Fair Isaac Corporation (FICO): A Bull Case Theory

We came across a bullish thesis on Fair Isaac Corporation on Darius Dark Investing’s Substack. In this article, we will summarize the bulls’ thesis on FICO. Fair Isaac Corporation's share was trading at $1,555.21 as of September 15th. FICO’s trailing and forward P/E were 60.41 and 42.92 respectively, according to Yahoo Finance.

Fair Isaac Corporation (FICO) has long been the silent engine of the U.S. credit system, with its FICO score serving as the benchmark for lending decisions across nearly every major financial institution. The company generates over 60% of its revenue from its Scores segment, particularly the B2B business where lenders pay for access to its indispensable credit risk models, while its Software segment provides analytics and decision-management platforms with growing recurring revenue.

FICO’s dominance is reinforced by powerful network effects, enormous switching costs, and regulatory inertia, particularly in the conforming mortgage market, creating a near-insurmountable moat. However, this very dominance has drawn regulatory and political scrutiny, with antitrust lawsuits and criticism of alleged price exploitation challenging its long-held monopoly.

Simultaneously, FICO faces emerging competitive pressure from VantageScore, a credit scoring alternative developed by the three major bureaus. VantageScore’s approval by the Federal Housing Finance Agency for use in conforming mortgages has cracked open FICO’s previously protected territory. Despite this, FICO has responded aggressively with FICO Score 10 T, a trended-data model that provides lenders with a more nuanced view of consumer risk. The product has rapidly gained adoption, covering over $313 billion in annualized mortgage originations, serving both as a competitive tool and a regulatory hedge by demonstrating superior predictive performance.

Financially, FICO remains exceptionally strong. Third-quarter 2025 revenue rose 20% year-over-year to $536.4 million, with GAAP EPS up 47% and non-GAAP EPS up 37%, led by a 42% surge in B2B Scores revenue. While the company navigates regulatory, legal, and competitive pressures, its entrenched position, pricing power, and innovation pipeline continue to generate robust cash flows. The current market fears appear overstated, creating a compelling long-term investment opportunity, with FICO’s strategic initiatives and durable moat providing both growth potential and downside protection for patient investors.

Previously we covered a bullish thesis on Fair Isaac Corporation (FICO) by Ryan Reeves in May 2025, which highlighted the company’s dominant market position in credit scoring, strong pricing power, and robust B2B Scores margins. The stock has depreciated approximately by 25.52% since our coverage due to broader market pressures. The thesis still stands as FICO’s moat remains intact. Darius Dark Investing shares a similar bullish view but emphasizes the strategic adoption of FICO Score 10 T to address regulatory and competitive challenges.

Fair Isaac Corporation is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 74 hedge fund portfolios held FICO at the end of the second quarter which was 68 in the previous quarter. While we acknowledge the potential of FICO as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you're looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock.

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Disclosure: None.