0001628280-26-000223
SEC filingRevenue growth of 6.9% drove net income; operating margin contracted on higher amortization, compensation, and tech costs.
In the first quarter of fiscal 2026, FactSet Research Systems Inc. reported total revenues of $607.6 million, a 6.9% increase from $568.7 million in the prior-year period. The growth was composed of 6.0% organic revenue growth, a 0.7% contribution from acquisitions (net of a disposition at the end of fiscal 2025), and a 0.2% net favorable impact from foreign currency fluctuations. Revenue growth was broad-based across segments and product lines, led by workstations, portfolio management and trading solutions, and data solutions.
Cost of services rose 11.3% to $287.9 million, while selling, general and administrative expenses increased 7.7% to $127.6 million. Operating income grew marginally by 0.4% to $192.1 million, resulting in an operating margin of 31.6%, down 200 basis points from 33.6% in the prior year. The margin compression was driven by higher amortization of intangible assets (100 bps increase as a percentage of revenue), employee compensation costs (110 bps increase in SG&A as a percentage of revenue), and technology-related expenses (80 bps increase in cost of services as a percentage of revenue). These were partially offset by revenue growth.
Net income increased 1.7% to $152.6 million, and diluted EPS rose 4.4% to $4.06, benefiting from a 2.3% reduction in diluted weighted-average shares outstanding (37.6 million versus 38.5 million) due to share repurchases. Free cash flow improved significantly to $90.4 million from $60.5 million, reflecting higher operating cash flow driven by net income growth and working capital management.
All three geographic segments posted revenue growth. The Americas, FactSet’s largest segment, grew revenues 7.9% to $396.2 million (65.2% of total), driven by organic growth of 6.5% and an additional 1.4% from acquisitions. However, segment operating income declined 4.0% to $78.5 million, reflecting higher employee compensation costs, amortization, and technology expenditures. EMEA revenues increased 4.0% to $149.5 million (24.6% of total), primarily from data solutions, though the gain was partially offset by the prior-year disposition of a business. EMEA operating income slipped 1.3% to $68.2 million, as higher compensation costs outpaced revenue growth. Asia Pacific posted the strongest operating income growth at 12.1% to $45.4 million, supported by 7.3% revenue growth from data solutions and workstations, partially offset by increased employee costs from a 206-person headcount increase.
Organic ASV, a forward-looking measure of subscription revenue, rose 5.9% year-over-year to $2.39 billion, with all segments contributing. The Americas led with 6.4% organic ASV growth, followed by Asia Pacific at 8.4% and EMEA at 3.7%. The company also reported client count of 9,003 and user count of 239,863, up 9.1% and 9.9% respectively, with annual ASV retention exceeding 95%.
The MD&A does not provide explicit quantitative guidance for future periods. However, management's strategic priorities are clearly articulated: expanding data offerings and delivery capabilities (including cloud and API-based solutions), embedding deeper into client workflows (especially buy-side front office and advisor desktops), and innovating with AI to enhance productivity and automation. The company continues to invest in its centers of excellence, with 68% of its 12,886 employees located in COEs, primarily in India. Capital expenditures increased 19.2% to $30.8 million in the quarter, driven by internal-use software development. The company maintains strong liquidity with $275.4 million in cash and equivalents and $1.0 billion available under its revolver. Returning value to shareholders remains a priority, with $181.3 million returned via buybacks and dividends in the quarter, and an additional $600 million in share repurchase authority approved in December 2025.
As of November 30, 2025, FactSet held $275.4M in cash and $17.2M in investments, against total debt of $1,368.7M (net carrying value). Shareholders' equity stood at $2,167.9M. Deferred revenue, a key indicator of subscription revenue backlog, was $162.6M. No inventory is reported.
Purchase commitments with suppliers and vendors totaled approximately $352M as of August 31, 2025, primarily for hosting services, data acquisition, and third-party software. No new material commitments were added in Q1 fiscal 2026. Standby letters of credit were $0.7M.
FactSet reports three segments: Americas, EMEA, and Asia Pacific. For Q1 fiscal 2026:
Operating cash flow of $121.3M exceeded net income of $152.6M by a factor of 0.8, reflecting significant non-cash charges (depreciation/amortization $44.1M, stock-based comp $18.5M) offset by working capital outflows, particularly a $70.3M decrease in accrued compensation and a $5.8M decline in deferred revenues. Capex of $30.8M consumed 25% of CFO, up from 30% in the prior year, indicating moderate capital intensity. Free cash flow (CFO minus capex) was $90.4M, covering dividend payments of $41.4M and share repurchases of $139.9M combined ($181.3M) by only 50%. The large share repurchase program was financed partly by debt issuance proceeds ($55M) in the prior period; in the current period, a $139.9M outflow reduced treasury stock. Working capital swings were notable: accounts receivable increased $19.2M (slowing collections), prepaid expenses grew $23.1M, while accounts payable provided $22.2M of cash. Deferred income taxes added $3.0M vs. $21.9M last year, reflecting lower tax deferrals. Overall, cash generation remains solid but capital returns are outstripping organic cash flow, requiring reliance on balance sheet resources.