits from higher volume, pricing discipline, and productivity gains accrue. Expect H1 margins to be closer to the midpoint of the guided range; technology and cloud-related expenses are anticipated to rise as infrastructure investments scale.
- Financial health and capital allocation: The balance sheet remains strong with room for additional leverage if needed, but management intends to repay the term loan by end of Q2 2025 and maintain investment-grade metrics. The buyback cadence and dividend support cash returns to shareholders even as AI investments continue to weigh on near-term profitability. Monitor working capital timing and any further M&A activity to fill product gaps or accelerate AI capabilities.
Competitive Position
Company
Gross Margin
Operating Margin
Return on Equity
P/E Ratio
FDS Focus
54.49%
33.60%
7.53%
31.08%
DNB
60.70%
6.09%
-0.48%
-61.29%
MCO
74.50%
44.00%
16.90%
33.53%
MSCI
81.70%
50.60%
-30.10%
38.03%
ICE
55.10%
37.80%
2.85%
31.06%
Gross Profit Margin
Operating Profit Margin
Return on Equity
P/E Ratio Comparison
Investment Outlook
FactSet remains well-positioned to capitalize on the secular shift toward integrated data analytics and AI-assisted workflows in financial services. The Q1 results demonstrate solid top-line growth, high gross margins, and strong retention, supported by a healthy pipeline and a broad product roadmap. The company’s back-half growth thesis hinges on large deals closing, continued monetization of Gen AI capabilities, and successful expansion of managed services across segments. While near-term margin headwinds from AI investments and ongoing tech spend exist, the guided second-half weighting and explicit 30–50 bps Gen AI contribution provide a credible path to mid-teens earnings growth in the back half of FY2025, assuming no material macro deterioration. Key catalysts include the JPMorgan partnership, the ON acquisition’s contribution to corporate workflows, and the adoption of Pitch Creator and Mercury across client segments. Investors should monitor: (1) the cadence of ASV growth in H2, (2) realized pricing versus CPI + 3% guidance, (3) evolution of the managed services attach rates, and (4) the pace of M&A activity that fills product gaps and accelerates AI capabilities.
Key Investment Factors
Growth Potential
Significant growth potential from Gen AI monetization across wealth, buy side, and corporate workflows; continued penetration in PEVC, hedge funds, and outsourcing/managed services; expansion through partnerships (e.g., JPMorgan) and strategic acquisitions (e.g., ON). Management targets back-half weighted ASV growth with a robust pipeline and six to eight-figure opportunities per quarter in the near term.
Profitability Risk
Macroeconomic uncertainty and client budgeting discipline could compress near-term growth. AI investments pressure near-term margins, though monetization and productivity gains should offset over time. Dependence on large, multi-year deployments may cause earnings cadence to be lumpy. Competitive pressure and potential pricing normalization could affect realized pricing in renewals and new business.
Financial Position
Strong balance sheet with cash of $289.2m, total assets $4.05b, and total stockholders’ equity ~$1.99b. Total debt ~$1.55b; net debt ~$1.26b; debt-to-capitalization ~0.438; current ratio 1.395. Cash flow generation remains solid with operating cash flow of $86.4m and free cash flow of $60.5m in the quarter. The company remains capable of funding AI investments while returning capital to shareholders via buybacks and dividends.
SWOT Analysis
Strengths
Industry-leading financial data and analytics platform with broad coverage across wealth, asset management, and corporate finance.
High client and ASV retention (ASV >95%, client retention 91%) signals strong stickiness and recurring revenue base.
Robust organic growth in Q1 2025 (ASV +4.5%; revenue +4.7–4.9%), diversified by geography and firm type.
Strategic AI capabilities (Mercury, Pitch Creator) and platform-level AI integration enable productivity gains and differentiated workflows.
Solid balance sheet with ample liquidity and a disciplined capital allocation framework (dividends, buybacks, and targeted M&A).
Weaknesses
Near-term margin pressure from ongoing AI investments and accelerated tech spend; GAAP margin declined ~120 bps YoY.
Dependence on large, multi-quarter deals which can introduce cadence risk and variability in short windows.
Geographic and segment mix may expose the business to regional macro shifts (e.g., banking and sell-side cycles).
Opportunities
Monetization of Gen AI capabilities could deliver 30-50 bps annual revenue uplift (plus upside from higher adoption).
Managed services and outsourced solutions expanding in buy side and corporate workflows; potential large wins (e.g., outsourced CIO) and continued displacements of incumbents.
Strategic partnerships (e.g., JPMorgan) and acquisitions (ON) to broaden workflow integration and IR solutions.
Product expansion in wealth, PEVC, hedge funds, and asset managers with scalable, platform-enabled AI tools.
Threats
Macroeconomic headwinds and budgetary discipline may limit discretionary spend and delay large deals.
Competitive intensity and potential pricing pressure could affect new bookings and renewals.
Execution risk around integrating Gen AI capabilities into monetizable offerings and scaling usage across clients.
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