FDS Q3 CY2025 Deep Dive: AI Investment Drives Product Momentum, Guidance Disappoints

Financial data provider FactSet (NYSE:FDS) reported revenue ahead of Wall Street’s expectations in Q3 CY2025, with sales up 6.2% year on year to $596.9 million. On the other hand, the company’s full-year revenue guidance of $2.44 billion at the midpoint came in 0.6% below analysts’ estimates. Its non-GAAP profit of $4.05 per share was 1.9% below analysts’ consensus estimates.

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StockStory’s Take

FactSet’s third quarter was met with a negative market reaction, reflecting investor disappointment in light of strong revenue growth but lower-than-expected non-GAAP earnings. Management pointed to broad-based demand for analytics and data solutions, especially in wealth and asset management, as key drivers of growth. CEO Sanoke Viswanathan described FactSet’s client relationships as “deeply embedded,” emphasizing the company’s expanding role in supporting complex workflows for both buy-side and wealth clients. The company credited recent wins and product enhancements, particularly those related to AI integration, for improving client retention and driving new business.

Looking ahead, FactSet’s guidance was shaped by ongoing investment in AI, data expansion, and enhanced workflow solutions, balanced by client caution and longer sales cycles. Management described a measured approach to margin guidance, citing higher technology spend and the need to maintain product leadership. CFO Helen Shan stated, “We are taking a conservative approach to our guidance to reflect the current environment of longer sales cycles and more rigorous client approval processes.” The company plans to prioritize productivity gains and disciplined investment, while expecting strategic initiatives in AI and workflow integration to drive future growth.

Key Insights from Management’s Remarks

Management attributed the quarter’s performance to AI-driven product momentum, client wins in wealth and asset management, and successful integration of recent acquisitions.

• AI-enabled product traction: New AI-powered features and tools were highlighted as major contributors to client renewals and competitive wins, with management noting that 60% of AI-related sales occurred in the quarter and that about 35% of renewals referenced GenAI capabilities as a deciding factor.
• Wealth segment expansion: FactSet reported strong momentum in wealth management, citing greater than 10% organic growth and several large deals that displaced incumbent providers. The company’s “land and expand” strategy led to higher adoption of data feeds and digital solutions among existing desktop clients.
• Integration of acquisitions: The integration of LiquidityBook for trading solutions and Irwin for investor relations workflows was credited for expanding FactSet’s reach and cross-sell opportunities. These moves supported growth, particularly among asset managers and corporate clients.
• Geographic and segment diversity: While the Americas saw accelerating growth, EMEA faced continued headwinds from midsize asset managers. Asia-Pacific experienced strong demand for AI-ready data and middle office solutions, offsetting pricing pressures through new client acquisition and solution expansion.
• Expense discipline amid growth: Despite increased technology and people-related expenses, management emphasized disciplined expense control, targeting productivity improvements in content collection, engineering, and client service through internal AI initiatives.

Drivers of Future Performance

FactSet’s outlook centers on further AI-driven product development, cautious spending by clients, and continued investment in technology and workflow integration.

• Sustained AI and workflow investment: Management expects ongoing investment in AI, real-time data, and workflow solutions to drive top-line growth, with new features and automation supporting both new sales and higher client retention across wealth and asset management.
• Margin pressures from higher costs: The company anticipates operating margin headwinds due to increased technology and content expenses, as well as targeted hiring in product and engineering teams. Management highlighted that about two-thirds of incremental spending will fund growth initiatives, while structural investments will focus on cybersecurity and infrastructure.
• Longer client sales cycles: Guidance reflects a more conservative stance, with management pointing to extended approval processes and rigorous client scrutiny as reasons for slower anticipated growth. Despite these headwinds, FactSet sees a strong pipeline and ongoing demand for integrated AI solutions.

Catalysts in Upcoming Quarters

In the coming quarters, the StockStory team will closely monitor (1) the pace of adoption for FactSet’s new AI-powered features and workflow solutions, (2) the company’s ability to maintain margin discipline amid elevated technology and hiring costs, and (3) client retention and expansion in wealth management and asset management, especially as longer sales cycles persist. Execution on cross-segment integration and new product launches will also be key markers of progress.

FactSet currently trades at $291.65, down from $335.80 just before the earnings. In the wake of this quarter, is it a buy or sell? Find out in our full research report (it’s free).

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