NYSE:FDS (Fair Value Update)

Ahead of the September 30, 2026 earnings release, we expected continued fundamental momentum across the Americas, EMEA, and APAC. Full year fiscal 2026 results confirmed continued growth, with annual subscription value increasing at a faster rate than over the preceding twelve months. Although reported operating margin came in weaker than expected, the adjusted non GAAP operating margin expanded by 10 basis points from fiscal 2025, indicating solid underlying operating performance after excluding acquisition related effects. Organic annual subscription value is projected to grow by 5% to 6.5% over the coming year, while full year revenue guidance of $2.6 billion to $2.625 billion implies continued mid single digit growth, consistent with the company’s recent growth profile.

Despite these results, the gap between the market price and our fair value estimate remains significant. We therefore maintain our position, supported by a margin of safety price of $488 per share and an estimated fundamental drift of 87% at the time of our analysis.

Before concluding our review of FactSet Research’s latest financial developments, the earnings presentation also provided encouraging evidence regarding artificial intelligence and its potential impact on the business. A significant portion of the selloff we have observed stemmed from broader market concerns that artificial intelligence could commoditize financial data, making companies such as FactSet less competitive. Throughout this period, we argued that fully integrating AI into financial workflows would be difficult in the near term given concerns around the quality and reliability of data delivered to end users. We also believed that FactSet’s financial capacity and proprietary databases provided the company with the resources to develop its own AI offerings, potentially turning what appeared to be a structural threat into a future growth opportunity.

The latest quarterly report makes this thesis more concrete through FactSet’s Model Context Protocol (MCP). MCP is a server integration that allows third party AI tools and enterprise large language models to query official FactSet financial data using natural language. More than 650 clients, representing approximately 7% of the latest client count reported in the FY2025 annual report, are actively consuming FactSet data through MCP on either a paid or trial basis. API call volume also increased sevenfold quarter over quarter. While MCP adoption remains relatively early, the rapid increase in usage provides initial evidence of demand and potential stickiness among clients adopting the technology.

More importantly, AI adoption is beginning to translate into measurable monetization. FactSet reported that more than 10% of annual subscription value growth was attributable to AI based solutions, while clients using AI products experienced ASV growth at approximately twice the rate of clients without them. This suggests that AI may not simply protect FactSet’s existing data business from commoditization, but could also expand the company’s addressable market and create an additional leg of ASV growth as adoption broadens.

Given this context, we continue to maintain our position and increase our fair value estimate to $423 per share.