Last Update 02 Dec 25
FDS: AI Integration Will Overcome Margin Pressures And Catalyze Long-Term Upside
Analysts have recently lowered their average price targets for FactSet Research Systems, reflecting mixed views on the company's margin outlook and investment phase. New targets are typically $50 to $100 below prior estimates as market participants remain cautious about competition from artificial intelligence and the earnings outlook for fiscal 2026.
Analyst Commentary
Recent analyst notes on FactSet Research Systems reveal a split in sentiment regarding the company's valuation, competitive positioning, and strategic vision. While some analysts see opportunity in the company’s entrenched client base and adaptability, others remain cautious given the headwinds from artificial intelligence and investment-driven margin pressures.
Bullish Takeaways- Bullish analysts highlight FactSet's "sticky" client relationships, suggesting the company’s solutions remain critical for clients even amid disruptive industry forces.
- There is confidence in FactSet’s ability to quickly integrate artificial intelligence into its platform, which could enhance its competitive edge and facilitate future growth initiatives.
- Some believe that shares are currently underappreciated by the market, as negative sentiment around AI disruption may be overdone in a slow-moving sector.
- The strategic shift toward wealth management and targeting new segments is perceived as an avenue for long-term expansion and potential market share gains.
- Bearish analysts remain cautious on margin outlook, noting that elevated investment levels could continue to pressure profitability into fiscal 2026.
- Some express concern that ongoing investments may only be sufficient to maintain FactSet's current competitive position, rather than spur significant incremental growth.
- Expectations for the company’s financial guidance are muted, with several price targets lowered due to perceived risks in achieving execution and delivering on growth promises.
- Competition from AI-driven entrants and broader market uncertainty were cited as key factors for reduced price targets and less optimistic ratings.
What's in the News
- Macrobond has integrated FactSet's equity and ETF datasets into its platform, providing users with access to fundamentals, consensus estimates, market aggregates, and global security analysis. (Client Announcements)
- FactSet announced general availability of IntelligentCross' JumpStart functionality within its Portware execution management system. This enables buy-side traders direct access to Jefferies' low-touch liquidity through AI-powered order matching. (Product-Related Announcements)
- FactSet Research Systems issued fiscal 2026 guidance, forecasting GAAP revenues of $2,423 million to $2,448 million and GAAP diluted EPS of $14.55 to $15.25. (Corporate Guidance: New/Confirmed)
- The company completed significant share repurchases, acquiring over 257,000 shares for $105.64 million and finalizing broader buyback programs. (Buyback Tranche Update)
- The FactSet Board updated and clarified its bylaws, enhancing procedural mechanics and voting standards for director elections. (Changes in Company Bylaws/Rules)
Valuation Changes
- Fair Value Estimate remained unchanged at $335.94 per share.
- Discount Rate decreased marginally from 8.48% to 8.46%.
- Revenue Growth Projection was effectively flat, holding at 5.39%.
- Net Profit Margin forecast remained consistent at 25.36%.
- Future P/E Ratio edged slightly lower from 21.78x to 21.77x.
Key Takeaways
- Integration of acquisitions and new GenAI products is expanding service offerings and supporting revenue and ASV growth.
- Enhanced data solutions and operational productivity improvements are poised to sustain margins and bolster future revenue.
- Rising technology costs and asset management challenges may pressure FactSet's margins and hinder growth, with uncertain market conditions affecting revenue consistency.
Catalysts
About FactSet Research Systems- Operates as a financial digital platform and enterprise solutions provider for the investment community worldwide.
- FactSet is integrating new acquisitions like Irwin and LiquidityBook, adding immediate cross-sell opportunities and expanding services across buy-side and banking workflows, which will support revenue growth.
- The launch of new GenAI products, including Pitch Creator and conversational API, is expected to provide additional services that drive adoption and increase ASV growth, positively impacting future revenue.
- The company is implementing strategic initiatives in its wealth management segment, securing partnerships like the UBS deal, and this broad market share in the wealth sector should contribute to sustained ASV growth.
- FactSet is increasing its focus on data feeds, benefiting from strong demand for high-quality data solutions, which should bolster future revenue and margin expansion through increased enterprise-level sales.
- Focus on operational productivity, such as reducing third-party content costs and enhancing workforce efficiency through automation, underpins the company's confidence in maintaining its operating margins despite recent acquisitions.
FactSet Research Systems Future Earnings and Revenue Growth
Assumptions
How have these above catalysts been quantified?- Analysts are assuming FactSet Research Systems's revenue will grow by 5.7% annually over the next 3 years.
- Analysts assume that profit margins will increase from 23.3% today to 27.0% in 3 years time.
- Analysts expect earnings to reach $730.7 million (and earnings per share of $20.08) by about September 2028, up from $532.9 million today.
- In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 27.6x on those 2028 earnings, up from 26.5x today. This future PE is greater than the current PE for the US Capital Markets industry at 26.7x.
- Analysts expect the number of shares outstanding to decline by 0.48% per year for the next 3 years.
- To value all of this in today's terms, we will use a discount rate of 8.33%, as per the Simply Wall St company report.
FactSet Research Systems Future Earnings Per Share Growth
Risks
What could happen that would invalidate this narrative?- The slowing price increases tied to lower CPI levels could negatively impact FactSet's revenue growth, as demonstrated by a nearly $7 million headwind to ASV growth this quarter.
- Persistent challenges in the asset management and banking sectors, including ongoing cost rationalization and budget tightening, pose risks to revenue and retention which could unfavorably affect net margins.
- The market environment remains uncertain, particularly for banking, which has been a drag on growth; this uncertainty may continue to suppress revenue growth despite potential wins with new products.
- Increased technology expenses, noted as 31% higher mainly due to greater cloud and software costs, could pressure operating margins and require significant cost efficiencies elsewhere to offset.
- The execution risks tied to international expansion, given mixed results in regions like EMEA, could lead to inconsistent revenue performance and impact overall growth expectations.
Valuation
How have all the factors above been brought together to estimate a fair value?- The analysts have a consensus price target of $428.375 for FactSet Research Systems based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $500.0, and the most bearish reporting a price target of just $355.0.
- In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $2.7 billion, earnings will come to $730.7 million, and it would be trading on a PE ratio of 27.6x, assuming you use a discount rate of 8.3%.
- Given the current share price of $372.86, the analyst price target of $428.38 is 13.0% higher.
- We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.
How well do narratives help inform your perspective?
Disclaimer
AnalystConsensusTarget is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by AnalystConsensusTarget are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that AnalystConsensusTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.