Chapter 2

The Financial Record

FactSet's five-year record reads like a quality compounder: revenue up from $1.59 billion (FY2021) to $2.32 billion (FY2025), a near-27% free-cash-flow margin, and $460 million returned to owners in FY2025 alone. But the FY2025 headline flatters the trend. Reported diluted EPS rose 11.8%; on an adjusted basis, stripping a one-time divestiture gain and an easy prior-year comparison, it grew 3.2%. The cash generation is real and durable; the "double-digit growth" is not.

Five years of revenue and margin

Revenue compounded at roughly 9.8% a year from FY2021 to FY2025, but the shape of that growth changed. The FY2022–FY2023 mid-teens jump was lifted by the March 2022 acquisition of CUSIP Global Services (CGS); reported growth then settled to 5.6% in FY2024 and 5.4% in FY2025 as that acquisition annualized and organic demand did the work [1].

Source: FY2025 Annual Report (Form 10-K), Consolidated Statements of Operations [2]; earlier years from FY2022 Annual Report (Form 10-K) [3].

Reported operating margin tells a story that needs a footnote. It rose from 25.8% in FY2022 to 32.2% in FY2025 — a 640-basis-point expansion the bull case leans on. But FY2022 was a depressed base: FactSet took a $64.3 million asset-impairment charge that year (of which $62.2 million came from vacating leased office space as it resized its real-estate footprint for hybrid work), which alone cut roughly 350 basis points off the margin [4]. Measured from FY2021's 29.8%, the expansion to 32.2% is closer to 240 basis points over four years.

Source: derived from reported financials, FY2021–FY2025 10-Ks; FY2022 impairment detail per FY2022 Annual Report (Form 10-K) [5].

What the FY2025 headline leaves out

The gap between reported and underlying growth is the single most useful thing this record shows a new investor. FactSet's own non-GAAP reconciliation makes the point without editorializing: reported operating income grew 6.7% in FY2025, but adjusted operating income grew 1.3%, and adjusted operating margin actually fell, from 37.8% to 36.3% [6].

The mechanics sit on the income statement. FY2025 pretax income grew faster than operating income because "other income (expense), net" swung from negative $49.8 million to negative $27.3 million — a $22.5 million improvement driven largely by a $22.4 million other-income line that houses the divestiture gain, plus lower interest expense as debt was paid down [7]. Management states plainly that the rise in net income and EPS was "primarily driven by higher operating income and a gain from the divestiture of a business" [8].

Source: FY2025 Annual Report (Form 10-K), non-GAAP reconciliation of operating income, net income and diluted EPS [9].

None of this is aggressive accounting — the adjustments are disclosed and the items are genuinely one-time, cutting both ways across years. The point is calibration: a reader who anchors on "EPS up 11.8%" will overstate how fast this franchise actually compounds. The underlying rate in FY2025 was low single digits.

Cash conversion is the durable part

Where the record holds up unambiguously is cash. Operating cash flow rose every year from FY2021 to FY2025, reaching $726 million, and free cash flow (after a rising capital-expenditure line) reached $617 million — a 26.6% free-cash-flow margin and roughly 1.0x conversion of net income [10]. The divestiture gain does not flatter this figure: the non-cash gain is removed in the cash-flow statement, and only the $25 million of cash proceeds sits in investing activities [11].

Source: FY2025 Annual Report (Form 10-K), Free Cash Flow table and Consolidated Statements of Cash Flows [12].

One watch item lives inside that cash line. Capital expenditure — property, equipment and capitalized internal-use software — climbed from $60.8 million in FY2023 to $85.7 million in FY2024 and $108.8 million in FY2025, which is why free cash flow was essentially flat year-over-year (up $2.8 million) despite $26 million more operating cash [13]. The rising spend tracks the company's AI-platform build; whether it converts to faster ASV growth or simply resets the capex baseline is the question it raises.

Capital returned, and a balance sheet with room

FactSet returned $460 million to shareholders in FY2025 — $160 million in dividends (a 27th consecutive year of increases) and $300 million in buybacks — against $617 million of free cash flow, a 75% payout that leaves headroom [14]. Notably, repurchases stepped up as the shares fell — $177 million (FY2023), $235 million (FY2024), $300 million (FY2025) — the pattern a value investor wants to see from management buying its own equity into a de-rating.

Source: FY2025 Annual Report (Form 10-K), Consolidated Statements of Cash Flows — financing activities [15].

The buybacks come with an asterisk. Diluted share count went from 38.6 million (FY2021) to 38.4 million (FY2025) — down only about 0.5% — despite roughly $1.0 billion of cumulative repurchases, because stock-based compensation and employee-plan issuance offset most of the retirement [16]. The repurchase program has largely defended the share count rather than shrunk it.

The balance sheet is the reader's insurance against the calibration mistake noted earlier. FactSet has deleveraged from the CGS-financed peak: net debt fell to about $1.03 billion and debt-to-equity to 0.63x (from 1.49x in FY2022), against $935 million of FY2025 EBITDA — roughly 1.1x net leverage [17]. During FY2025 the company refinanced, raising $803 million of new debt to repay $805 million of old [18]. Bankruptcy risk is not a live question here, which matters for a reader who has been burned by it before.

Where the growth actually comes from — and a recent inflection

Revenue is concentrated in the Americas, which produced 65% of FY2025 revenue; EMEA added 25% and Asia Pacific 10% [19]. Segment operating income by region is not a clean read of geographic profitability — FactSet centralizes most content and technology cost in the Americas, so the region carries the cost load while EMEA and Asia Pacific look far more profitable than they independently are — so the useful geographic signal is revenue, not segment margin.

Source: FY2025 Annual Report (Form 10-K), MD&A segment results by geography [20].

The forward-looking metric FactSet manages to is Annual Subscription Value — contracted forward revenue for the next twelve months. Organic ASV growth is where the recent record turns from a deceleration story into an inflection. It bottomed at 4.8% for FY2024 [21], recovered to 5.7% for FY2025 [22], and has climbed through FY2026 to 6.7% at February 2026 [23] and 7.1% at May 2026 [24]. The slowdown that framed the de-rating (De-Rated Compounder) is, on the most recent data, reversing.

Source: quarterly organic ASV growth as reported; anchor points per FY2025 10-K [25], Q2 FY2026 10-Q [26] and Q3 FY2026 10-Q [27].

What the forward estimates say

Consensus does not extrapolate the ASV re-acceleration into the earnings line. Sixteen-to-eighteen analysts model FY2026 revenue of about $2.47 billion (up 6.4%) and FY2027 of $2.61 billion (up 5.8%) — mid-single-digit top-line growth holding. On the bottom line, consensus adjusted EPS of $17.81 for FY2026 is only 4.9% above FY2025's adjusted $16.98 — consistent with the low-single-digit underlying rate this chapter identified, not the 11.8% GAAP headline.

Source: consensus analyst estimates (16–18 analysts), as of July 2026.

The sell side is unusually cautious for a franchise of this quality, which fits the "fallen star" frame. Of the most recent ratings, none were strong buys — two buys, ten holds, four sells and two strong sells — and the mean price target of $254 sits below the $262 spot price, with a $210-to-$340 range around it.

Source: consensus analyst price targets and recommendation distribution, as of July 2026.

The financial record, then, cuts two ways for the report's central question. The business is a genuine cash machine with a fortress balance sheet, disciplined-if-dilution-offsetting buybacks, and — most recently — re-accelerating subscription growth. Against that, its underlying earnings power grew low single digits in FY2025 once the divestiture gain and prior-year noise are removed, and the Street already prices modest growth with a mean target below the market. Whether that combination is a margin of safety or a fair price for a slower compounder is what the valuation work has to resolve.