FactSet announced on September 30 that revenue for the fourth quarter of fiscal year 2026, ended August 31, rose 6.3% year over year to $634.7 million, while adjusted earnings per share increased 11.6% to $4.52, both exceeding market expectations.

The company also disclosed that the new annual subscription value generated by AI solutions in fiscal year 2026 more than doubled compared with the prior year, with new AI products contributing roughly one-tenth of the quarter's new subscription value in the fourth fiscal quarter.

AI Products Expand Client Purchases, Driving Greater Demand for Data Access

FactSet provides financial data, analytical tools and workflow software to investment institutions, banks and wealth management firms, and its annual subscription value (ASV) represents the expected revenue from existing subscription services over the next 12 months.

The company's new ASV from AI solutions in fiscal year 2026 more than doubled compared with the prior year. Chief Financial Officer Josh Warren further explained that subscription value directly attributable to new AI products accounted for slightly more than 10% of the $86 million in new organic ASV in the fourth fiscal quarter.

AI products are expanding the scope of FactSet's cooperation with financial institutions. Chief Executive Officer Sanoke Viswanathan said that just three months after the launch of AI for Banking, a large investment bank chose to adopt its full suite of banking intelligence agent products across its global operations, and the company has since signed more related orders.

Providing data to AI applications through the Model Context Protocol (MCP) has also become a new source of demand. By the end of the fiscal year, more than 650 clients had signed up for or were trialing related services, and call volume in the fourth fiscal quarter reached seven times that of the previous quarter.

FactSet also launched Portfolio Analysis MCP, connecting analytical functions into agent workflows.

Overall Subscription Scale Grows 7%, Renewal Terms Extended

As of August 31, FactSet's organic ASV reached $2.5682 billion, up 7% year over year, an increase of $168.2 million. The organic measure excludes the effects of acquisitions, divestitures and foreign exchange movements.

The company's annual ASV retention rate remained above 95%, and the average renewal contract term increased by about 30% in the fourth fiscal quarter. Management said the company is encouraging clients to shift from seat-based purchasing to more flexible enterprise agreements covering data, analytics and multiple workflow services.

Fourth-quarter revenue was $634.7 million, above the market expectation of $629.8 million; adjusted earnings per share were $4.52, above the expected $4.33. Full-year fiscal 2026 revenue was $2.4763 billion, up 6.7% year over year.

Higher Compensation and Technology Investment Pressure Margins

Alongside revenue growth, FactSet's fourth-quarter adjusted operating margin fell to 33% from 33.8% a year earlier.

The company mainly attributed the decline to higher incentive compensation tied to ASV performance and increased technology-related spending. Under U.S. generally accepted accounting principles, net income for the quarter fell 21.1% year over year to $121.1 million, with earnings per share declining to $3.41 from $4.03.

One-time restructuring costs and other expenses weighed on profit, while adjusted earnings per share were supported by revenue growth and a reduced number of shares outstanding. Warren disclosed that the company reduced its total headcount in the fourth fiscal quarter, marking the first decline after years of growth, and implemented further staff reductions in September.

The company said the adjustments are intended to simplify operations and free up funds for product development and client service.

New Fiscal Year Expected to Restore Margin Growth, Earnings Guidance Below Expectations

FactSet expects fiscal year 2027 revenue of $2.6 billion to $2.625 billion, with organic ASV growth of 5% to 6.5%; adjusted operating margin of 34.75% to 35.25%, an increase of 0.25 to 0.75 percentage points from 34.5% in fiscal year 2026.

Adjusted earnings per share guidance is $19.25 to $19.65, below the market expectation of $19.68. Warren said a higher assumed tax rate and increased interest expenses from debt refinancing are expected to drag down earnings per share growth by a combined roughly two percentage points.

Management also said clients are showing greater interest in AI services tied to usage and consumption, but given that clients' AI transformation is still at an early stage, the company's fiscal year 2027 guidance has not yet incorporated assumptions of further acceleration in this business.