FactSet Research Systems Inc. (FDS) Q4 2026 Earnings Report, Transcript and Summary

Good day, and thank you for standing by. Welcome to the FactSet Fourth Quarter and Fiscal 2026 Earnings Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Kevin Toomey, Head of Investor Relations. Please go ahead.

Thank you, and good morning, everyone. Welcome to FactSet's Fourth Quarter and Fiscal 2026 Earnings Call. Before we begin, the slides we reference during this presentation can be found through the webcast on the Investor Relations section of our website at factset.com. A replay of today's call will be available on our website. After our prepared remarks, we will open the call to questions. The call is scheduled to last for 1 hour. To be fair to everyone, please limit yourself to one question. You may reenter the queue for additional follow-up questions, which we will take if time permits. Before we discuss our results, I encourage all listeners to review the legal notice on Slide 2. Discussions on this call may contain forward-looking statements. Such statements are subject to risks and uncertainties that may cause actual results to differ materially from results anticipated in these forward-looking statements. Additional information concerning these risks and uncertainties can be found in our Forms 10-K and 10-Q. Our slide presentation and discussions on this call will include certain non-GAAP financial measures. For such measures, reconciliations to the most directly comparable GAAP measures are in the appendix to the presentation and in our earnings release issued earlier today, both of which can be found on our website at investor.factset.com. During this call, unless otherwise noted, relative performance metrics reflect changes as compared to the respective fiscal 2025 period. Joining me today are Sanoke Viswanathan, Chief Executive Officer; and Josh Warren, Chief Financial Officer. I will now turn the discussion over to Sanoke.

Thank you, Kevin. Good morning, everybody, and thank you for joining the call. Fiscal 2026 was strong. We achieved the highest Q4 ASV performance in FactSet's history. For the year, organic ASV grew at 7% or $168 million to $2.56 billion, exceeding the high end of our guidance, with robust growth across all regions and client types. For fiscal 2026, adjusted operating margin was 34.5%, reflecting the investments we made this past year. Adjusted diluted EPS was $18.01, up 6% year-over-year. It was an important year for FactSet. We launched several new products. Trusted FactSet data through MCP servers, multi-asset class risk models, new capabilities in our quant modeling environment and agents for banking, buy-side and wealth management clients were just a few. We reorganized around a unified product organization, strengthened our leadership bench and sharpened commercial execution to accelerate top line growth while boosting workforce productivity with the help of AI to improve operating leverage and drive future margin expansion. The more widely our clients deploy AI, the more valuable are our foundational strengths: connected data, embedded workflows, service excellence and broad and deep distribution as we see in this quarter's adoption, engagement and growth trends. Our client wins this quarter demonstrate the strength of our platform as leading global financial institutions consolidate more of their data, workflows and mission-critical operations with FactSet. Our strategic investments are making an impact, securing 6- and 7-figure deals involving new products such as AI for Banking, MCP, deep sector content, trading solutions and real-time data. In banking, we continue to win significant mandates by displacing major competitors. Just 3 months after launching FactSet AI for Banking, a bulge bracket investment bank selected our full agentic banking stack across its global footprint. We have since signed additional AI for Banking deals, indicating wider adoption. We also won a mandate to displace a long-standing incumbent at a large regional bank, a deal that includes MCP and deep sector content with a clear path for expansion. On the buy side, we secured several significant 8-figure enterprise deals. We renewed a large global asset manager in a new enterprise deal that includes transactional services, MCP and data feeds. Another global asset manager expanded its managed services agreement into new capabilities for end-to-end performance and holdings-based analysis for equity, multi-asset and fixed income. We also displaced an incumbent at a European quant fund with our data feeds and programmatic environment API. In wealth management, we secured 2 major competitive displacements across workstations and real-time data feeds. With these wins, we now serve Canada's 5 largest wealth managers and have also gained traction among independent firms. We also expanded our relationship with a leading U.K. wealth manager, which selected FactSet's performance reporting solution, showcasing the strength of our solutions across the end-to-end portfolio life cycle. AI-related solutions made up a double-digit share of new ASV this quarter, exceeding fiscal 2025's total AI contribution. And we're seeing early evidence that it is complementing our existing product offerings. Among clients with an established workstation relationship, the majority increased total ASV after adding MCP. Our client wins throughout the year demonstrate that our investments are paying off. We are attracting new clients and expanding our existing relationships. Q4 capped a year of solid execution against the 3 priorities guiding our business transformation: commercial excellence, productivity improvement and long-term strategy. We are delivering stronger commercial outcomes, real productivity gains and an AI strategy that is differentiating FactSet in the market. The impact of our commercial excellence initiative is clear, with strong new business growth, continued ASV retention of over 95% and strong expansion. Data ASV delivered through direct feeds, APIs, MCP, or through a partner, continued to grow at double digits, with AI adoption driving new logo acquisition and enterprise adoption boosting retention and expansion among our largest clients. We continue to accelerate the shift of our business model from seat-based contracts to flexible enterprise agreements. In Q4, the majority of renewed ASV was secured as enterprise agreements or in contracts with terms of 3 years or longer, increasing average contract length by roughly 30%, while broadly preserving pricing. This underscores how our flexible engagement model is leading to longer duration, higher-value contracts. Second, we continue to streamline operations and reduce complexity as we scale our productivity initiative. This translated into net head count reduction in FY '26, a real sign of operating leverage inherent in our business. We are taking the freed-up capacity, redeploying most of it into new product and growth opportunities and returning a portion of it to the bottom line. In Q4, we continued to scale AI across our product and engineering teams, expanding AI-enabled projects by roughly 40%. The token governance and optimization measures we put in place last quarter are driving further efficiency gains. Token use related to coding assistance grew more than 80% quarter-on-quarter, with token spend growing at only half that pace. A key area of investment in our data refinery is private markets data. In Q4, we reengineered a pipeline that integrates and delivers content from dozens of providers, covering millions of global private companies. Platform consolidation, combined with agent-assisted engineering, cut processing times in this area by more than 75%, halved the onboarding effort and more than doubled delivery speed, freeing engineering resources for document enrichment and data labeling that further strengthen our AI foundation. The client assist agent I talked about a couple of quarters ago has been fully rolled out to all clients as of Q4 and now resolves over 30% of all user-initiated requests without human interaction. These initiatives are all driving faster delivery and improved quality at a lower cost. We expect these to scale in FY '27 and further enhance our operating leverage. We are rolling out a differentiated AI strategy that leverages the high quality of our connected data and the deep embedding of our analytics and software in client workflows. Our strategy is resonating with clients, and our momentum is strong. For example, MCP adoption is accelerating across clients of every size. Over 650 clients were actively engaged under contracts or trials to consume our data sets through MCP as of fiscal year-end. API call volume continues to expand rapidly, with Q4 volumes at 7x the level we experienced last quarter. We expect this to continue as we make more data sets available through MCP. In Q4, we launched our first analytics MCP, extending our market-leading portfolio analytics into agentic workflows. We believe this will unlock tremendous value for buy-side clients as they deploy agents in performance measurement, risk and reporting. And it's not just MCP. Clients using our AI solutions grew their ASV twice as fast as the rest of our client base in Q4. We continue to invest in real-time data and pricing and reference data as clients prepare for 23/5 trading. Our acquisition of BCC Group, a leading platform for distributing and managing real-time feeds, significantly expands our addressable market by opening up new opportunities across the real-time data ecosystem. We'll go deeper into the strategy and how it translates into our medium-term growth and financial targets at our upcoming Investor Day on November 10. I'm looking forward to sharing more there. I'll now turn the call over to Josh to discuss our Q4 and fiscal '26 performance in more detail as well as our FY '27 guidance.

Thank you, Sanoke. As Sanoke outlined, fiscal '26 was a transformational year for FactSet. We accelerated growth while strengthening the firm's foundation through initiatives that sharpened our go-to-market approach and improved productivity and efficiency across the organization. I'll highlight 3 areas as I walk through our results for Q4, the fiscal year and the framework for our FY '27 outlook. First, our client base. Its quality and breadth form the most meaningful growth opportunities we see. Strengthening client relationships and expanding capabilities position us well entering FY '27. Next, translating that growth into durable compounding free cash flow across market cycles. We expect to see enhanced operating leverage become more evident in improving FY '27 operating margins. FactSet's margins compressed during FY '26 for 2 primary reasons. A series of structural investments previously discussed, including modernizing our infrastructure and strengthening cybersecurity and resilience, and the output of accelerating ASV to record levels. Revenue that ASV delivers is recognized over time, while performance-based incentive compensation is expensed upfront. Finally, our flexible balance sheet and disciplined capital allocation approach, which support our strategy going forward. To recap our results for the fiscal fourth quarter, at the end of August, ASV exceeded $2.56 billion, representing 7% organic growth and acceleration of more than 125 basis points over the comparable rate in 2025. We generated $86 million of organic ASV during the quarter, our largest quarter ever. Revenue grew more than 6% to over $634 million. Our adjusted operating income was $209 million, a 33% margin, and adjusted EPS grew 11% (sic) [ 11.6% ] to $4.52. To review our results for fiscal 2026 overall, we generated $168 million of organic ASV above the high end of our guidance range. In dollar terms, that represents a more than 30% increase over the organic ASV generated in FY '25, and in growth rate terms, FactSet's best results in the last 3 years. Full year revenue reached $2.476 billion, a 6.7% growth over 2025, also above the high end of the guidance range. Our adjusted operating income was $855 million, representing a 34.5% margin, approximately 180 basis points below 2025, and within our guidance range. And adjusted EPS grew 6% to $18.01, also above the high end of the guidance range. FactSet serves more than 9,200 clients in over 80 countries, with approximately 3/4 of our top 100 clients having been with us for more than 20 years, including 95 of the top 100 global asset managers, 38 out of the top 40 wealth managers and 90% of the top 50 global investment banks. Adoption of AI is at varying stages of maturity across our client base, and the boldest are partnering with FactSet to reimagine core workflows and essential processes. For Q4 '26, organic ASV accelerated to 7% year-over-year, an increase of $86 million during the quarter. For the full year, $168 million of organic ASV represents a record outcome. Growth was evident across all client types and regions. By client type, Q4 results for institutional buy-side organic ASV grew 5%, an acceleration of approximately 100 basis points from Q4 2025. Across both buy side and sell side, our dealmakers category saw organic ASV grow 9%, approximately doubling its growth rate from a year ago. Wealth grew 9% organic ASV, and our market infrastructure category grew 8%. Every region grew faster in Q4 than it did a year ago, with organic ASV accelerating to 7% in the Americas, 5% in EMEA and over 10% in Asia Pacific, our fastest-growing region. Focusing on our Q4 results and reflecting broad-based strength, revenues grew 6.3% year-over-year or 7.1% on a like-for-like basis. Q4 adjusted operating margin was 33% compared to 33.8% last year. As I noted earlier, periods of faster ASV growth can temporarily compress margins in any quarter, since the incremental ASV is not yet reflected in revenue. This was the case in Q4, where compensation-related expenses increased 9% year-over-year, driven by performance-based arrangements, not due to additional head count. During Q4, we reduced overall head count as part of our efforts to streamline our operating footprint, marking the first annual head count decline following several years of growth. Earlier this month, we implemented additional head count reductions. We recognize the impact of these decisions on those affected, but believe they position us to operate more efficiently while strengthening our business for the long term. We remain focused on investing in product development and client service and expect these cost efficiencies to free up capital for client-facing innovation. Higher earnings and a lower share count led to an 11% (sic) [ 11.6% ] increase year-over-year to $4.52 in our adjusted earnings per share. Consistent long-term free cash flow generation is a hallmark of our model and positions us to be a durable compounder across market cycles. Free cash flow was $177 million for the fourth quarter of fiscal 2026, roughly in line with the prior year period. For the full fiscal year, free cash flow was $707 million, an increase of over 14%. Our free cash flow during Q4 reflected the onetime restructuring costs associated with rightsizing certain teams, alongside productivity improvements that we expect to improve our margin and free cash flow generation over time. We expect the efficiency gained to reduce complexity and operational risk while improving overall quality, leading to a better overall outcome for clients and shareholders. We anticipate our free cash flow during Q1 '27 will reflect similar temporary impacts from productivity investments that we expect will benefit operating leverage and free cash flow over time. Our disciplined framework prioritizes organic investments in high-growth projects as our top priority for capital allocation. We prioritize opportunities with visibility into return on capital above the demanding hurdle rates. We then consider inorganic activity that meets our strategic and financial criteria and return excess capital to shareholders. Where we do look inorganically, we often source opportunities from our own ecosystem. Because of our reach, we are typically acquiring or investing in firms we know well, partners whose technology is running alongside ours and whose teams we have already worked with. We believe that lowers integration risk. For example, following the close of Q4, we announced the acquisition of the BCC Group, a Frankfurt-based data infrastructure company that augments our real-time data offering to allow for integrated entitlement management. We have worked together on multiple deployments and are excited about the future opportunities. The strong cash generation of our business allows us to return any excess capital to our shareholders. During Q4, we continued our repurchase activity, buying back approximately 552,000 shares for $138 million. For the full year FY '26, FactSet more than doubled its buyback activity with approximately $644 million of shares repurchased, reducing shares outstanding by almost 7%. In total, we returned over $800 million to shareholders in fiscal 2026 through dividends and repurchases, representing an annual increase of over 75%. We believe that returning capital to shareholders is an important output of our highly predictable business model, combined with improving operational efficiency and consistent free cash flow generation. Gross debt leverage remained 1.5x, and net debt leverage was 1.2x. Our balance sheet remained strong with meaningful incremental capacity available to support growth. We are committed to maintaining our investment-grade rating, which Moody's reaffirmed with a stable outlook this quarter. During Q4, we amended our credit facilities to increase our overall revolver capacity from $1 billion to $1.5 billion and extend the maturity at more favorable pricing in the event of a draw. As of August 31, our revolving credit facility was completely undrawn. This provides us with optionality as $500 million of notes with a 2.9% interest rate mature in March 2027 and increase strategic flexibility as we continue to grow. We expect to detail our multiyear shareholder value creation algorithm at our upcoming Investor Day. But before we do, I'll turn to our outlook for FY '27. We expect another strong year with organic ASV growth of 5% to 6.5% during the fiscal year ahead. Clients use our intelligence solutions every day, and while there is no intrinsic seasonality, the natural renewal cycles and increasingly enterprise-oriented nature of our agreements suggest that growth may not progress smoothly quarter-over-quarter. Our revenue growth for FY '27 is expected to be 5% to 6% on a reported basis and approximately 100 basis points higher on a like-for-like basis, reflecting a combination of factors, such as our exit from the ESG Signals Attribution business, FX rates and other onetime items. Today, most of our recurring revenues are fixed subscriptions, but a growing portion is activity-linked and consumption-based. While these revenue streams add some variability to forecasting and subsequent revenue flow-through compared to traditional subscriptions, we are seeing accelerated client interest, particularly for emerging AI-driven offerings. We have not factored in any acceleration for FY '27, given the early stages of AI transformation at our clients, and therefore, our actual revenue growth may diverge from ASV over time. We believe improving operating leverage provides a path to increased operating margins for the full fiscal year. We expect margin improvement in FY '27 of between 25 and 75 basis points. Within this framework, we will continue to invest in initiatives to drive sustainable, profitable growth. While we don't manage to the margin in any given quarter, and the timing of various programs may cause some deviations from a linear progression through the year, we believe that FY '26 operating margins represented a floor. We expect EPS growth to improve to the high single digits in FY '27 despite 2 nonoperating headwinds, specifically, a higher assumed tax rate and incremental interest expense from the maturity of 2027 notes, which together we estimate represent an approximately 2% headwind to EPS growth. We intend to focus on growing our free cash flow and anticipate that free cash flow per share should compound over time, reflecting both the strength of our foundation and the growth opportunity ahead. We look forward to providing further detail on our long-term strategy, client foundation and multiyear outlook at our November 10 Investor Day and to seeing all of you there. With that, we look forward to your questions.

[Operator Instructions] Our first question comes from the line of Alex Kramm with UBS.

I want to actually ask about consolidating M&A. I know you mentioned some M&A in your script, but there were obviously headlines about one of your data and desktop competitors maybe having their business on the block, and obviously details are limited. But that transaction could include some proprietary data sets that you clearly lack. So the question is, look, is something like that even feasible or interesting to you in this part of the cycle with all these uncertainties out there? But consolidating, obviously, another player, taking a lot of costs and maybe gaining some proprietary data in this kind of environment could be interesting. So any general comments you can make would be appreciated.

Yes. Thanks, Alex. Thank you for the question. Clearly, we don't comment on competitors. But just to talk about our overall strategy, I think we see tremendous growth opportunities organically. We are focused on investing and transforming our business into a high-growth business with the right level of investment in growth in the foundational characteristics that continue to support the trust that clients have in us. And we have a very rich list of opportunities in front of us that we are absolutely focused on right now. That said, we announced the BCC Group acquisition. We've done other strategic investments throughout the year, and we have a clear framework for how we allocate our capital. When we look at opportunities that are high return can complement what we do organically, we certainly will consider, and we are constantly looking at the market for all opportunities. The comment you made about proprietary data, we believe we are investing in significant amounts of data capabilities, expanding the proprietary data we already have and continuing to invest in the quality and the concordance and meshing our data with client data. That's our strategy. And of course, if there are opportunities to accelerate that, we'll be taking a look at it.

Our next question comes from the line of Ashish Sabadra with RBC Capital Markets.

Really strong momentum in the ASV. I wanted to focus on the competitive environment. So Bloomberg launched their MCP offering yesterday. There have been a significant number of private companies with also MCP offering, and overall, the switching costs for MCP has gone down. So in this kind of a competitive environment where maybe some of the LLM providers are also bundling some private company provider, how does FactSet continue to differentiate? And can you continue to sustain that strong sales momentum that you've seen?

Yes. Thanks, Ashish. We were leaders, as you all know, in innovating on how we deliver our data. We have done this historically as well. When the transition to APIs came about, we were early in that. When cloud shares started, we were again early in that, and this is no different. We were one of the first to produce our data through an MCP server endpoint. The quality, the capabilities that we deliver through our MCP is standing out in the market clearly. We get great feedback from our clients and our technology partners or even the frontier labs. So there is a lot of good feedback that comes back to us about the quality of our MCP delivery. The adoption, you would see in our -- in the slides we just presented, has scaled and continues to scale rapidly. Just this quarter, our adoption grew by 40% in terms of number of clients, and the usage is exponentially growing. It grew 7x this quarter over last quarter. And the last quarter, it grew 13x from the prior quarter. So we continue to see a lot of traction. And I would say we are still at the early innings of this sort of long game because we have just made our first couple of dozen data sets available on MCP. There are hundreds more to go. More importantly, we are expanding well beyond data. When you think about MCP as a protocol through which capability is delivered, we are delivering more capabilities, whether it is skills, tools, analytics, and these are all very well received by our clients as they are starting to adopt more agentic workflows. The bundling of data plus analytics plus capabilities is where we excel. We create really strong capabilities for our clients. The context that they are able to harness through our platform gives them differentiated output when they use AI, and that's where we are winning relative to the competition.

Our next question comes from the line of Shlomo Rosenbaum with Stifel.

Sanoke, I'm going to ask you a little bit for a sneak peek on some of the stuff you're planning to talk about on the Analyst Day. When we talked a few months ago, you were talking to me about rolling out an agentic workstation and things that looked like they were going to be more -- very much disruptive to the way people look at the workstation right now. And I wonder if you could just talk a little bit about some of the things that you're thinking about, and what should people kind of expect who are regular users of FactSet? And then if you don't mind, Josh, I know I'm only supposed to ask one question, but I just wanted to get the clarification on the growth in ASV from AI that was in the double digits. Was the growth portion from AI? I just wanted to make sure that, that was clear. Sorry if I'm sneaking in a second one, I'm not supposed to.

We'll give you a pass this time, Shlomo. Maybe I'll take the second one first and then Sanoke hand it over to you for Investor Day. Yes, the -- Sanoke, actually in the last question, talked a bit about the adoption that we see, the utilization that we see, the early stages of monetization that we see, and specifically, that's right. With regard to our ASV that comes from our AI offerings, both for this quarter as well as for the previous quarter, we're very pleased to report that more than 10% of the ASV that we added during the quarter came from our AI, call it, AI SKUs, new AI-enabled offerings.

Terrific. And yes, it's going to be a lot of content on November 10. So for those of you who are still on the fence, please do make it a point to come in person. There's also going to be a lot of product that we will be showcasing, and nothing like touching and feeling the real product to get a feel for what's underway. Just to give you some color, we will go into the details of the FactSet Intelligence strategy that we shared in the last quarter. That's now well developed. There are lots of clients already using our products and giving us rave reviews. It is, as you said, Shlomo, a real transition in the user experience. We are moving into a world where workflows are transitioning from the traditional information consumption to human-directed but agent-executed workflows. And the user experience has to correspondingly evolve, and that's what we'll be showcasing. We'll obviously share with you our strategy, our medium-term outlook and our financial algorithm, and we look forward to discussing all of that in detail on November 10.

Our next question comes from the line of Faiza Alwy with Deutsche Bank.

I wanted to ask about the ASV guide for next year. I know, Josh, you talked about the FactSet growth may not progress smoothly from quarter-to-quarter, and you are guiding to a deceleration from '26 into '27. So just wanted a bit more color on that, and more specifically, like did you have some pull forward of contracts in 2026 or just any other commentary there would be helpful.

Yes. Faiza, thanks for that question. Look, we had a terrific Q4. We executed really well, and the performance was visible as you can see. We continue to have a robust, diverse and proportionate pipeline. And we can confirm we did not pull forward anything into FY '26. It was just a question of great execution. That's what we demonstrated. We continue to have great conversations. Our client dialogue is elevated. We have broad-based strength across regions, products and client types. And as you said, right, there is a natural cycle in our -- to our business. It is second half weighted. And we are just at a very early stages in a year with a full year of execution ahead of us, and we prefer to guide to a range that we have high confidence in and let performance then drive any revisions in future quarters.

Our next question comes from the line of Kelsey Zhu with Autonomous.

Could you talk a little bit more about your acquisition of BCC Group and how it fits into your overall strategy? Is FactSet basically expanding more into the services layer for clients? Because if you look at what bccg offers, it seems to provide the infrastructure layer between clients and different data providers. So just curious to get a little bit more of your thoughts there.

Yes. Thanks, Kelsey. It's an astute observation and an important one. As you all know, the real-time data distribution market is a large market. It's a mature market. And clients are keen to see new competition. They are excited with our offering and we are continuing to invest in it and scale in it. We still have a small market share of a large TAM, and we see this acquisition as a real unlock in opening up a lot of new opportunities for us. To give you some color, we worked with BCC Group in a number of situations, and we've had very successful implementations partnering with them. We deliver the data. They have the platform that orchestrates the distribution in the client environments, and that's really important when you're trying to displace large incumbents who have been entrenched for many years. We need a full stack solution that clients can use to almost turnkey switch over from existing situations to us. I wouldn't characterize it as a services business. It's a very high operating leverage technology business. It is about routing. It's about program execution and it's about optimization of the endpoint delivery of data, which is very complex and intricate when it comes to real-time data feeds.

Our next question comes from the line of Toni Kaplan with Morgan Stanley.

I was hoping you could talk about your assessment of the large LLM competitors, what they're offering in financial services verticals, how deep you think they'll go, how you fit into that? Do you complement them with supplying data through connectors and/or partnering? Or do you just view them as competitors? And so I just wanted to get a sense of maybe the ecosystem more broadly and how you think that this plays out over the next few years.

Thanks, Toni. I spoke about this a little while ago, and I continue to believe that new frontier lab marketplaces are an incredible marketing channel for data and specifically for FactSet. They enable access to users that traditionally may not have direct connectivity or access to our workstations and/or our data feeds. So it's exactly the motion that we are seeing in the market. Over the last several months, we have seen a rapid adoption of our MCP. Those connectors activate new workloads at clients that are rolling out horizontal AI. Very quickly, those clients realize that to get the full value of FactSet and the full value of the depth and embeddedness that we have and the context we bring, they start consuming more capabilities from us. So it's a very complementary and symbiotic relationship we have with frontier labs. Could they compete with some of our work over time? Possibly, but we don't worry about that. We see plenty of opportunity to grow in partnership with them. The most important thing is, and clients are realizing this as they continue with their AI sort of adoption curve and maturity, that context really, really matters. To get the value out of AI, you have to activate the internal context, get the best connected external context, and then you get a much higher output out of the AI. So that's what's driving the value towards us as -- and that is exactly the strategy that we have been pursuing.

Our next question comes from the line of Manav Patnaik with Barclays.

I was hoping you could just maybe touch a little bit more on the margins. You talked about the modernization of the infrastructure, the cybersecurity, et cetera. Like -- so where do those investments stand? And I guess what I'm trying to get to is, I think you mentioned this past year when you saw periods of faster ASV growth, the margins were pressured. So will that be the case in '27 as well?

Thanks, Manav. Yes, margin clearly was a topic of great interest throughout FY '26. And as we said earlier, we see a clear path to growth or improvement in margin in FY '27. So let me just recap where we started this time last year. When I took charge here at FactSet, I noticed that we needed to make some foundational investments. There were some onetime investments that were important to make. I can give you a couple of examples. We moved from a single cloud provider to a multi-cloud provider framework, which gives us the resilience, the flexibility and new capabilities. Now that's a onetime investment that is important to do, and it continues to bolster the trust and confidence clients have in our infrastructure. Another example is making the investments in changing our data to be machine-ready. That's a process that we had to start more or less as soon as I got here, and that's helped us achieve the success that we see in the data delivery through MCP. Again, significant onetime investments that we don't expect to repeat in this year. Having said that, the more important capacity building that we've been doing throughout the last 6 to 9 months through our productivity programs are really paying off. We've simplified the business. We've collapsed our different business units into a single unified product organization. That's reduced the complexity and interactions and reduced bureaucracy. Number two, we've really taken a hard look at our portfolio, and we've exited businesses that we don't think we have the right to win in. And we've talked about that in prior quarters. And last, we are seeing real agentic adoption, and that is translating into operating leverage across different parts of the business, engineering, client support as well as in our data collection, data refinery. So all of this is translating into growing operating leverage and returning the business to the operating leverage that it should have, which gives us the capacity to make the investments we need to continue to make in growth opportunities. And we'll continue to do that and still return some to the bottom line, which will show up in margin.

Our next question comes from the line of Andrew Nicholas with William Blair.

In your prepared remarks, Sanoke, you mentioned a bunch of wins that included competitive displacement. Just wondering if you could speak to the biggest themes or drivers on those wins, particularly with functionality, breadth, price. And then somewhat relatedly, we're hearing a lot more about the importance of implementation expertise among info services firms. Does that become a potential area for differentiation going forward kind of being able to bring people inside your client organizations to help them integrate this data, integrate your technologies and your capabilities? Or is that not as big a part of the opportunity going forward?

Thanks. I'll start with that second part first, and then address the broader point about our broad competitive positioning. You are absolutely right that implementation and, I would say, context engineering in the domain that we are deploying our solutions is really important. We have this real strong capability internally of the FactSet consulting teams that have been built up over the years. We view them as absolutely our forward deployed experts who are working with our clients every day. They understand deeply the end user workflows, and therefore, any agentic implementations we do with them are that much faster, that much more effective, and we get the ROI on it very, very quickly. So that's a real advantage, and it's absolutely working for us. That is then a segue into the broader competitive positioning for us. We have, as you know, a full stack approach. We clearly have our data capabilities, we have analytics capabilities, and we have workflow capabilities. At each level in that stack, we have also direct clients who consume any one of those layers of the stack, but many clients prefer to take the full stack, and they consume it in different ways. And that's resonating with clients because the flexibility that we are offering to have an open architecture approach, unbundled approach, where clients can pick and choose and meet our analytics, our data and our solutions where they want us to meet them. That's really resonating, and that's a real differentiator in the market relative to other competitors. To give you a little bit more color, we've had very good success in competitive displacements across all client types. In banking, we had -- one anecdote I can give you is a really blue-chip private equity firm that was really excited about our MCP offering, but in the first instance, decided to stick with an incumbent just because of the challenges in displacement. But 3 months later, they were back with us, and they did a complete displacement of a long-standing incumbent. In another large regional bank example, we had a tremendous relationship with them on their wealth management side, and that allowed us to do a complete displacement of a competitor across their capital markets business. On the buy side, hedge funds are really excited to consume our data through MCP. That's a fast-growing segment for us, and that's allowing us to really displace some traditional competitors in the fixed income markets that we've historically struggled to displace. So these are just a few examples that I thought, Andrew, might be helpful color.

Our next question comes from the line of Curtis Nagle with Bank of America.

You guys saw pretty solid addition of clients using MCPs, I think it's 650, 200 plus quarter-over-quarter. Would you be able to break out just what the proportion is paid versus trial? And I guess, how those conversion rates compared to 3Q?

It's -- I'd say it's broadly comparable in terms of the conversion pipeline. So we have a very fast-moving pipeline in MCP where you start with the initial sort of trial, then it moves into larger scale trials and very quickly then converts into larger contracts. And often, the contracts then expand into workstation discussions, broader agentic flow discussions and the like. So the pipeline is very active. The conversion rates are strong. The best example I can give you is, again, we see 5- and 6-figure deals regularly, like multiple deals a week. And just maybe a bit of color since the numbers we just published on the slide today, again, we've seen an expansion of at least another 20%. So just gives you a sense of the pace of the pickup in the market.

Our next question comes from the line of Scott Wurtzel with Wolfe Research.

Just wanted to ask on the remarks you had made around the kind of consumption-based pricing with some of your AI-related products. I'm just wondering if there's any color you can give on sort of how the mix is between consumption-based and subscription-based pricing with AI-related products. And if it is more -- is it more product-driven or more client preference driven? Any color there would be great.

Yes. It's -- I'll start by saying it's very, very early days in the industry's transition from subscriptions to subscription plus consumption. We certainly have contracts that are now clearly geared towards that. But I would say it's super early days. And is it -- your question around what drives it -- it's largely driven by, I would say, what makes for a flexible yet somewhat predictable economic structure for the client. So clients have a preference when they start. But inevitably, as they understand the dynamics and they see the product range and as the contract negotiations progress, we largely end up in a structure where clients like to have a somewhat predictable, fairly large subscription base, which comes with a certain amount of volume of data or agentic capability that they can consume. And above that, you kick into volume-based tiers that then becomes consumption led. So that's the structure. Generally, we are broadly seeing the industry gravitate toward that structure. But as I said, the data of consumption-driven pricing and the volumes of that is still very, very early.

Our next question comes from the line of Craig Huber with Huber Research Partners.

Great. Given investors' concerns in recent months, recent quarters around AI, is it possible for you guys to quantify how much you think AI is helping your revenue? And then separately, how much AI net investments is benefiting your profits? That's my main question. I do have a housekeeping question, if I could squeeze this in because you changed the definition here. Your intangible asset amortization add-back of $85 million to $97 million includes some extra discrete items. I'm curious, what is just the pure intangible asset amortization add-back you're thinking for fiscal '27?

Craig, good to hear from you. It's Josh. I mean just to be blunt on that last one, we've consolidated all of our, kind of all of our items purely for simplicity's sake as far as noncash items, just to give you the reporting in a format that's simpler and more consumable. With regard to AI and its contribution, like we said earlier, with regard to our -- the ASV added during the course of the year, if we think about what is directly AI and really a net new product offering from FactSet, that constituted about 10%, a little more than 10% of our Q4 flow as it were of the 100 -- or sorry, of the $86 million of ASV generated during the quarter. We continue to think that, that's an exciting opportunity for us. We continue to see that in the early innings. As Sanoke mentioned, every client is on a different stage of their own AI journey. And we're, of course, looking to AI, to the other part of your question with regard to how to operate as efficiently and as effectively as possible. Sanoke mentioned in his remarks some growth in our own token consumption, both in the actual amount of tokens consumed and in our spending around our tokens, and it's an area that we are monitoring quite actively and, in our minds, quite robustly.

Our next question comes from the line of Jason Haas with Wells Fargo.

I'm curious to hear your thoughts on what you think the staying power of MCP is. We've heard that some of the newer AI models don't necessarily need to use MCP. They can use just traditional APIs. I'm curious if you're seeing that and if you think MCP will maybe be a passing trend or is it here to stay.

Yes. It's an interesting question, Jason, and it's, again, very early days. I would argue that model characteristics broadly, right, beyond how they consume data, continues to evolve. We've seen a spate of new model types come out in the last few weeks, which is exciting. Some of them are very efficient in certain dimensions and not as efficient as large language models and other dimensions. So we keep a close watch on all of this, and we are prepared for the trends to evolve in any direction because we do have APIs. We do have cloud shares. We deliver data in multiple different formats, and we are prepared for that eventuality. A large part of our innovation here comes from partnering closely with the frontier labs as well as with new model providers, open weight models, et cetera. And that innovation will continue to help us as we navigate this AI diffusion across the industry.

Our next question comes from the line of Peter Knudsen with Evercore ISI.

One thing I've heard from a few different companies now is the importance of maintaining a closeness in the relationship with the client, specifically sort of an understanding how they're using their respective data, what they're doing with it, and I guess learning what is needed and sort of creating a feedback loop with the client. So I'm just wondering, as you talked about increasing a shift towards direct data feeds and APIs, how might that be impacted? And to what degree is FactSet still able to gather the same level of information from the client usage as historically?

Yes, that's a great question. And I would just encourage everybody to think about the user base itself evolving from human use to a hybrid of human and agent use. And agents don't need a graphic user interface like a terminal or a workstation to understand what's happening. And that's where the APIs, the MCP, the various tools that we offer to agents who are the consumers really help. And we have the telemetry, we have the feedback loops and we continue to reinforce our context at our layer. So it's an absolutely important point. The human context accumulates through our human interfaces, which happen to be the workstation and various other front-end platforms. And the agent context continues to accumulate through agent calls, through APIs and through MCP on our estate, on our data estate, on our analytics estate and our software estate.

Our next question comes from the line of Surinder Thind with Jefferies.

Sanoke, can you maybe talk a little bit about your product development capabilities and how that's changed over the past year in the sense of maybe head count versus the total budget that you use, including token cost to kind of build products, and then maybe the impact of speed to market? And then just ultimately, like how much more can you deliver now? And then how much of that can actually be absorbed by your clients relative to last year?

Broadly, George (sic) [ Surinder ], I'd say absorption is a function of the maturity levels of different clients. And I think that's certainly evolving, and we see some very sophisticated clients moving very, very fast. And there is sort of a big middle where there's lots of experimentation, but also significant legacy infrastructure that has to be wrangled in order to drive the adoption of AI. And then there are -- there's a very long tail, right? We have over 9,000 clients widely distributed around the world. So you see a range of client maturities. This is -- back to your question about our product development, we are very geared towards supporting that range of clients. We're working with clients of all types. We have capabilities not just in terms of releasing a product, but as I said earlier, our consultants who can then adapt the product, provide the right kind of solution in a specific context. So it's a full stack approach that we take, and that's helping us drive the adoption curve. Internally, how we are organized and your -- the first part of your question is, we have simplified ourselves. We've got a simplified, unified product organization. That's driving pace, that's driving clarity of vision, that's driving greater sharing and collaboration internally inside the company. And net-net, I'd say the capacity of all of that means it's translating into shipping products faster and better.

Our next question comes from the line of George Tong with Goldman Sachs.

I wanted to go back to your organic ASV growth guide. You noted that the pipeline is robust and confirmed there was no pull forward into fiscal 2026. Can you talk about the key swing factors that would determine whether organic ASV growth finishes near the low versus the high end of the 5% to 6.5% guidance range?

Sure. Happy to take that question, George. Look, George, what I would say to that is just overall, as you know, it's early in the year. We have, call it, 11 months of execution to play out. What you saw both in Q4 and really for the full year 2026 was excellent execution. And as we thought about our outlook for '27, our goal, both Sanoke's, myself, we believe in providing transparency both into our operations and our outlook. And what we've endeavored to provide is a guidance that is both data-based and prudent based on what we see. And like I said, you saw from the outperformance in Q4 that many of our renewals tend to be back half weighted. So I wouldn't expect a, call it, linear progression throughout the year, but those were some of the factors that went into our thinking.

Our next question comes from the line of Henry Hayden with Rothschild & Co Redburn.

Sanoke, I believe on the last call you mentioned that around 20% of the top 100 clients are using MCP on a paid basis. We were hoping to get some color on the incremental uplift in spend that you're seeing from those that are, and the extent to which you're currently charging a premium for MCP data connectors versus non-MCP data feeds.

Yes. We don't call out that specific metric, but I can give you some color around it, which is our MCP delivery to all of those top clients is typically bundled with a whole host of other capabilities. It tends to include traditional data feeds, it tends to include additional data feeds, and it tends to include a combination of workstations and various other analytics solutions. On the whole, when workstation users start consuming MCP from us, and that's -- we've seen a significant trend of that. We've seen that they grow faster with us. On average, I think the majority of workstation users that have taken MCP from us have grown anywhere from 20% to 50% more in terms of their overall ASV with us.

Our next question is from the line of Ashish Sabadra with RBC Capital Markets.

I just had a quick modeling question around -- about below-the-line items. I was just wondering if you could comment on what -- how should we think about the tax rate for fiscal year '27 as well as interest expense?

Two questions there, and we tried to size it as a 2% growth headwind, so call it between $0.30 and $0.40 of earnings per share given the $18.01 that we delivered in FY '26. But on tax rates, look, the effective tax rate was approximately 19% for FY '26. It was approximately 18% for FY '25. I would think it's reasonable to forecast a slightly higher tax rate going into FY '27. And then on the interest expense, as I noted, we have $500 million of notes maturing in March, and we're going to be opportunistic in the capital markets and assessing opportunities. I think it's reasonable to assume that we refinance those at higher rates than the 2.9% cost of carry given that we're just in a different interest rate regime than we were 5 years ago when those notes were issued. I noted also, Ashish, that we derisked that maturity through our revolver upsize and operate at a very conservative leverage ratio. But all in, we're committed to maintaining our investment-grade status. But think of those, call it, below the line items, as about 2% headwinds on our earnings per share outlook for FY '27.

Our next question comes from the line of Shlomo Rosenbaum with Stifel.

A follow-up from me as well. I just wanted to ask a little bit. Some of the weight on margins came from execution on ASV growth and the incentive comp. I was just wondering with more consumption-based pricing, is the company thinking about different metrics in terms of overall incentive-based comp being maybe more weighted on overall revenue versus ASV? Because as you talked about, Josh, we could see a divergence between ASV growth and revenue growth, and I was wondering if ASV growth is going to be the right way to be incentivizing the levels of management in the company going forward.

Thanks, Shlomo. That's an important question. I'll start out by saying we made tremendous progress throughout FY '26 in optimizing our incentive design, and the results speak for themselves. We have a very good design in place. It rewards our teams appropriately, and we'll continue to have a structure that is high value for us. We are going to continue to optimize that design. We have lots of levers, one of which you just described, which is as -- with the rise of consumption-based pricing, how does that impact incentives? But there's plenty of other dimensions that we need to optimize on. We're well on that path. We have a new Workforce Transformation Officer who just joined us, Di Hirji, and we have a lot of work underway to continue to improve on our incentive design, and that will play through into how we talk about our payouts in the next few quarters as well.

And if I could, Shlomo, what I might add is, look, we look at a range of metrics, but we continue to believe that ASV is the best available forward indicator of the revenue for the next 12-month period. So we look at a range of metrics that we manage the company with, that we report to you on. And again, we believe that ASV is an important metric of our go-forward productivity and delivery.

Our last question comes from the line of Alex Kramm with UBS.

Just a very quick follow-up on the ASV outlook. If I heard you correctly, I think, obviously, ASV is second half weighted, so maybe a little bit of conservatism here at this stage. But can you also just very quickly talk about the near-term momentum? Because the 1Q sometimes can be tough. I think in prior years, we've seen it even negative. So given some of the MCP momentum you had, do you feel confident in year-over-year growth on a dollar basis in organic ASV? Or anything you would highlight in terms of the near-term momentum and pipeline, specifically for 1Q?

Well, maybe I'll turn to Sanoke specifically for the pipeline and how we're trending toward the first quarter. But what I would say is for the year, look, Alex, as you noted, we're coming off a record quarter, we're coming off a record year. That's a reflection of outstanding execution. And when you think about our ASV guidance, maybe relative to guidance that FactSet has given previously, this guidance is higher and tighter than what FactSet has provided in the last 2 years. So think of it as a narrower range, think of it as a higher objective, and we base that on the data that we see based on the quality of the pipeline that we are looking at.

Yes. And I mean, as I said, the pipeline is robust. It's diverse, it's proportionate. And the AI strategy is really resonating. So the MCP growth continues. I mentioned how just even in the months since the close of the quarter, it's continuing to accelerate. So yes, we feel very confident about the quarter at this point in the cycle, Alex.

This concludes the question-and-answer session. I would now like to hand the call back over to Sanoke Viswanathan for closing remarks.

Thank you all again for joining us today. Robust growth, strengthening commercial performance and measurable productivity gains position us well for the fiscal year ahead. Before we close, I want to thank every FactSetter for their continued dedication and commitment to delivering for our clients. We remain focused on executing against our strategic priorities that I've talked about in the past 3 quarters, and I look forward to providing more comprehensive view of our long-term strategy and growth opportunities at our Investor Day on November 10. Operator, this concludes today's call.

Thank you. This concludes today's conference. Thank you for your participation. You may now disconnect.