FactSet Sinks On Soft Outlook: What The Valuation Now Prices In

Key Takeaways

• FactSet (NYSE:FDS) delivered fourth-quarter results that came in light, followed by fiscal 2026 guidance that undershot Wall Street expectations. Higher technology spending and slower subscription growth were the main pressure points.

• At current levels, FactSet trades on valuation multiples that suggest investors are pricing in a tougher stretch ahead unless margins stabilize and Annual Subscription Value (ASV) growth picks up again.

• Looking forward, the stock's path will be shaped by its ability to raise renewal pricing, convert new GenAI products into paying modules, and show tighter expense control. 

• The risks: entrenched competition from Bloomberg and Refinitiv, and client budget discipline that could slow seat growth.

FactSet's Reset: Earnings And Guidance Under Pressure

FactSet sold off after reporting fiscal fourth-quarter results that missed profit expectations and issuing a fiscal 2026 outlook below Wall Street's consensus. The release raised fresh questions about margin trajectory and the pace of Annual Subscription Value (ASV) growth, putting valuation and near-term multiple risk back in focus. 

For the quarter, FactSet posted $596.9 million in revenue, up 6.2% from a year ago, while adjusted earnings per share came in at $4.05, an 8.3% gain. Looking at the full year, revenue reached $2.32 billion, a 5.4% increase, with adjusted EPS of $16.98, up a modest 3.2%.

The issue is the road ahead. Management guided FY2026 GAAP revenue between $2.423 and $2.448 billion, organic ASV growth to 4% to 6%, and adjusted EPS between $16.90 and $17.60, which is a step below the $18.26 to $18.27 consensus cited in day-of coverage. Commentary around higher technology spending added to concerns about near-term margins. 

Markets reacted quickly: shares fell 8.8% in afternoon trading after the results and outlook, putting FactSet among the day's sharpest S&P 500 decliners as investors recalibrated expectations around growth and profitability.

Why The Stock Reacted: Reading The Signals

The move came down to guidance and what it implies for margins. FactSet's fiscal-2026 adjusted EPS outlook of $16.90 to $17.60 landed below the $18.26 Street mark, a signal that heavier platform and technology investments will cap near-term operating leverage. 

Investors zeroed in on the softer ASV outlook. The pace implies a slowdown from last year's momentum, raising concerns that net sales and client retention may not fully offset the drag unless renewal pricing gains traction or new modules start contributing sooner.

On the call and in the release, leadership framed 2026 as a balance year: keep investing in cloud and AI-driven capabilities while protecting discipline on costs. That's the right direction strategically, but it asks investors to wait for the payoff in margins. 

Valuation Snapshot: What's Priced In Now?

• P/E (NTM): 16.2x: Below the stock's five-year median, reflecting more cautious expectations for margin expansion.
  
• P/S (TTM): 5.0x: Consistent with peers in financial data but not cheap enough to suggest deep value.
  
• FCF Yield (TTM): 5.1%: Healthy, but not extraordinary given the growth outlook.
  
• ROE/Operating Margin: 7.1% and 33.2%: Respectively, showing profitability remains strong.
  

Taken together, these numbers suggest the market is already discounting slower subscription growth and limited near-term operating leverage. The multiple isn't pricing in a collapse, but it does assume FactSet won't quickly return to double-digit ASV growth or expand margins without visible payoff from its cloud and AI investments.

For a re-rating, investors will need to see proof of stronger ASV momentum, monetization of new AI modules, and tighter cost control that supports operating margins in the upper-30s. Without those, the current discount is likely to hold.

Peer Check: Where FDS Sits vs. Data Vendors

FactSet operates in the same orbit as S&P Global (SPGI), MSCI (MSCI), Morningstar (MORN), and London Stock Exchange Group (LNSTY), which owns Refinitiv.

SPGI is trading at a rich valuation, recent third-party sources put its P/E near 39x, a premium reflecting its dominant position in indices, ratings, and recurring revenue streams. 

Morningstar tends to sit mid-pack among data providers, offering solid recurring revenue but lower margin scale. The London Stock Exchange has transformed into a hybrid model, with roughly half of revenue now tied to its Data & Analytics arm and the rest to exchange operations. That mix typically leaves its valuation multiples trading between high-growth data providers and legacy exchange peers.

For FDS, that landscape means relative discount won't vanish unless it proves its ASV growth is sticky, pricing power firm, or that recent AI and workflow products are lifted into paying modules. The market looks willing to give premium peers a benefit of growth and margin stability, which is a higher bar for FDS.

Catalysts To Watch in the Next 3 To 12 Months

Renewal pricing & seat growth: Watch whether renewal rates stay strong among buy-side firms amid cost scrutiny. Given FactSet's disclosed ASV growth targets (4-6%), maintaining or surpassing pricing leverage will matter. 

GenAI and workflow integration: The recent integration of MarketAxess' AI-powered bond pricing data into FactSet's platform highlights how new module adoption could accelerate monetization and strengthen renewal rates by embedding the products more deeply in client workflows.

Expense discipline: Management highlighted rising costs tied to cloud infrastructure and AI investments in the Q4 release and earnings call. Keeping that spending aligned with revenue growth will be central to protecting operating margins and reassuring investors that margin pressure is temporary.

ASV trendline: FactSet guided fiscal 2026 organic Annual Subscription Value growth to between 4% and 6%. If quarterly updates show momentum at the upper end of that range, it would support valuation stability and signal healthy retention and pricing power. The company defines ASV as the forward-looking annual value of subscription revenues.

Capital returns/M&A: While no large moves were disclosed recently, potential for bolt-on data acquisitions or share buybacks may serve as tailwinds, especially if cash flow remains healthy after investment.

Risks To Watch

FactSet operates in a market where competition is relentless. Bloomberg and Refinitiv/LSEG push bundled offerings aggressively, while S&P Global and MSCI leverage their entrenched positions in indices and ratings. That combination exerts pressure on pricing power and seat growth, keeping a ceiling on ASV expansion.

Execution also carries risk and FactSet is leaning heavily into cloud migration and AI-driven product development. If those investments don't translate into new paying modules quickly, margins could remain under pressure longer than expected. Macro conditions matter too, as budget tightening among asset managers, banks, and hedge funds can slow expansion or trigger downsizing in client contracts.

Finally, data regulation adds a structural risk. Any changes in licensing terms, sourcing costs, or compliance requirements could raise expenses and limit product flexibility, potentially eroding profitability in what is already a high-cost investment cycle.

What The Market Needs To See

The latest guidance reset expectations, but also clarified what investors should focus on. For FactSet to earn a re-rating, the company will need to demonstrate credible ASV acceleration, sustained renewal pricing, and visible returns from AI and workflow integrations. The roadmap is straightforward: to prove that tech spend can fuel profitable growth rather than dilute margins.

If management can move ASV growth toward the top end of its 4% to 6% range while holding technology and operating expenses in check, today's discounted multiple has room to stabilize or expand. If not, the risk of further compression remains.

This leaves FactSet in a phase where it has to prove itself. Over the next two quarters, investors should track ASV momentum, operating margin trajectory, and evidence that new modules are being adopted. Those data points will decide whether the market's caution is overstated, or whether the current valuation is justified.

Benzinga Disclaimer: This article is from an unpaid external contributor. It does not represent Benzinga’s reporting and has not been edited for content or accuracy.