FactSet Research Systems Inc. Stock

Good day, and thank you for standing by. Welcome to the FactSet Third Quarter 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 Third Quarter 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 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. Q3 performance was strong with our fifth consecutive quarter of acceleration in organic ASV growth. We grew ASV by 7.1% to $2.48 billion across all regions and client types. Adjusted operating margin was 34%, reflecting the investments that we've made this year. Adjusted diluted EPS was $4.53, up 6.1% year-over-year. Our client engagement and growth trends this quarter show that our 4 foundational strengths of Connected Data, embedded workflows, service excellence and broad and deep distribution are becoming even more valuable as our clients deploy AI widely.

Five example client wins from this quarter demonstrate the breadth and depth of our solutions and the tangible impact of strategic investments we have made in new products such as managed portfolio services, deep sector content and real-time detail. We won a mandate to deliver turnkey performance, risk and reporting managed services to one of the largest global sovereign wealth funds. We expanded our engagement with a large global OCIO to provide comprehensive reporting and digital capabilities wrapped with managed services from our subject matter experts. We signed a 5-year enterprise contract renewal at a major global bank. The scope has increased to include more data consumption with deep sector content playing a key role. LPL Financial, the largest independent broker-dealer in the U.S. that supports over 32,000 financial advisers selected our real-time data platform to support their cloud native trading application and intraday portfolio P&L workflows.

We displaced a long-standing incumbent to expand our presence at a large global investment manager across our front-end middle office, already a top 20 client seeking to further consolidate their operations with FactSet. Each of these 5 wins represents an existing client, expanding their relationship with FactSet, underscoring meaningful room to grow within our current relationships.

Last quarter, I shared the 3 priorities guiding a transformation in how we do business, commercial excellence, productivity improvement and long-term strategy. This quarter shows tangible commercial and productivity outcomes and our AI road map taking shape consistent with our strategy.

First, the commercial excellence initiative is resulting in stronger new business growth, retention and expansion of ASV. As we roll out better tools, increased conversion at every step and streamline our processes in marketing, sales and customer success, we are seeing improvement throughout the sales life cycle.

Our new website resulted in more top-of-funnel demand generation. Pound rates improved by 8%, engagement increased by 8% and prospects, marketing qualified leads and sales qualified leads grew by double digits. In Q3, our pipeline conversion from marketing activity increased 15% year-over-year, and win rates for these opportunities improved by 27% with 76% of the resulting ASV coming from new business. The corporates, asset owners and institutional asset management client types were particularly strong.

We are rolling out a new AI-powered sales enablement platform to our entire team targeted at improving the quality of our sales pitches, increasing deal velocity and improving win rates. Beyond these traditional levels, we are transforming our model for retention and expansion as our clients adopt AI. Q3 was the fourth consecutive quarter of double-digit growth in ASV for our data solutions with MCP contributing to the momentum.

Over 90% of our top 50 clients are now using 4 or more FactSet AI solutions. And quarter-over-quarter, overall ASV growth among clients using our AI solutions was 50% higher than for the rest of the book, early evidence that our AI adoption is helping drive retention and expansion opportunities.

The AI transition is also accelerating the shift of our business model from [indiscernible] linked contracts to flexible enterprise agreements that encompass our growing data analytics and workflow capabilities. The majority of ASV renewed in Q3 was in the form of enterprise agreements all renewed for durations of 3 years or more. Average contract term extended by roughly 30% while broadly preserving pricing, underscoring the foundational value attributed to FactSet by our clients as they adopt AI.

Second, we are rolling out AI agents, streamlining operations and reducing complexity to generate sustainable productivity improvements and operating leverage.

Let me highlight a few examples in engineering, data operations and client service, our 3 largest operating cost centers. In Q3, we scaled AIUs across our product and engineering teams. coding-related token use grew 5x quarter-over-quarter, while committed lines of AI written code grew almost 10 times. Coding agents now author 27% of committed code in the engineering teams using these tools with rollout continuing across the organization. With these efficiency gains, we initiated a roughly 10% reduction in our technology workforce and freed up significant capacity to accelerate strategic product development. We are embedding AI across the full data operations life cycle from collection through quality assurance. Where we have fully implemented new tools, we have reduced operator touch time for data table extraction by more than 50%. We are now scaling this playbook with clear goals to improve quality, timeliness and unit cost.

In M&A data, we have dramatically reduced turnaround time for deal updates. Within FactSet Fundamentals, one of our largest data sets, we've consolidated multiple data pipelines into one, allowing us to redeploy significant capacity and reduce the size of this team by 5%. Our client service teams are seeing early positive results from digitization pilots we are running. This reduce the need for manual onboarding activities from our consultants, enabling them to spend more time on strategic user health and retention efforts. In Q3, approximately 4,000 bankers used our digital onboarding tools and the capacity unlocked resulted in a 22% quarter-over-quarter increase in live user interactions by our consultants.

This helped drive a 5-point increase in Net Promoter Score among our junior banker population in Q3, building on the momentum from last quarter. We are in the early stages of these efforts, but together, they are aimed at a structural reduction in our cost to serve while improving overall quality. As we realize the full impact of these productivity initiatives, we expect to see further scale benefits and operating margin improvement.

Finally, we are developing our strategy based on a strong foundation of connected data, embedded workflows, service excellence and deep and broad distribution. These strengths make FactSet a trusted government platform for institutional finance and are even more important to our clients as they make their AI transition. As a starting point for our clients, we have launched our AI solutions under the banner of FactSet Intelligence. It consists of 3 layers that accelerate our clients' AI adoption, the trusted data ecosystem governed and optimized agentic infrastructure and intelligent workflows build for hybrid workforces.

First, a trusted data ecosystem, including FactSet, client and third-party data. Data is the fuel for AI and has to be high grade to provide the right quality output. FactSet's MCP server built on a robust ecosystem of content APIs has over 450 clients actively engaged under contracts and trials. API call volume is experiencing rapid growth with Q3 volumes at 13x the level we experienced in Q2. We expect this to continue as we make more data sets available through MCP. Clients can now access our data through all major frontier lab platforms, including Anthropic, OpenAI, Google and Microsoft.

Our MCP enables access to high-quality, comprehensive and auditable data sets presented through the same endpoints used by our own developers. The quality of our data delivery through MCP is driving expansion at clients where we are already embedded in high-value workflows. For example, we launched our portfolio analytics MCP just last week, bringing our signature portfolio analytics into agentic workflows. Portfolio Analytics has long been central to how our buy-side clients measure performance, manage risk and meet reporting obligations, and we believe we will unlock significant value for clients by extending these capabilities to agnetic use.

We are also extending our AI solutions in the data layer to client, internal data and third-party data. FactSet's unique strength in entity resolution, ontology and concordance in partnership with Snowflake, Databricks, Google and AWS position us well to help clients build out their enterprise knowledge graphs. Second, FactSet has governed and optimized agent infrastructure. Our clients want to curate and optimize multiple horizontal and vertical AI solutions.

To meet this demand, we are rapidly rolling out infrastructure to become the integrated agentic platform for our clients. We already support millions of models and billions of formulas and data points across the nearly 250,000 users of our workstations every day. Users can discover our agents soon build, test and publish their own agents and even integrate third-party agents, all while maintaining the security standards, data entitlements, audit logs and cost optimization that clients expect and get every day from FactSet. While the user interface may very well evolve as agentic workloads take off, we are confident in the value we deliver to our clients and are already seeing significant client interest in rationalizing various experimental efforts and consolidating their AI implementations with us.

Third, intelligent workflows for hybrid workforces. As we roll out agented capabilities, we are working closely with clients to redefine how they get work done with a hybrid workforce of humans and agents.

Through the partnership we announced with [indiscernible] in March, we have launched a fundamental transformation in investment banking workflows with our Capital Markets Intelligence suite of agents. Senior bankers can now send an e-mail to an agent describing what they need and receive insights and artifacts directly Built on current FactSet data, comparable company analysis and deal precedents, automatically generated and delivered back. What used to take hours or days now happens in minutes, freeing up capacity for higher-value client workflows and interactions. We are seeing strong early engagement with active or pipeline trials at over 30 of our top 100 banking clients. We will roll out similar capabilities to our buy side and wealth clients in the coming weeks with our Institutional Research Intelligence and Adviser Intelligence product suites. We announced strategic partnerships with InSync Analytics, Genius AI and [indiscernible] AI to advance these capabilities and supplement our internal agent development road map.

Across all layers of FactSet intelligence, we see significant growth opportunity as our clients consume more data through many new channels, consolidate their agentic deployments with us and reimagine their workflows with our agentic solutions.

To further accelerate our product innovation, we announced a strategic partnership with Google Cloud this week, expanding our distribution through Google Cloud's enterprise channels and unlocking new revenue opportunities. The partnership will focus on 3 main areas: enhancing FactSet's workstation with Google's enterprise search, deep research API, grounding and other multimodal capabilities, using Google Cloud's AI platform. These capabilities will supplement FactSet's trusted and connected data and analytics and improve the breadth and depth of our AI-enhanced insights. FactSet will bring our financial intelligence directly into Gemini Enterprise and expand our MCP and agent sharing functionalities, creating interoperability between the FactSet [indiscernible] and Gemini Enterprise. This builds on the previously announced deep mind, deep research collaboration.

FactSet will also develop and launch a new generation of agents using the Gemini Enterprise Agent platform designed to improve efficiency, execution and decision-making across key client workflows. As AI reshapes financial institutions, FactSet is becoming mission-critical AI infrastructure. We are transforming our business model to win in an AI intensive future. We look forward to sharing our strategy and medium-term business plan at our upcoming Investor Day.

I'd like to now welcome Josh Warren to FactSet. Congratulations, Josh, on your first earnings call as CFO of FactSet. He will now discuss our Q3 performance in more detail.

Thank you, Sanoke. It's great to be here with everyone this morning. Before getting into the financials, I want to take this opportunity to thank all the FactSetters who have made me feel so welcome since I joined in April. I would also like to specifically recognize Helen Shan, whose leadership over the last 8 years as CFO and Chief Revenue Officer, has put FactSet on firm footing as we embark on a new chapter.

This week marks the 30th anniversary of FactSet's IPO, and I'm excited to join the firm at this moment. As AI and agents reshape how information is sourced synthesized and acted upon, FactSet is positioned for durable structural growth that can deliver excellent outcomes for our clients, employees and shareholders.

In our results, I'll highlight 3 things. First, our client franchise, its quality, breadth and durability reinforce our financial profile. Next, our operating leverage. And finally, our flexible balance sheet and disciplined capital allocation, which support our go-forward strategy. Expanding our client relationships drove this quarter's results, which I would like to [indiscernible]. As of the close of fiscal Q3, at the end of May, our ASV exceeded $2.48 billion, representing 7.1% organic growth, an acceleration by more than 250 basis points over the comparable growth rate in 2025.

Revenue was $622.9 million, representing 6.4% growth over the previous year. Our adjusted operating income was $211.8 million, representing a 34% margin, down approximately 300 basis points relative to the comparable quarter in 2025 due to targeted investments to improve operating leverage, marketing and performance-related compensation linked to ASV momentum. And adjusted EPS grew 6.1% to $4.53.

FactSet serves clients across over 80 countries, including 95 of the top 100 asset managers, more than 85% of the top 50 global investment banks and the world's top wealth managers, corporations, exchanges, central banks and sovereign wealth funds. This breadth gives FactSet meaningful exposure to all major geographies and client types in the financial services industry, so we are not dependent on any single market or segment while providing a substantial opportunity to expand wallet share within our current clients.

With an average client relationship spending more than 16 years and 9 of our top 10 clients measured by ASV having been with us for more than 2 decades, we grow with our clients and our longest-standing relationships have some of the most exciting opportunities for growth. ASV retention rates above 95% reflect the strength of our client relationships, those relationships fuel our ASV bookings growth that provides a line of sight into future revenue.

As of last year, ASV no longer includes onetime nonrecurring revenue such as professional services. Our approach is to embed flexibility within enterprise agreements and importantly, secure minimum commitments. These minimums give us a baseline so that we can support new consumption patterns and be rewarded for the value we deliver while preserving the forward visibility that we expect will remain central to our financial model as we deliver more AI solutions to our clients.

Today, most of our recurring revenue comes from fixed subscription and license revenue. A growing portion of our recurring revenue streams are driven by initiatives that are activity based, including workflows that are increasingly mission-critical for clients. We are seeing more client interest in consumption-oriented pricing, particularly for emerging AI-enabled offerings, while modest in size today compared to our total ASV, we expect these revenue streams to become an increasingly important driver of our growth over time. These revenue streams introduce a dynamic and growth-oriented dimension to ASV forecasting and subsequent revenue flow-through that complements the traditional subscription base.

As our delivery model evolves alongside our clients, we expect to review our approach to reporting to preserve transparency and alignment with our go-forward strategy. Our organic ASV is a like-for-like comparison that excludes the impact of foreign exchange, discontinued business lines and acquisitions that closed within the last 12 months. For the third quarter, organic ASV accelerated to 7.1% year-over-year, an increase of $35 million during the quarter, FactSet's highest ASV growth rate since Q1 2024. Growth was evident across all regions and client types as the world's leading financial services firms continue to choose FactSet as a trusted partner.

Turning to our performance by geography. Organic ASV accelerated in each region compared to the prior year. Americas grew 7%, EMEA grew 5%, and Asia Pacific, our fastest-growing region, grew 10%.

Now turning to our results by client type. The institutional buy side consisting of global asset managers, asset owners and hedge funds accelerated to 6% organic ASV growth. This represents slightly less than half of our overall ASV. Wealth remains our fastest-growing category and delivered 10% organic ASV growth. Organic ASV for deal makers grew 9%. This category represents a broad range of clients, including investment banks, sell-side research teams, corporates and private capital firms. Today, this represents nearly 40% of clients and less than 20% of ASV. Though smaller in size, our strategically important market infrastructure category saw organic ASV grow 7%.

Demonstrating strength across the platform, third quarter revenues grew 6.4% year-over-year or 7% on a like-for-like basis. Adjusted operating margin was 34% for the quarter as compared to 35% in Q2 and nearly 37% a year ago. This reflects a series of deliberate investments that we expect to deliver growth and operating leverage over time. Compensation-related expenses typically account for approximately 60% of our total cost base.

Our Q3 margin reflects a 7% year-over-year increase in compensation-related expenses that were driven by performance incentives linked to the ASV acceleration delivered, not additional headcount. Because revenue from new ASV bookings is recognized over time, periods of faster ASV acceleration can temporarily compress margins in any quarter since the incremental ASV is not yet reflected in revenue.

We will remain long-term focused and optimized for profitable growth. Despite the increased overall compensation expense during Q3, FactSet reduced its overall headcount by approximately 1% after holding it roughly flat during the first half of the year. While compensation-related expenses accounted for approximately 40% of the increase in operating expenses, the majority of the year-over-year growth came from non-compensation items tied to growth and productivity initiatives. More than 1/3 of that non-compensation expense increase was technology spending, including to strengthen our core infrastructure and on-token costs. We increased our marketing spending and have a variety of professional services engagements underway to drive future operating leverage. Margin this quarter was also negatively impacted by nonoperational items, such as our FX hedging program, which went from a gain in Q3 2025 to a loss in Q3 2026 creating an overall drag of approximately 60 basis points.

Our earnings per share increased 6% year-over-year to $4.53. This was driven by higher revenue and a lower share count, partially offset by increased expenses and a higher effective tax rate. While we continue to drive ASV growth, we're focused on capitalizing on our scale to deliver long-term, sustainable and profitable growth. To that end, we've launched a range of strategic projects aimed at running FactSet with greater discipline and efficiency. Sanoke outlined multiple productivity initiatives, but from an operational standpoint, I'll highlight 2 items we initiated during Q3 and completed in the past few weeks. We recently rightsized certain engineering teams as we standardize how we build and run software and take advantage of AI-assisted coding. Additionally, we entered into an arrangement with rep risk to support our clients' needs as we discontinued the Signals attribution service FactSet provided following the 2020 acquisition of True Value Labs. We are continuing to review our product portfolio against appropriate hurdle rates.

And while we expect to make additional efficiency improvements, our focus and our investments will remain on serving our clients with excellence. Consistent long-term free cash flow generation is a hallmark of our business model and a metric we actively manage towards. Our free cash flow grew to $254 million for the third quarter of fiscal 2026 compared with $228 million for the prior period, an increase of 11%. Our disciplined framework prioritizes organic investments in high-growth projects, followed by strategic inorganic activity and finally, returning excess capital to shareholders.

During Q3, we accelerated our repurchase activity, buying back approximately 926,000 shares for $203 million. Fiscal year-to-date, we've deployed over $500 million to repurchase shares. Additionally, we increased our quarterly dividend for the 27th consecutive year. In total, during fiscal 2026 year-to-date, we have returned over $625 million to shareholders through a combination of dividends and repurchases, approximately double the amount of return over the same period last year demonstrating our continued commitment to delivering shareholder value.

Overall, we are committed to maintaining our investment-grade rating, which Fitch reaffirmed with a stable outlook this quarter. We continue to assess opportunities about optimizing our debt maturity profile to align with our strategy. Our balance sheet continues to strengthen with a conservative level of gross debt leverage at 1.5x and net debt leverage of 1.2x providing capacity and flexibility to support growth.

Turning to our outlook. We remain confident in the guidance ranges that were previously set for ASV, revenue, operating margin and EPS. On revenue and EPS in particular, we are tracking toward the high end of those ranges based on our business trajectory. We are pleased with our accelerating ASV growth, and our focus remains firmly on delivering long-term value for our clients and shareholders.

During my first 10 weeks here, I've seen that when clients are thinking through and making big decisions about the data powering their platforms, they turn to FactSet as a partner. Our open architecture and partnership-oriented approach positions us to deliver excellence to our clients and compounding growth for our shareholders. With that, I'll hand it to the operator to open the line for questions.

[Operator Instructions]

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

Really strong momentum on ASV and it seems like pretty broad-based. But as we look at the guidance, the guidance implies a moderation in the fourth quarter, so just wanted to better understand, is that just purely conservatism, tougher comps? Or are there any puts and takes that you could flag?

Thanks, Ashish. As you've noted, I think it's been a really strong quarter. And in fact, the momentum continues into Q4. Just a month into the quarter, we see that momentum has continued. We continue to see a strong diverse pipeline of clients. It's across -- it's broad-based. It's across regions and it's across all of the different client types that continues to maintain that growth trajectory that we've seen.

It is a tough compare. Just to remind everybody, Q4 of last year was our largest quarter ever, and it is a tough compare. But as we stand today, at the end of June, early July, we are ahead of last year in terms of our bookings. And we also see a pipeline that is as robust as we saw at this time last year. And as you can imagine, AI is a tailwind for us. So that is also helping us.

Now in terms of reaffirming guidance, we don't change guidance quarter-to-quarter and there is a lot to execute ahead of us. There are multiple 7-figure deals outstanding. So it will be all down to execution in the next 8 weeks, and there could be a timing issue there. And the second thing is a lot of tons of mid-market deals, which we are actually quite excited about because they are faster to close. And AI is very dynamic. So with that, I think we are reaffirming the guidance and reasserting that we are very confident in our delivery.

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

I wanted to talk a little bit more about your AI monetization strategy. So thanks for a lot of the detail that you provided that 90% of your top 50 clients use 4-plus AI products and faster -- 50% faster ASV growth. So just give us some context around that and just the monetization around that? Is it because there's a direct price for the usage of AI? Is it access to more data sets? And then you also talked about a lot of your clients consolidating their AI workflow with you? And are you agnostic as it relates to whether they're using your MCPs? Or whether they're using your specific tools that are inside FactSet workstation. So sorry, long-winded question, but just with a little more context there.

Thank you, Faiza, and lots of questions in there. And we'll take a little bit of time to answer that because there is a lot of color in here that we can share. Maybe I'll start first with the short-term picture on AI monetization and then sort of transition to how we see this in the longer term. At the moment, I think we are maximizing our AI monetization with a lens of maximizing enterprise value. So it's all leading to the growth acceleration in ASV, our increased retention as well as expansion in our existing clients.

So just to give you a little bit of color, just in this quarter, we saw over 10% of the ASV growth came directly from AI SKUs. And obviously, there was a much bigger impact than that in the broader ASV growth as well. Just to give you a couple of client examples. We had like one of the top 10 banks literally double their data subscriptions with us because of AI. And these are multiyear contracts. A top hedge fund grew 6x with us, again, because of our MCP delivery. And at this point, over 20% of our top 100 clients are using MCP on a paid basis, right? So these are just some short-term statistics giving you the -- sort of the momentum that we are seeing. But when we think more longer term, and as you referenced, I think we see multiple, multiple opportunities, and we see AI as a massive tailwind.

To start with, there's been lots of questions about what are our moats. And we're really now starting to see this in evidence, right? It's no longer the theory. We have a strong moat in our connected data and in our embedded workflows and we see this as a leapfrog moment for us on a stable subscription base. Our whole data solutions business that historically delivered standard data feeds, APIs and also sharing on environments like Snowflake and Databricks is perfectly set up for this, right? With ASV coming through on AI, we see us shipping faster, and we are able to flex all of this into commercial agreements that are not just seat linked, but are true enterprise agreements that has a stable, large subscription base and a flexible construct on top of that, which allows us to capture the upside in the future from a consumption basis. So that's a little bit of color on the short term and the medium term and happy to take any further questions on this. But hopefully, you can see the momentum is picking up.

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

All right. I guess, I need to switch over to margins for a second here. I think previously, you made some comments in your guidance, and I don't think you made them today, but that you're actually hoping to get somewhat closer to the midpoint of your adjusted operating margin guide. So just wondering with some of the things we've done, some of the things that are a little bit more onetime like that FX hedge. Is that still what you're shooting for? Or what are the kind of upsides and downsides to that? And then I know you're not going to give guidance for next year, but maybe you can just remind us, I think there are a few things this year that are somewhat one-timers, professional services, some infrastructure investments that you had tax for this year. So maybe just remind us what are those onetime-ish items comes out as we head into 2027 and dimensionalize those, please?

Yes, as you noted, we came in this quarter, the 34% adjusted operating margin that reflects a combination of things. It reflects the strong investments that we've been making throughout the year. And as we've said in prior quarters, those are second half weighted. So you saw the effect of that in the quarter and the performance incentives we are accruing given the ASV outperformance. We're very happy with the pace of the investments. We are seeing really strong progress, both on the growth-oriented investments and in the foundational investments, both of which we see starting to deliver operating leverage.

And as you know, we don't manage through a quarterly margin, and we don't guide to a quarterly margin, but we see significant acceleration in AI and continued opportunities for investment, and we'll continue to entertain high ROI investment opportunities as they come along. So with all that said, what I would clearly say is we see a clear line of sight now on margin improvement coming in the future quarters. That includes some of the things you mentioned, right? We are still clearly for this year, focusing on the midpoint of the guide, right? We still have confidence in that. And we are seeing line of sight from all of these initiatives that we think will lead to margin improvement in the coming quarters. I'll ask Josh to build on that and give a little bit more color on the puts and takes for this quarter and going forward.

Sure. Thanks, Alex. Really appreciate the question. Nice to hear from you. Just to Sanoke's point, just on the puts and takes. The biggest single item and really, frankly, the main dynamic in the quarter is timing, specifically around pay-for-performance arrangements, not headcount growth. Compensation-related expenses was the single biggest related -- single biggest item in terms of our increased expenses. When we start to look at the other items, right, technology spending is our second biggest category. That's a combination of things, including our increased focus on our core infrastructure programs related to cybersecurity, ITDR and also our token spending. Our token spending has increased year-over-year, and Sanoke mentioned some of the return that we're seeing on our token spending.

With regard to the other category, there's -- as you may observe, there's a series of other initiatives that we have in flight. We increased our marketing spending, we have professional services arrangements, but what I would say, looking forward, taking all of that into -- kind of into the [indiscernible] as the past, looking forward, we see a clear path to expanding our margins. And part of what we're looking forward to is continuing the momentum that we see in the business. And that momentum, ultimately, we feel will position us well both on the top line and on our margins.

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

Welcome to the call, Josh. A lot of infoservices companies have talked about this trend of AI implementation, driving accelerated data demand. I was wondering if you can talk a little bit more about FactSet's strategy to monetize on this trend, both near term and long term. And in relation to this, how should we think about the incremental revenue opportunities brought by MCP, especially in the past, you called out some expansion of new user persona. And I was wondering if you can tell us a little bit more about that.

Sure, Kelsey. I mean, some of it I just covered, I think, in my discussion around AI. But just to repeat that, right, the short-term monetization we see is an acceleration in our ASV growth. Clearly, MCP is a real accelerant. We see whenever there are deals that involve an MCP component, more often than not. And I would say 90% of the time, we've seen contract value improvements. So at the moment, it's playing out in the overall broad ASV acceleration. As we go along, we are going to see more and more discrete [ ASKs ]. And as I said, more than 10% of the ASV even this quarter came from that. Now again, it's too early to kind of draw a trend line from that. but that was from virtually 0 last year, and it's certainly growing. Now in terms of your question around user personas, yes, that continues. I think even today of our MCP trials as well as our MCP paid implementations, around 20% of the users of our endpoints are net new users whether they might be in existing clients or at new clients, but they are net new users. And these are new workflows and new workloads that are coming on, thanks to our ability to deliver -- deliver data to new AI workloads.

And just to remind everybody, we are also available on all the different frontier lab marketplaces as first-class data connectors and that enables this easy discovery, connectivity and also growing users. Now the last thing I would add is an important and a key indicator for us is how does this translate into broader growth in our product suite and product penetration.

And from what we've seen so far in the last 6 months, whenever there is AI consumption through MCP, it is actually leading to an upsizing of our existing products, whether they are workstations, whether they are other APIs, whether there are other standard data feeds, there is a multiplier effect on the existing business as well. And if you recollect a couple of quarters ago, I spoke about the AI flywheel effect. It is still very, very early stages, but we are starting to see that in action.

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

I just wanted to understand the partnership strategy and maybe just part of broader capital allocation as well. I mean, I understand all the Frontier lab partnerships with a bunch of these other ones that you've announced, which we are not too familiar with. I'm just trying to understand the pipeline of what that list looks like and whether these are step one and to potentially making some of these deals? Or is that not the way I should think about this?

Yes. Thanks, Manav. And you've spotted the sort of the diversity of partnerships that we've struck. It's a deliberate strategy, and it is consistent with how we've thought about our network and ecosystem historically. As you know, we've always been open architecture. And typically, any M&A we've done -- we've had a history of connecting it with other partners that we've actually worked with, and we have the experience, there is a clear understanding of the value creation potential, et cetera.

In this cycle, we are very focused on 3 things, which connects back to what I described earlier in my prepared remarks on FactSet Intelligence. Across each of those 3 layers that we described, there is a lot to be done, both at our end, at our clients end and in terms of integrating the whole ecosystem. So at the data layer, there is a number of initiatives underway to help clients advance their data meshes and to build these enterprise knowledge graphs, which requires us to partner with firms like Snowflake and Databricks and the like. Similarly, some of the partnerships that you see at the top of that slide, which are the recent ones that we've announced, those help us really accelerate the agentic workflows that we are building that are very focused on user personas, whether it's on the buy side or in wealth management.

And the Google partnership we announced cuts across the whole page really because we get a lot of benefits from it immediately. A, in the FactSet workstation, we can infuse Gemini everywhere. We can get the benefits of early releases of the most advanced frontier models. We get the ability to get cheaper tokens usage because we get the preferential pricing as part of this contract and we benefit from better infrastructure and joint product development and innovation.

So the idea is that we are accelerating product development. We are being very prudent in our capital allocation, which Josh will get into in a second. And we are working very actively to ensure that we are staying at the cutting edge of the market and actually leading the market in many ways as our clients make this AI transition. Maybe, Josh, do you want to comment a bit more capital allocation.

What I would add to -- Sanoke, what I'd add to that is we're very focused on operational execution, but our capital allocation framework provides really a road map to value creation. So specifically, what that means is prioritizing the investments that offer the highest risk-adjusted returns. So we're very focused on investing in growth, investing in growth means building out the products and solutions that we deliver to our clients. And then beyond that, we consider all excess uses of free cash flow, whether it's return of capital to shareholders in the forms of buybacks or dividends or you asked about M&A or our partnership strategy in particular.

And on that -- what I would say just to augment what Sanoke outlined, is we intend to be very surgical in terms of how we are approaching our acquisition philosophy. We are at the heart of a robust ecosystem of partners that we work with. But our approach is really going to be focused on the areas of highest and greatest impact. So what is really exciting for me in particular and for all of us at FactSet is because of FactSet's open architecture approach. And because we operate in this rich ecosystem, a lot of our inorganic activity, we expect to be derisked, right?

We are already likely having a technology integration or a client integration with a particular partner that we would work with. So you should expect a pipeline that flows from a lot of the day-to-day execution activity that we are engaged in.

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

I wanted to ask a little bit about the commentary about the 3Q '26 renewals extended the length of contracts by 30% on average. And I just want to get a little bit more color in terms of are you trading anything like price to get an extended term? And then also, just with the evolving kind of monetization model. Is there any risk of locking yourself into something that might not be ideal a couple of years down the line? And I'm actually -- it's interesting that clients are interested in going out that far, given that the models are evolving. And I was wondering what the feedback is from that. Do you think that you may have to open up these contracts later on if something kind of changes.

If you could just give a little bit of color on that? And then just -- Josh, first of all, I guess, welcome to the company on the call. I just wanted to noting that not reporting client count, user account and employee count, is that something that you feel is just less relevant as you kind of assessed the company in terms of the metrics driving the business?

Yes, I'll go first, and thanks for the question. Thanks for the welcome. Maybe let's take your questions in reverse order. In terms of client count and user count, more than happy to share our user count is up 12% year-over-year, you should expect to see those numbers in our Q that we are filing likely aftermarket today. But what -- fundamentally, we're committed to transparency, and we're committed to giving you the metrics that matter.

So an indication of user counts tends to be in the long tail and not really flows through to the revenue or profitability that impacts the return that we provide for FactSet. Sanoke, do you want to take the first part of the ...

Sure. I mean as I said earlier, Shlomo, I'm really excited to see the transition we are making from just sort of shorter term, maybe [ seat-based ] contracts to longer-term enterprise agreements that give us a lot of flexibility and give our clients a lot of flexibility. So just to give you a little bit of color on how they are structured. We want to -- I think the operator word between us and our clients is flexibility because it is an uncertain future. I think clients are unclear as to exactly where their own consumption will be. And so at the same time, there is a high degree of trust working with us. So we've been able to parlay that sort of that paradigm, if you will, into structuring these contracts.

So the contracts are all value-based and any price improvement that we see is based on the value we deliver. We are -- I can definitely confirm we are not taking any price compression in return for their contract extensions, right? As it stands, I think there is a lot of new functionality, a lot of new data sets that we are launching, and we are delivering it through more and more new channels. So we talk a lot about MCP, but our -- a tremendous amount of our delivery happens directly on the large data measures, whether it is Snowflake or Databricks or Google or AWS. So we are pretty tech forward, as you know, and that ability to deliver data through multiple channels and provide lots of new functionality plays into these contracts.

And in an AI world, right now, there is a lot of value that clients are placing on that. Our flexibility is an important aspect of it. There is a large subscription base to it, and I think we feel very comfortable about that. And there is a lot of provisions for new consumption patterns, whether it is in terms of diversity of data sets or increased volume tiers depending on the type of workloads that clients are experimenting with. We feel pretty good about this transition. We'll continue to focus on it. It is still early days, and we'll keep you updated in future quarters.

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

Sanoke, can you maybe discuss a little bit about the commentary and the review of the product portfolio, how expensive is it or how comprehensive is it? Is there a certain theme that you're pursuing and then maybe where does M&A fit into that strategy?

Sure. I'll touch first from an AI perspective, Surinder, and then maybe expand a little bit to our broader, sort of what I would call, the classical product definition of who we are as a company. So just on the AI world, we should look at the stack that we talked about earlier in our prepared remarks.

We see us playing across that stack and positioning ourselves as the AI infrastructure for institutional finance. We see our capabilities in data concordance, the quality of the data we deliver, our ability to integrate and mesh with internal and third-party data as world class. And we see that as an essential ingredient as clients build out their enterprise knowledge graphs. So that's the first layer of the FactSet intelligence stack. The workstation itself, we view as a very much a container that has a lot of capabilities today that is all desired in this AI world.

So it has trusted infrastructure, which is feature rich. It is already baking in all of this trusted data that is positioned to support these new agentic workloads. We have the right entitlements. We have the right model libraries. We have the security standards. The UI itself, the user interface, we think, is less relevant. That might very well adapt and we are very actively adapting it ourselves into more of an agentic infrastructure and an agentic user interface, which is fully infused with the best AI capabilities. We are starting to see the benefits of all of this because as clients are exploring and experimenting with lots of horizontal and vertical AIs. They are starting to come back and consolidate it on our own agentic infrastructure. So the product development there, we see is the transition from a traditional workstation to an AI native or an agentic workstation.

And that then leads to, what I talked about in the call earlier, which is brand-new workflows fully infused with agented capabilities, and we are partnering very actively with clients. And these have to be developed and delivered with our forward deployed engineers as well as forward deployed consulting teams. So that's all in the AI stack. Now let me maybe pivot a little bit to talk about product development from a different axes, if you will, which is our capabilities in data and analytics.

So here, we are continuing to invest and grow, and this is really a big driver of our growth in fixed income analytics. We've always been very strong at it in our performance analytics, portfolio analytics capabilities, but we are now bringing all of that capability also to the front office, and we are winning and taking market share from incumbents there. We are extending our capabilities in private capital. So our private market data sets are some of the fastest-growing SKUs, if you will, in data delivery.

And as you know, we've spoken about it in prior quarters. We're continuing to invest in deep sector data as well as in real time and pricing and reference data capabilities. All of this is resonating well, and we'll continue to invest in it. So you can see us rounding out both in terms of the vertical of the AI stack as well as across the range of horizontal data disciplines and analytics capabilities.

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

This is Yehuda Silverman on for Toni. Just had a quick question on the payback period. I know you previously mentioned 3 years for some of the heavier investments. Just curious if you can update us on if there's any difference in the change in the payback period around some of the more recent AI-related investments? And where we currently stand on the timeline for some of the investments that have been made over the past quarters and years.

Yes. Two things. We are making investments in a number of different areas. There are investments we've made in improving our sales productivity, our tooling, our marketing capabilities, our website, et cetera. These are very, very fast payback initiatives that pay back in a matter of months. And so we are very excited to continue to make those sets of investments. And then there are structural investments that we have to make deep in the core infrastructure of the company. Those generally tend to take longer, but we still believe that they are well in line with what we've said before.

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

Appreciate you taking the question. I think a lot of the AI discussion is actually centered on the institutional business. But I'm curious how you think about any differences in the opportunity, the pace of adoption, the right to win within wealth. Obviously, maybe [indiscernible] AI and that partnership is part of that [indiscernible]. I don't know, Josh, given your background, do you have any additional insights on kind of market positioning and how you see FactSet in that market. But just kind of curious if there's a different -- any differences in strategy we should be thinking about as to AI in that space versus the rest of your business?

Thanks for that question. And indeed, I think we are seeing differences in the trends A lot of our institutional progress is exactly as you pointed out, very related to the stack that we talked about earlier. In wealth and the broader consumer finance market, there is an exciting opportunity for us, both to power up the adviser experience, which is certainly going through a transformation, but we are still believe we're in early stages of that. And the Tiffin engagement and partnership is very much geared towards improving the experience of advisers, and I'll touch a little bit more on that.

And the second thing is there's a big opportunity for us and a growing opportunity for FactSet in directly serving the end customers' experience, especially in wealth management, but even more broadly in retail consumer finance. So two reasons. Number one, we have the trusted data. Two, we are the -- even in the historical pre-AI world, we always had a digital business that allowed us to reach directly out into clients. So for example, some of the largest wealth managers out there, their portals -- their client-facing portals are all related to what we build and deliver that for them.

The point I want to get to on wealth is that adviser experience is evolving and it's still at its early stages. One of the largest business problems for advisers is how to stay on top of their customer portfolios market events and all the analytics associated with it in order to deliver high-quality experiences and improve their coverage ratios.

This is precisely where the Tiffin agents will help us because we can marry that up with our market data signals internal data, internal research and deliver high-quality advisor experiences. Josh?

I would just add I mean it will come as no surprise. Clients are in different stages of evolution. Every sector is in a different stage of evolution. I think we're incredibly excited about the conversations that we're having and with regard to the adviser experience really in the long tail of advisers, particularly into RIAs, there is really a lot of opportunity to almost think about the way advisers do their jobs differently.

And I think FactSet may have a role to play there. But fundamentally, across the board, whether it's in wealth in the sell side and the buy side, what we're seeing is people are starting to recognize, particularly as more work shifts from humans doing the work to agents doing the work. The quality of the output depends on the quality of the data that's going in. So that creates a real opportunity for FactSet to play a significant role. And that is something that I and we are very excited about.

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

Can you unpack the contribution of pricing to organic ASV growth this quarter? And how much is coming from realized pricing increases versus seat expansion, product mix or a broader workflow adoption as you roll out your AI capabilities.

Sure, George. Thank you for that question. Price increases, as I referred to earlier, we view that in the context of value increase for our clients. And our real focus is on retention and expansion of our existing enterprise client base. We don't believe in just an inflationary price increase. Having said that, I think our price increase this quarter was better than what we were able to achieve at the same quarter last year and that just reflects the continued increase in value and flexibility that we are delivering to our clients.

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

I just wanted to circle back to the implied margin cadence for the rest of the year. If I model to the midpoint of your guidance, I'm getting like flattish year-over-year adjusted operating margins versus it was just down over 250 bps or so in fiscal 3Q. So it's implying like pretty nice improvement in the run rate growth of expenses there. Was there like a pull forward of compensation expense from 4Q into 3Q? Or is it because you did this headcount reduction to now the run rate of expenses is lower going forward. If you could just kind of match up the qualitative commentary to what the guidance implies would be very helpful.

Yes, sure. Let me just maybe address that quickly, keeping an eye on the time. What I'd say is we have a big quarter ahead of us. And we continue to see strong ASV growth, and we see a lot of momentum in that. So what we have left for ourselves in terms of flexibility in the margin range is that if we continue to outperform on our ASV delivery and we want to pay for performance, I think we are retaining the flexibility in the margin range.

[Operator Instructions]

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

Great. So maybe just talk a bit -- or for Josh, either/or. The impact of the higher token costs, you mentioned in the margin in the quarter. I think you also mentioned there's an expectation to get higher returns on that spend. It sounds like a cool partnership that might help, but just impact I'm talking a little more if you would.

Thanks for the question. Appreciate it. Tokens are an interesting one in the sense that they were not a line item that we really thought about in 2025. So all of the token spending is net new. But we treat tokens like any other resource. And we have a series of operational controls around monitoring them. There's a whole regime around developer training, intelligent model routing. So it's the right tool for the right job. Budgeting that we've undertaken. Sanoke mentioned the ROI that we're seeing on tokens. So we are very pleased to be growing our investment in them.

Thank you. I would now like to hand the call back over to Sanoke Viswanathan for closing remarks.

Thank you, operator, and thank you all for joining us today. Accelerating ASV growth, strengthening commercial performance and measurable productivity gains are positioning us well for the remainder of the year and beyond. Before I close, I want to thank every FactSetter for their continued focus and commitment to delivering for our clients. We are executing from a position of strength, and we look forward to updating you on our progress next quarter. Operator, this concludes today's call.

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

Good day, and thank you for standing by. Welcome to the FactSet Second Quarter Earnings Call.

[Operator Instructions]

Please be advised that today's conference is being recorded. I'd 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 Second Quarter 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 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; Helen Shan, Chief Financial Officer; and Goran Skoko, Chief Revenue Officer.

I will now turn the discussion over to Sanoke.

Thank you, Kevin, and good morning, everyone. Thank you for joining us. ASV growth accelerated in Q2 for the fourth consecutive quarter. Organic ASV grew 6.7% to $2.45 billion. It accelerated across all geographies and has grown year-over-year in each of retention, expansion and new business. Adjusted operating margin was 35% and reflects the investments we're making this year. Adjusted diluted EPS was $4.46, up 4% year-over-year. These results confirm that FactSet's foundational strengths are increasingly valuable in an AI intensive environment, our connected data, embedded workflows, best-in-class service and broad distribution. Customer wins from this quarter illustrate the breadth and depth of our data and product capabilities.

First, following the multiyear renewal of our relationship with a major global investment bank, we expanded into their international corporate bank. This was driven by the depth and differentiation of our deep sector content. Similarly, our private capital data assets were central to our new mandate with a leading Australian private equity fund. These wins show how deal makers continue to value our differentiated data. Second, one of our largest international wealth clients selected our proposal generation solution as an extension of their existing use of FactSet for portfolio monitoring. A major Canadian wealth manager adopted our real-time exchange data feed product. These expansions showcase demand for our products that span the whole investment life cycle, including portfolio construction, ongoing oversight and in client engagement.

Third, Capital Group expanded their use of our Portware trading platform, which also achieved several new wins with other large asset managers. In addition, our new auto management solution, LiquidityBook is gaining significant traction with hedge funds and other institutional buy-side clients. Based on our strong first half performance, we are raising our ASV revenue and EPS outlook ranges for fiscal 2026. This reflects sustained momentum across all client types and geographies. We are maintaining our guidance range for operating margin as we continue to balance investments with productivity improvements.

Last quarter, I outlined 3 priorities: driving commercial excellence delivering productivity improvements and solidifying our long-term strategy for sustainable growth. We've made strong progress on all three. We are bolstering the health of our client franchise, making our core operations more efficient and redeploying our resources to fund strategic investments to drive further growth and structural investments to deliver better operating leverage in the medium term. First, on commercial excellence, we are rolling out new pricing and packaging are infusing AI throughout the sales life cycle and have realigned sales and customer success incentives.

With disciplined pricing and packaging, our revenue base is becoming more durable. Our direct [ sea-based ] exposure now represents less than 20% of ASV because of appropriate minimums and bundling into enterprise agreements. In Q2, the majority of our renewed ASV was in the form of enterprise agreements or contracts that are more than 3 years' duration.

On average, these renewals extended in length by more than 30%. Our focus on client health has led to a 5-point Net Promoter Score improvement just this quarter amongst our investment banking users. This is helping drive ASV retention and expansion, our overall ASV retention continued at over 95% in Q2. 86% of our top 200 clients use 5 or more of our solutions, up from 78% 3 years ago. In Q2, Data Solutions grew by double digits across all firm types, including the highest expansion we have seen since 2023. Today, 48 of our top 50 clients are using at least 3 of our AI solutions with several more in trials. In Q2, new business growth accelerated. Our marketing leads increased 11% year-over-year and with stronger lead scoring and more targeted outreach, win rates for these opportunities improved by 29% year-over-year.

Corporates and private capital wins were particularly strong with double-digit growth in both. First half productivity initiatives have already captured more than half of the 100 basis points of productivity improvement we targeted for the year. We've made real changes in technology, data operations and client support, our largest 3 operating cost centers. We have consolidated all FactSet technology under our newly appointed CTO and are converging on standard tools and platforms to deliver efficiency.

For example, our internal development platform that standardizes tooling and software deployment will allow engineers to spend more time on product development. AI coding assistance now author nearly 1/5 of our successful code commits and free up 1/4 of our engineers capacity in those teams. This includes over 90% reduction in efforts spent on business-as-usual activities like software upgrades and patching. Some teams have radically reduced time to market for new product development by fully automating the delivery life cycle and collapsing a month-long cycle to 1 day. We see ample scope to scale this transformation. In data operations, we are seeing rapid transformation as we drive down unit cost and time to value and expand our content universe.

Our [indiscernible] private company classification project to deepen coverage from 4 to 6 levels is a great example. We have quadrupled classification capacity year-over-year while keeping costs flat, capturing scale economies in our business. This quarter, we have deployed 4 distinct AI tools across different parts of our data operations, generating 25% plus reduction in manual curation on average. We are expanding this systematically across all our data while maintaining high-quality standards. The text to formula agent that we launched in October 2025 has fundamentally changed how we handle client inquiries.

Our Help Desk experiences double-digit monthly growth in formula support requests, but the volumes handled by our client service representatives have now started to decline as the agent absorbs an increasingly large share of these inquiries each month. This allows our support colleagues to focus on higher-level activities such as custom client implementations, advanced analytics support for fixed income and [ client ] workflows and outbound engagement to expand our reach.

We are lowering the variable cost of serving each client while increasing our capacity to engage and retain our highest value accounts. Beyond these 3 areas, we are systematically identifying further cost savings across the business. These include streamlining procurement and lead to cash processes, consolidating legacy software contracts and optimizing our third-party data agreements. These productivity gains will make us a structurally more efficient company, flattening the cost curve as we scale and freeing up resources for higher return opportunities. We've made substantial progress on developing our medium- to long-term strategy. I will share it in detail along with the business plan at an investor event after the end of this fiscal year.

Let me reiterate that we are well positioned to be a winner in an AI intensive world and to deliver attractive ongoing financial returns. To give you some insights now, a key element of our strategy is to be a leading data and workflow infrastructure provider for AI-enabled institutional finance. What we are seeing so far is clear. As clients move AI into production, they are pulling FactSet deeper into their operations, not replacing us. Our foundational strengths include connected data and embedded workflows and these make us more valuable to clients as they implement AI in their environments. We are wired into our clients' operations and so the relationship deepens with every transaction.

Five key factors make our data differentiated and trusted and thereby integral to financial institution clients that have 0 error tolerance: Data depth and coverage. We collect and refine data source directly from over 300 stock exchanges, millions of public and private company websites, thousands of data partners and clients themselves, for example, broker research. FactSet holds the commercial and legal rights to access these proprietary data sets and licensed content.

Data cohesiveness. We seamlessly integrate the data from one time period to another to provide holistic company time series data from annual, quarterly and preliminary reports going back over 40 years.

Data comparability. We provide data that is comparable within and across industries with considerations to different accounting standards, market and company-specific presentations reporting practices and regulatory requirements.

Data traceability. Clients can view the data source of each data point through document trace backs. This creates data transparency, credibility and reliability.

Data quality. We apply quality checks to data and apply in-tool checks at every step of our collection pipelines. We have automated logical validation rules augmented by audits conducted by humans. After all this, we conduct product checks by our experts to ensure our data products are fit for use in each of our end markets. Over the past 3 years, we have tripled our data assets while maintaining these high-quality standards. But it's not just data alone. It's how deeply we integrate FactSet data with client data and deliver value [indiscernible] that is how we support the sophisticated decisions our clients make every day.

FactSet's office add-ins are woven into clients' daily research and reporting and the custom models they have built on our data have grown by 17% just this quarter. Our buy-side analyst clients stored over 2.5 million research notes in our database and this has been growing at over 35% per year for the last 3 years. Investment committees use this research to make decisions. Compliance teams run regulatory checks against our outputs and the longitudinal analyses stored and reported from our analytics book of record are essential to communicating the definitive source of portfolio performance and the characteristics of millions of funds managing trillions in assets.

The number of institutional portfolios integrated into FactSet grew by 20% in the last year to almost $8 million. Let me use a value-add risk calculation for a multi-asset class portfolio to illustrate the mission-critical nature of our embedded workflows. When a portfolio manager looks at a value-add risk number, they scrutinize the output of tens of thousands of simulations across hundreds of risk factors driven by millions of data points, position attributes, historical return series, yield curves, volatility surfaces, correlations and many, many more, all of which must be correct, consistently sourced and temporarily aligned.

If even a single data node is wrong, the entire risk calculation silently misstates the riskiness of the portfolio. This isn't a theoretical concern. It's a daily operational reality for every institutional investor, managing risk at scale. The data checks we conduct across our multi-asset class portfolio analytics suite alone have grown by 29% in just the last year, underscoring the importance of our robust infrastructure. AI accelerates aggregation and finds patterns in the data, but it cannot substitute our trusted, reconciled data production and modeling infrastructure that underpins these risk, valuation and compliance workflows.

Our AI strategy will leverage these foundational strengths and build more integrated solutions at all levels of the emerging AI stack. Partnerships for growth are an important component of our strategy. For example, partnerships with Snowflake and Databricks enabled clients to seamlessly combine FactSet data with their own sources and operate AI-driven workflows in the secure cloud environments they already use. We are also actively partnering with Anthropic OpenAI and other leading frontier labs, to ensure that FactSet data sets are readily available in their marketplaces to facilitate rapid development of new AI solutions, and we are infusing agentic capabilities across our workstation so that users can operate more effectively inside our governed, trusted workflows.

Our newly announced partnership with [indiscernible] will accelerate our agentic platform for banking, meeting the growing demands of our deal-maker clients. We have strong traction and are seeing rapid adoption and use of our solutions as AI workloads take root at our clients. One illustration, our MCP server that's built on a robust ecosystem of content APIs was launched in December and already has over 120 clients actively engaged. API call volume is steadily growing as well with March volumes at 3x the February level. We expect this success to be replicated across our AI solutions in all layers of the stack. As AI continues to reshape financial institutions, FactSet is becoming more central to clients' mission-critical workflows.

We are in the early innings of sector-level technological change and are building on our current foundational strengths to continue creating value for our clients in the future. Let me close by thanking every FactSetter for their continued focus and commitment to delivering for our clients. We are winning competitive mandates and expanding relationships from a position of strength. Now I will hand over to Helen to discuss our Q2 performance and updated guidance in more detail.

Thank you, Sanoke. Great to be here with everyone today. For the second quarter, organic ASV accelerated to 6.7%, an increase of $38 million. Growth was balanced across all regions and fueled by 3 key drivers: strong client expansion, new business wins and higher pricing capture from our annual price increase in the Americas.

Let's walk through our performance by region. In the Americas, organic ASV grew 7% up from 6% in Q1. Asset management continued to be a bright spot with growth driven by both trading and middle office solutions. Dealmakers contributed with competitive displacements in banking and uplift from successful renewals in sell-side research. An increase in new business logos was powered by hedge funds and corporates. In EMEA, organic ASV grew 4%, in line with Q1. A competitive managed services win, higher demand for data solutions in wealth and a large banking renewal that included Pitch Creator and our new MCP solution drove the positive results. These wins helped offset softness with asset owners, partly due to pension reform in the Netherlands.

In Asia Pacific, organic ASV accelerated to 10%, up from 8% last quarter. Improved demand from asset managers and hedge funds for middle office and trading solutions, coupled with stronger banking retention drove the region's performance.

Now turning to our results by firm type. On the institutional buy side, we delivered 5% organic ASV growth, up from 4% last quarter. This reacceleration was driven in part by higher trading volumes fueled by additional Portware installations, increased data demand by hedge funds and continued strength in managed services linked to our performance solutions. In wealth, organic ASV maintained a 10% growth rate despite the challenging year-over-year comparison given our landmark UBS win a year ago. This performance was driven by higher demand for our wealth platform as we further integrate into clients' daily workflows with our proposal generation and adviser dashboard solutions.

In dealmakers, organic ASV grew 8%, up from 6% in Q1. Competitive displacements and successful enterprise renewals added momentum in banking. Our investments in deep sector, aftermarket research and banker productivity solutions position FactSet as the trusted enterprise partner. Both corporates and private capital accelerated to double-digit growth this quarter with new business and competitive wins fueled by demand for our data.

The organic growth in market infrastructure accelerated to 8%, up from 7% in Q1 with robust sales in real-time data and higher retention. In addition, strong issuance activity supported the positive results for [indiscernible]. We continue to expand our client and user base. In Q2, we added 98 net new clients, bringing our total to 9,101 led by corporates and wealth. Our user base increased to over 241,000 with additions largely in wealth and dealmakers, reflecting a 10% annual growth rate. Lastly, we continue to have solid retention rates at 91% for clients and above 95% for ASV. These results reflect the mission-critical nature of our business as the world's leading financial institutions continue to trust FactSet.

Turning now to our financial results. Second quarter revenues grew 7.1% year-over-year to $611 million or 6.8% organically, excluding impact from foreign exchange and M&A. Adjusted earnings per share was $4.46, up 4% year-over-year, driven by higher revenue and a lower share count, partially offset by a higher tax rate. Adjusted operating margin came in at 35% for the quarter as compared to 36.2% in Q1 and 37.3% a year ago. In line with our plan, this reflects the timing of strategic investments, driven by 3 main factors: First, higher people expense due to year-over-year compensation adjustments and full impact from merit increases; second, accelerated technology spend on cloud infrastructure and AI tools; and third, higher professional fees from increased project work in the quarter.

The midpoint of our full year margin guidance reflects expected investment pacing through the second half in technology infrastructure, professional services and product development. AI is playing a dual role, enhancing client value through new capabilities while driving productivity gains. We remain committed to long-term growth while maintaining our track record of capital discipline.

As highlighted last quarter, we are investing to differentiate our data, deepen client workflows and modernize our platforms with approximately 2/3 directed towards growth initiatives and 1/3 on enhancing our internal infrastructure. Funding will come from productivity improvements and disciplined cost management. With the first half now complete, let me connect our investments to the early outcomes we are seeing. Our investments in data expansion are delivering. We now offer our core data sets through MCP servers, giving clients flexibility to access our data in their preferred environments. Workstation users are benefiting from optimized real-time data delivery, driving both efficiency and cost effectiveness for clients. And we are meeting client demand by integrating premier research firms like JPMorgan, Barclays and Kepler directly into our platform. These are expanding our addressable market while enhancing the value we deliver to clients.

Our workflow investments are receiving market validation. We expanded our long-standing shorter relationship to provide a managed service to enable greater scale. As highlighted earlier, Capital Group selected us as their trading platform because of our hyper-scalable platform and high-volume capabilities. And the year post acquisition, demand for our liquidity book order management system and FactSet + Irwin Investor Relations solution is driving meaningful new logo growth and cross-sell expansion. These all showcase our ability to scale from point solutions to enterprise-wide partnerships.

On the structural side, we're executing across 4 priorities: First, modernizing our tech stack and cybersecurity to strengthen platform resiliency as we integrate agentic capabilities into the workstation; second, deploying AI to scale our content operations, as mentioned by Sanoke earlier; third, strengthening our brand with our fluent and finance campaign that is generating strong top of funnel growth. Lastly, freeing up engineering capacity with AI, enabling us to accelerate new projects with existing talent. We expect these benefits to accelerate through next fiscal year and beyond. We are also on track to capture our intended in-year expense savings by automating manual processes through AI, optimizing cloud usage and streamlining our portfolio through product life cycle rationalization.

For example, we've been able to reduce the cost of vectorizing client data by 80%, while delivering faster and more accurate results. Of our planned 100 basis points in savings, we have already secured more than half and remain on track to deliver the full benefit in H2. This improving operational efficiency, combined with consistent free cash flow generation gives us flexibility to deploy our capital. Our framework prioritizes organic investments followed by strategic M&A, then returning excess capital to shareholders.

Our balance sheet remains strong with gross debt leverage at 1.4x providing capacity across all 3 priorities. At current valuation levels, we see our buyback program as a compelling use of capital. In Q2, we repurchased approximately 652,000 shares for $163 million, and year-to-date, we deployed over $300 million to repurchase shares at attractive prices. To put this into context, in the past 2 quarters alone, our accelerated pace of buybacks has resulted in a 3% reduction in total shares outstanding. At quarter end, we had approximately $700 million remaining under our upsized $1 billion authorization. Based on our strong first half performance and improved visibility, we are raising our fiscal 2026 guidance. ASV growth is now expected at $130 million to $160 million, representing approximately 5.4% to 6.7% growth, an increase of $20 million at the midpoint.

We are targeting GAAP revenue at $2,450 million to $2,470 million, representing an increase of $25 million at the midpoint. We are maintaining our guidance ranges for GAAP operating margin and adjusted operating margin accounting for the potential higher performance-based compensation given the strong commercial outlook, the effective tax rate remains unchanged. Our guidance range for GAAP EPS is now $14.85 to $15.35, an increase of $0.20 at the midpoint. For adjusted EPS, our range is now $17.25 to $17.75 representing an increase of $0.25 at the midpoint.

This revised outlook reflects improved visibility in client demand, accelerating commercial momentum and realized benefits from our productivity initiatives. Our priorities are clear: Deliver innovation, deepen client relationships and invest with discipline. With that, I'll turn it back to the operator for questions.

[Operator Instructions]

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

If you transition all of your workstation ASV into Data Solutions ASV and apply usage-based pricing on top of that, what would that look like? Because I think end users are using FactSet workstations to get access to your data anyway. So just curious how do you think about the business model in the "post AI world" especially as data consumption is expected to increase meaningfully? How important is it for FactSet to continue to own the user interface product, especially for research analysts.

Thank you, Kelsey. I appreciate the question, and it is an important question for not just us for the whole industry. We, at the moment, are seeing strong growth across all our channels. So we are seeing continued growth in our workstation, which Helen already talked about. We are also seeing tremendous growth in our data solutions, both through data feeds, APIs and increasingly through our newest channel, which is the MCP server, which allows for opening up of new TAMs inside our clients. So we're seeing user persona shifting from just the traditional users who continue on the workstation to also include technology teams data science teams and the broad enterprise user across our clients, which happen to be very large financial institutions for the most part.

So we're seeing actually a real compounding of this at the moment. Your question is a speculative question about the future where all these channels disappear, and we are just in the data business. The way we are working through that, it's early stages in this evolution of the market is we are developing our strategy by working jointly with our customers to effectively look carefully at our pricing and packaging, and we are striking enterprise contracts with them that gives both them and us a lot of flexibility in how to continue to deliver value to them in the future.

So what -- and you've seen the results. We've had great success in this quarter alone in restructuring some of our contracts and we're seeing a real extension of almost 30% -- or over 30% in our enterprise contracts. And also a significant share of our contracts are now enterprise agreements or agreements that are really long term in nature. So with that, we give ourselves and our clients flexibility to consume our data in any number of ways through the workstation, through data feeds, through MCP and frankly, any new channels that open up in the new context.

So we are very optimistic about the future of this multichannel mix business, if you will. Because remember, the core of all of this is our data, which is highly valuable in whatever context our clients consume it. And we've given you quite a lot of evidence of how important it is for us to deliver strong, high-quality concorded data. And Goran, do you want to add anything to that?

Yes. Kelsey, the concept of utilizing our content or components of act is not new to us. Over the past 7, 8 years, we have been talking about open approach and servicing clients where they are meeting them where they really need our solutions. So in terms of owning that interface or really enriching the interface, so the clients can properly complete the workflow. That has been our approach for years.

In terms of Sanoke touched on enterprise-level agreements and as we -- which we are entering with more and more clients into and consumption laid on top of that, which we think will more than compensate any type of attrition in the workstation side going forward.

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

Really strong momentum in the business. There's just -- my question was focused on the sales pipeline, demand environment as well as sales cycle, particularly in the context of the geopolitical -- evolving geopolitical concern. Any color that you can provide on that front?

Sure, Ashish. We are seeing broad-based demand and a really strong pipeline through the rest of the year. We are seeing improved retention continued expansion and also really strong new business growth. So it's across the board. What's driving our sales cycle now is we're seeing asset managers consuming a lot of our data solutions. As you know, we've been making investments in real-time data, pricing and reference data and private capital data. All of this is resonating and it's driving significant interest in our buy side. Our middle office solutions are again resonating very well with the managed services overlay. That is particularly getting even more exciting in an AI intensive world where we can add agentic workflows on top of that. And our trading solutions are growing strongly as well.

So broadly, I'd say the sales cycle has not changed. The macro conditions are not affecting us. We see strong traction across all of our client groups. What I can say is when it comes to AI solutions, the sales cycle is considerably faster. Clients are eager and enthusiastic to try out new solutions. And you might have seen, we even announced yesterday a new partnership with [indiscernible] on our banking agentic platform. Again, we're being very client demand-driven, and we see tremendous demand and enthusiasm from clients to try these solutions. And our MCP solution, which we launched just in December, again, to reiterate, has been our fastest-growing solution in the market.

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

I just wanted to focus on -- I think you mentioned your middle office and trading solutions growing really strong as well. And I noticed in the prepared remarks, that came up a lot in terms of the accelerated growth. So I was just hoping you could double-click on that. Maybe just help us appreciate how big those 2 solutions are? And maybe what are the key sub-solutions, I guess, within those that are selling really well nowadays?

Thank you, Manav. Yes, this is our one-off of the crown jewels in that business, which is we are deeply, deeply entrenched in providing some of the critical support to large buy-side clients. It starts with sort of the essential ingredients of what we do in portfolio analytics, which is performance analytics, attribution and risk management. And these are mission-critical processes for our clients. And as we said in our prepared remarks, millions of funds depend on the immutable data that is stored and distributed from our analytics book of record, which delivers these quality high-grade analytics year after year after year over the last several decades. And so it's a very important part of the core investment operations of our clients. the parts of that, that are particularly growing in -- especially in this quarter, and we see this trend continue is clients continuing to shift into multi-asset class portfolios and starting to really demand a total portfolio view that mixes private and public positions normalizes risk across these asset classes, and it looks at what-if scenarios cutting across different types of risk analyses that you run on all of those portfolios. Events like -- in recent markets around private credit and the like, only increase the relevance of these risk analyses and make our business even more sticky to our clients. So we're seeing strong progress in our managed services that help clients operate these large platforms, transform their data, ensure that it is deeply integrated into our systems and the output of it is reported downstream into multiple different sources, whether it is compliance teams that are doing regulatory checks, end clients that are demanding progress on performance and also investment committees who are using all of that research and analytics to make asset allocation, both strategic and dynamic asset allocation decisions.

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

Can you talk a little bit like about what has changed so much in the last couple of quarters. We were seeing kind of the company's organic growth slowing down kind of meandering. You came in a few quarters ago. Usually, we don't see a real acceleration with the change that happens instituted by the top within just 2 quarters. And I was wondering if you can kind of point to a few critical parts about what seems to be clicking. What is there because maybe you changed some incentives that really realign things or what are the things that were going on beforehand that seem to have hit their stride, so we can just kind of get a sense as to the picture of the reacceleration of the revenue growth and what might be the runway for more of that going forward.

Thank you. It's a very important question and something that we spend a lot of time on. And we believe that we are just at the start of this inflection. There is a number of things that are landing well for us. I'll start by saying that prior to my showing up, the client -- the company had started making very targeted and focused investments in the right areas that are areas where we see a huge headroom for growth. I'll start with data. Data is the foundational strength of the company. We've certainly had many decades of success in building our data sets and continuing to build the kind of client franchise that we have today. And yet, there are big parts of the data environment that we are still early in the game, and we have the smallest market share amongst our competitors, and we see huge headroom for growth.

A great example is real-time data. So real-time data, we now have capabilities that are competitive and comparable to our larger competitors. It's an investment that's been made over the years and accelerated in the last couple of years and that's allowed us to win very significant clients. For example, one of the largest global asset managers is a client of ours. They went live about a year ago and we displaced hundreds of different internal solutions, and we developed and delivered a world-class market data solution real-time with delayed data distributed across the entire asset management estate of this client. So that's one example of something that's clicking. That is a marquee win in the space. And just off the back of that, we are seeing huge traction across the buy side and the sell side for real-time data.

I'll just rattle off a few other investments like that, that we've been making that are all clicking now. So clearly, our AI investments are working. We are doing well across the various layers of the AI stack, AI-ready data, the MCP server, the -- our agentic platforms, and our AI solutions that are infused inside the workstation that like we said, 48 of our top 50 clients use at least 3 of our AI solutions, and I expect that number to be quite a bit long -- higher in future quarters.

Third, our investments in content beyond real time, which are really relevant for dealmakers and wealth managers. So pricing and reference data as well as the data in private capital or private company-related data and other data sets, obviously, our historical hallmark has been supply chain data, revere data, et cetera. These are all coming together nicely and opening up lots of new opportunities for us. And when I look at the penetration of data solutions distributed beyond the workstation amongst our client base, we still have a huge room to just continue to increase cross-sell within our existing client base.

So I mean, certainly, our efforts at commercial excellence, to your point, Shlomo, in the last couple of quarters are helping. We see terrific energy in our sales and customer success teams and that's, of course, adding value to our retention and expansion. But even more, it's all of these targeted investments that have been made over the last few quarters are starting to click and I see a lot of runway ahead of us. Helen, do you want to add anything.

Yes, maybe one thing just to add, Shlomo, because you're absolutely right, things take a little bit of time to get leverage. But I think back to what Sanoke was saying, the core of what we are is really important. Our open platform is perfect in this new environment as we're talking about AI, which is why AI is a tailwind for us, and that's why you're seeing double-digit growth in data across all the various firm types whether it's banking or wealth or on the buy side. So I think that's a really important point that our investments we made have helped both retention and then why new business is growing as well.

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

I wanted to focus on the expense side of things. I'm sure there's been any change into how you're thinking about expenses through the year. I think previously, you had said that the investment plans were more second half weighted. So I was curious if that's the case. And then maybe like more big picture, I appreciate you're making investments in the business, and it's clearly showing up in better ASV growth. Are you planning to, I guess, moderate some of the pace of investments or the expense [ growth ] so you can start leveraging expenses next fiscal year? Or do you want to kind of keep pushing there and drive the ASV higher.

Thanks, Jason. As you can tell, we are very pleased with the execution we have seen in the first half of the year. And the guidance range for what we have given on operating margin is a reflection of the fact that we see all of these opportunities to make high ROI investments both in growth as well as structurally to improve the company's success going forward. And you're right. I mean we do expect a heavier investment second half. At the same time, we have been very disciplined, and we will moderate spend based on what we see in terms of ROI and the opportunities we see to invest. So we are keenly focused on our earnings. We want to -- our intent is to grow earnings going into next year and beyond, right? So our investments are going to be very tailored to highest ROI investment opportunities. And we think we can achieve both because we are seeing all of these promising productivity improvement opportunities. We gave a flavor for those earlier in our presentation, and I believe we are still at the very, very early stages of capturing productivity gains. And as those accelerate, they'll serve as a nice offset to these investments, and we'll be able to deliver operating leverage as well.

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

I appreciate all the color again this quarter on your strategic priorities and the foundational strengths. And I thought Slide 8 was particularly helpful in terms of the uniqueness and value of the data, but I am curious, just as you think about where FactSet sits in the ecosystem relative to newer competitors or even the model providers, maybe address what you think are some of the disadvantages you have from being a legacy provider? And to what extent are those disadvantages addressable, whether it's organic investment or partnerships or M&A, I just understand all the reasons why people will stick with your clients are sticking with you are investing more in your product. Just curious what you're defensive to and investing in as a result.

Sure. We have a number of advantages, and I think you've registered those. I think those are exciting, and we see lots of runway to grow with those advantages. What you'll also see is that where we see complementarity, we've been actually one of the players that has been most forward-leaning in partnerships across the ecosystem. It starts in -- first and foremost, again, with data. So we've always had really strong in-depth multiyear commercial and technical partnerships with a number of other content providers. They are increasingly looking to us given our technology prowess to aggregate more of their data and to deliver more of the data through new channels that we are able to open up for them. So that's number one. We work with content providers across the stack, and that's an important part of our traditional strategy, and we will continue to accelerate that.

Number two, to your point about new capabilities from AI natives and hyperscalers. As you would have noticed, we have a strong partnership with Anthropic. We are one of the prominent financial services connectors on the Claude marketplace. And I must say it is our fastest-growing marketing channel. We think of it as a marketing channel because the business model is very synergistic. We make our gains when clients connect through Claude into our data sets and consume more and more of our data and our contracting is directly with our clients. And Anthropic does well when that happens because those agents that the clients may be deploying use more and more tokens, and that's good for Anthropic.

So I'm just using that example to illustrate why our partnership model is a win-win here to Helen's point before, we've always been an open architecture company, and it's really coming into its own in this AI environment. So those are a couple of examples. I don't view these as disadvantages as much as market opportunities that are opening up that our business model is uniquely positioned to take advantage of.

For broad solutions, many of the AI native firms can be very good in their point solution. But for clients who want something that's integrated and they don't want to have multiple solutions, we are really best positioned to be able to deliver that.

Our next question comes from the line of David Motemaden with Evercore ISI.

You had mentioned a few areas of further cost savings across the business. I think it was streamlining procurement, consolidating legacy software optimizing third-party data agreements. Could you just talk about what sort of the runway is on those? And how we should think about that creating margin opportunities as we head into next year. It sounds like you guys are making good progress this year, but I'm more thinking into fiscal 2027.

Sure. What we've indicated today is that we've already captured over 50% of the 100 basis points of productivity improvements that we targeted for this year. While we gave you examples of the early impact that we are seeing from the application of AI in engineering and data operations and customer success I must say those are early days. And in fact, I see tremendous scope for growth of the AI-based opportunities. What you see in the value capture to date is more along the lines of what you're describing, which is procurement, legacy software consolidation, data contract optimizations, effectively, just looking across the company and making sure that we are leaving no rock unturned ensuring that we are being efficient about our usage of third-party services and just running a better company. So we are getting all of that done, which can be done faster. And these AI programs are just taking root, we see a lot of opportunity to expand the scope going in into next year. And as I said, our focus is going to be very much on improving earnings going into 2027 and beyond and we'll balance these productivity gains with continued high ROI investments we want to make in the future growth opportunities.

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

You talked about introducing new pricing and product packaging initiatives. Can you elaborate on this a bit more and what year-over-year price performance was in the U.S.

Sure. I'll start with the conceptual sort of effort what we are doing across pricing and packaging. And Helen is going to give a little bit more color on the specific progress of price improvements we have seen. I'd start by saying we have a very strong shelf of really good products. Customers really love our products. We've gotten great feedback our NPS scores are very high. And despite that, we are continuing to invest in growing NPS across different segments. This gives us strong pricing power. So when we look at across our estate and we look at how we are packaging and bundling our products, we are doing a thorough review and where appropriate, we are making changes. We are rebundling and we are restructuring these enterprise agreements with different client types. And as I said earlier, to give them and us flexibility so we can evolve into this new world where it will be a combination of seats. It will be a combination of data delivery, and it will be a combination of consumption, right? So it will be all of that. And we are ensuring that we are retaining the flexibility and clients are retaining their flexibility. With that, I'm going to hand over to Helen to describe how that pricing power translated in this quarter.

Yes. No, thank you, Sanoke. As we do every year, the annual price increase in the Americas actually contributed more this year than last year, so it's up slightly, which reflects really that our strategy -- pricing strategy is grounded in the value that we deliver. So clients are valuing the product. It's supported by the price realization that we're seeing. And it's -- quite frankly, clients are accepting the increases due to the value and the workflow integration we're providing. Now that is driven in part through the fact that we have a larger ASV base. We've had improved retention, which increases as well. And as noted, the shift to enterprise is also contains some contractual escalators. So we've been very pleased with how we've been able to continue to leverage and build on capturing price this year.

Our next question comes from the line of Jeff Silber with BMO Capital Markets.

In noticing some of the statistics that you released on client count and user count, it seems that users per client seem to be escalating at a greater rate. Is there something driving that? Is that a mix shift maybe towards wealth? Or is there anything else going on there?

Yes. I think -- I mean, I'd caution us in, I would say, reading too much into our client count. As you know, we have 9,000 plus clients and there is always a long tail of clients in our sort of businesses. So we had a very good quarter. We added a significant number of new clients. At the same time, we also significantly expanded our presence in our top clients in our top 100, our top 200, which drive significant chunks of our business. So I wouldn't draw too much into the client count itself. What I would say is it's important to understand that corporates, wealth managers private equity and these sort of client segments drive a lot of our new client expansion because remember, we have a huge, huge penetration with the largest global banks largest global asset managers and the largest global wealth manager. So the tail by definition, is smaller firms around the world, and that is certainly what is driving our client count. With user count, wealth management is a significant driver because we have -- as we win large wealth managers, we win at a large number of advisers and that adds to the user count as well. So I just want to caution you not to read too much into those numbers because they tend to be the long tail.

[Operator Instructions]

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

I'm just wondering if you guys can talk about the pace or degree of AI product adoption in the wealth channel. I'm just trying to kind of understand given that wealth is still, I think, ongoing this digitization journey if this could be a potential longer tail opportunity?

Yes. I think you read that right, Scott. Wealth is a more heterogeneous environment for us amongst our end markets. We have large firms. We have midsized firms. We have RIAs. There's a whole range, international private banks and international wealth managers have their own dynamics. So we are seeing a gradual pickup in AI adoption in wealth. It's certainly behind what we have seen in the sell side and in the buy side. but we see it picking up and I expect it to be an important growth driver as we go into the next few quarters. I don't know, Goran, if you want to add anything to that and...?

Some of the AI solutions that we see adoption around prospecting. So we have some of our largest clients adopting our intelligent prospecting and monitoring solution that is something that drives new business for our clients. And we are rolling out some of our AI solutions with 2 of our largest clients currently. So the adoption is is increasing, but I would agree with Sanoke, it is trailing investment banking and other areas of the business.

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

Just wanted to just touch on here this AI concern out there. There's obviously a lot of concern as AI evolves here over time that the white-collar workforce takes pressure, fewer needs for human beings to run operations and stuff. When you drill down on that, if that does play out here and say you have a 10% or 15% pullback a number of white collar workforce at the buy side, sell side. Talk to us, if you would, please, about the vulnerability for your pricing, the revenues you can gain here in that sort of environment? Obviously, you're trying to move more and more to enterprise-wide pricing as you've been doing that for many, many years. But how vulnerable are you do you feel -- you and your peers if that does play out there.

Yes. Thanks, Craig. What I'd start by saying is to imagine a scenario where you have that kind of headcount reduction in our end markets. We have to then appreciate that the agenttic workflows have become such high grade and high quality that they're able to really displace these -- the humans who do those jobs today. So that's an assumption that we would have to make. If that were to be right, I would say those agents are going to need very, very high-quality inputs in order to be able to execute the job that we expect those agents to do at that point. I shared the example of the value-add risk calculation, and that's one of those ways in which we think our data, our connected data and the embedding that we have in these workflows just becomes exponentially more valuable in a world where agents are becoming the primary call on that data. So we believe that the -- we are very well positioned to capture the upside in that kind of scenario.

And it will all come down to the optimization of pricing between the seats that those humans may have adopted versus the data consumption that the agents will have in the future. And this is exactly the point I was making earlier, which is -- we are working very closely with our clients. And I can tell you there is a huge appetite and conviction among our clients to partner with us on rewriting these contracts to create flexibility for themselves and for us. and we see us capturing an ability to continue to hold our pricing power and to capture the upside from that transition if and when it happens.

Thank you. I would now like to turn the call back over to Sanoke Viswanathan for closing remarks.

Thank you, operator. Thank you, everybody, for joining the call today. We continue to execute with discipline, accelerating ASV growth, strengthening commercial performance and measurable productivity gains position us well for the second half of fiscal 2026 and beyond. In May, we'll welcome clients to FactSet focus where they will experience firsthand the innovation we are delivering across our platform. Operator, this concludes today's call.

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

Good day, and thank you for standing by. Welcome to the FactSet First Quarter 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 First Quarter 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. [Operator Instructions]

Before we discuss the 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; Helen Shan, Chief Financial Officer; and Goran Skoko, Chief Revenue Officer.

I will now turn the discussion over to Sanoke.

Thank you, Kevin, and good morning, everyone. I'm very pleased with how we've started our fiscal year. We are reporting strong ASV growth and healthy operating margins coming from broad adoption of our solutions and some key customer wins. ASV grew 5.9% to $2.4 billion. Adjusted operating margin was 36.2% and adjusted diluted EPS is at $4.51, up 3% year-on-year.

Thank you to all our FactSetters for your focus and commitment to delivering for our clients. We are not just growing. We are winning in the places that matter. Across firm types and in the areas that we've prioritized, clients are choosing FactSet over alternatives because of the strength of our platform. I will share just 3 examples. We secured a significant mandate with one of the largest wirehouse breakaway teams who made FactSet a requirement in their transition to an RIA consolidator. This matters because these breakaways preserve enterprise revenue at the originating firm while adding ASV at the consolidator.

At a global top 10 bank, we displaced an incumbent for pricing and reference data feeds, supporting their global reference data hub and multiple use cases in Asia Pacific. We secured a major win with one of the world's largest investment managers who chose FactSet Vault as their analytics book of record and our managed services for performance to unify holdings across all their subsidiaries into a single database and deliver flexible reporting across their institutional and retail businesses.

These wins illustrate the resilience and scalability of our client franchise, driving ASV growth and expanding our reach into adjacent markets, opening new sources of growth. I'm pleased to announce that we are increasing our share repurchase authorization from $400 million to $1 billion. This decision reflects our conviction in the strength of our balance sheet and in the intrinsic value of our shares, delivering shareholder returns while maintaining the flexibility to invest for long-term growth.

Over the past 3 months, I have focused on the fundamentals of our business, including our people, clients and products, assessing what we do, where we lead and where we need to improve. I spent time with employees in all our major global offices reviewing our operations, product development and execution and met with over 80 institutional clients across North America, Europe and Asia. I've engaged with technology and content partners on ways to develop new solutions for our clients. And I've spoken with shareholders about their priorities and how we can better articulate our strategy and milestones.

What I've heard from everyone reaffirms the core strengths that set FactSet apart and why we believe we will continue to be indispensable to clients. First, our connected data, clients rely on FactSet for high-quality trusted content curated over decades and enriched by deep domain expertise. Just as important, our ability to standardize and reconcile third-party sources with speed and precision is market-leading, thanks to advanced integration, concordance and entity resolution capabilities. And clients access our data where and how they need through APIs, secure low latency feeds, cloud connectors and MCP servers without sacrificing performance, security or reliability.

Second, embedded workflows. FactSet isn't a portal. We are built into the data pipes and decision engines that run global finance. Every day, clients on average make 8.4 billion FactSet query language requests for spreadsheet use, evidence of deep reliance on our platform for valuation, screening and other decision-making.

Our portfolio analytics power mission-critical workflows, performance attribution, risk and reporting where accuracy, explainability and governance matter most. We are interested to view the activity, exposure and risk across client books and deliver analytics that inform decisions throughout the investment life cycle.

Third, best-in-class client service. We combine technology with human expertise. Our consultants are trained on the workflows of asset managers, banks and wealth advisers. They operate as partners to our clients, designing implementations, guiding transitions and enabling user adoption and personalization. In a recent meeting I had with the Head of Wealth Management at a top 10 global bank, the first thing he said to me was, how much he appreciated his FactSet consultant and mentioned her by first name and said, she had just been in his office before I showed up.

Fourth, broad and deep distribution. We have reach across the industry, 100,000 wealth advisers, roughly 3/4 of the top global investment banks and 95 of the top 100 global asset managers rely on FactSet. The average age of our client relationships is more than 16 years. So it is clear that this trust runs deep.

These strengths reinforce each other in a flywheel to make FactSet essential today and increasingly so as AI and agentic capabilities become more prevalent in daily work. Success in enterprise AI comes from trusted high-quality data, secure integration with models and workflows and detailed knowledge of how financial institutions operate. This is where FactSet stands out. Over 90% of our ASV is composed of proprietary client-facing solutions and proprietary data and tools enriched by subject matter experts. Examples include portfolio analytics, FactSet Performance Solutions, CUSIP, Revere and FactSet Fundamentals.

We are one of the few companies trusted to integrate external and private data at scale without compromising safety, supported by strict data ownership, entitlements and security compliance. While other providers offer conversational interfaces or point solutions, they lack the governed data foundations and enterprise integration that regulated financial workflows require.

And because FactSet is so deeply integrated across buy-side wealth and banking clients, we are uniquely positioned to navigate their technology architecture, consolidate fragmented data environments and tailor AI and agentic solutions to their needs. As the flywheel compounds, it directly translates into faster product innovation, deeper user personalization and measurably better client outcomes.

Let me give you a sense of the volume running through this flywheel today. Just in the past 30 days, our clients have actively used 1 million custom models and screens to run data queries pulling hundreds of billions of data points. We believe AI will accelerate this flywheel. We are still in the early stages of enterprise AI adoption. But to give you an example, across the AI products we launched earlier this year, we've seen broad-based user adoption with sequential growth of more than 45%.

Put simply, AI doesn't replace what makes FactSet essential, it amplifies it. While I'm pleased with our first quarter results and the positive feedback from our clients, there's much work to be done to unlock the tremendous value within our business. This starts with decisive action to accelerate growth and operating leverage. I have 3 priorities: driving commercial excellence, delivering productivity improvements across the business and solidifying our long-term strategy to ensure FactSet is positioned for sustainable growth.

First, commercial excellence. With our strong products and trusted client relationships, we are sharpening sales execution to reinvigorate top line growth. We are driving new business development, using analytics to prioritize new prospects, scaling marketing to increase awareness and recall our flagship solutions, putting AI tools to work for personalized outreach and follow-up and managing the pipeline with rigor.

We are simplifying packaging and pricing, organizing clients by persona and usage, refreshing bundles with data-driven insight, fully integrating recent acquisitions, pricing to value and tightening controls to reduce leakage. We are focusing on improving retention and expansion within our clients, aligning customer success metrics and incentives to drive adoption and upsell, using analytics to flag and reduce churn and elevating our strategic dialogue at top clients. And we're modernizing sales operations, raising performance expectations, applying best practices to sales incentives, reducing friction with advanced forecasting and analytical tools and instituting robust productivity tracking.

We are executing with urgency while laying the groundwork for world-class commercial performance. For example, we have changed sales incentives to better align them with the outcomes we want, new business, cross-selling and upselling. This has already led to faster sales motions and a richer pipeline.

My second priority is driving productivity gains. I have initiated a disciplined review of our technology, processes and client service model to identify and act on opportunities to reduce complexity, apply modern tools and streamline operations. We've initiated a program of transforming and consolidating our legacy technology applications onto a centrally managed modern platform. This is expected to significantly reduce complexity for our developers and deliver efficiencies.

One tool having immediate impact is our new Text to Formula agent, which reduces routine support traffic, resolving requests in an average of 6 seconds versus minutes for a human interaction. On average, approximately 35% of formula support questions daily are now handled by this agent. By offloading these repetitive requests, our service teams are able to focus on higher-impact client work. Each interaction also adds to a reinforcement learning loop that continuously improves product performance.

Leveraging new data modeling, visualization and programming approaches, our data operations team is now able to ingest third-party data at 10x the speed, vastly expanding our content coverage without adding headcount. These examples illustrate the scope of opportunity there is to drive productivity and efficiency across the organization.

My third priority is solidifying our long-term strategy to ensure FactSet is positioned for sustainable growth. I'm engaged closely with the Board and my management team to shape FactSet's future, and we are holding ourselves accountable to make hard decisions around allocating resources and capital. I know you're all eager to hear my thoughts about medium-term guidance. It's too early for me to comment on that, but I want you to know that I'm working actively on new growth initiatives anchored on content and technology innovation that drive real competitive differentiation and deliver durable ASV growth and operating leverage.

As I reflect on my first few months, I have greater conviction in FactSet's position today because the structural advantages are real, the client reliance is deep, and the opportunities to expand our impact are tangible. We have 3 clear priorities that we are acting on with urgency to drive a culture of excellence across the company. Over the coming quarters, we'll continue to provide more details as we execute against these priorities.

Now, I will hand over to Helen to discuss our Q1 performance in more detail.

Thank you, Sanoke, and great to be here with all of you on this call. Our Q1 FY '26 results mark a solid start to the year, driven by disciplined execution and deepening traction with our clients. For the first quarter, organic ASV growth accelerated sequentially to 5.9%, an increase of $6.6 million. Expansion with our existing clients was the key component with strong demand in trading, workstations and markets data across the buy side, banking and wealth.

With that, let's review the quarterly results in more detail, starting with our regional performance. In the Americas, organic ASV grew 6% this quarter, driven by asset managers and wealth. Within this region, we are seeing increased demand for our portfolio life cycle solutions and AI-ready data, both from existing hedge funds and new ones coming on board.

In EMEA, organic ASV grew 4% this quarter. We had higher expansion with performance solutions and improved retention overall, both helping to offset some softness we experienced with asset owners in the region.

In Asia Pacific, organic ASV grew 8%, up from 7% last quarter. Middle office solutions and AI-ready data were the key drivers here as we're seeing regional firms increasingly investing in modernizing their tech stacks to compete globally.

Now, turning to our results by firm type. On the institutional buy side, we delivered 4% organic ASV growth, with broad-based strength across firm types. Asset managers led the way with multiple 7-figure wins and improved expansion with existing clients. Growth here was fueled by our trading solutions performance and managed services.

Hedge funds accelerated again this quarter with strong demand for our data capabilities and front office offerings. Asset owners' growth was softer this quarter as we lapped a large, outsourced CIO win in Q1 last year. We do continue to see selective opportunities, where our performance solutions and client relationships are gaining traction.

In wealth, we delivered 10% organic ASV growth in Q1, displacing incumbents with 6-figure wins, spanning workstations, pricing, reference data and analytics. This quarter, off-platform solutions, data feeds, APIs and analytics integrations comprise an increasing portion of expansion. This validates our land-and-expand strategy as existing workstation clients embed FactSet content into their broader technology stacks.

In dealmakers, organic ASV grew 6% year-over-year. Banking drove the majority of the growth as clients expanded their use of our data feeds, APIs and off-platform solutions. Across our banking franchise, we are seeing higher net seasonal hiring driven by a strong M&A market globally.

Corporates and PE/VC also contributed to growth with both new business wins and improved retention. Integrated solutions are resonating and driving expansion within existing clients. This quarter, we are renaming partnerships and CGS to market infrastructure to better reflect the exchanges, data providers and market participants we serve. Organic growth was 7% with robust data demand and continued strong issuance activity.

We're expanding our client base and deepening relationships. Client count grew to over 9,000, up 9% year-over-year, driven by corporate and wealth additions. Retentions remained healthy at 91% for clients and above 95% for ASV. Our user base is now approaching 240,000 with wealth and asset managers leading user growth in the quarter, up 10% versus the prior year.

Turning now to our financial results. First quarter revenues grew 6.9% year-over-year to $608 million or 6% organically excluding foreign exchange and M&A impact. Adjusted operating margin came in at 36.2% for the quarter. Adjusted earnings per share was $4.51, up 3% year-over-year, driven by growth in revenues and a lower share count, offset by a higher tax rate.

Operating expense increased 9% year-over-year on an adjusted basis with a few key drivers. People-related expense rose $15 million or 7%, driven by higher annual merit increases and year-over-year lapping dynamics. Specifically, employees hired or acquired after Q1 of last year, including from Irwin and LiquidityBook are now reflected in our full quarterly run rate. Sequentially, total head count grew less than 1% in the quarter, concentrated in low-cost locations.

Technology expense grew $13 million, or 23%, driven by higher internal use software amortization and cloud expense. As we've discussed, we are concentrating investments in both growth and structural capabilities to expand our market leadership through product innovation. Our other expense categories remained well-controlled.

Third-party content costs increased $4 million to support new data sets for research workflows while real estate expense rose $2 million due to lease renewals and a return-to-office expense. For a detailed breakdown of our expense progression and reconciliations, please reference the appendix in today's earnings presentation.

I will now walk you through our investment priorities, which remain consistent with what we've outlined last quarter. We're allocating roughly 2/3 to growth and 1/3 to our internal infrastructure. The growth investments are targeted across firm types. First, we are building a more differentiated data universe, including enterprise data such as real-time feeds, pricing and reference data as well as our own deep sector content.

Second, we are deepening our client workflows, such as extending our strength on the advisory desktop into the home office functions for wealth clients, broadening our managed services offering and connecting the trade life cycle through our modern EMS and OMS solutions. The structural investments are aimed to enable growth.

First, we are upgrading our go-to-market tools and processes to accelerate our sales motion and increase activity levels. Second, we are modernizing core infrastructure, cybersecurity enhancements, AI-powered productivity tools and performance-based incentives. These are intended to drive operational efficiency as we scale. These investments should strengthen retention and expand our opportunities with existing clients while positioning us to grow with new clients.

To help fund these activities, we are executing on productivity actions Sanoke noted earlier, reallocating resources from maintenance to growth initiatives, managing headcount and third-party spend more rigorously and implementing AI to automate routine processes. Together, these actions should produce sustainable expense savings.

On capital allocation, we maintain a balanced framework. But in our priorities, growth comes first. We are deploying capital into product development, go-to-market capabilities and infrastructure modernization to drive future growth. Our strong balance sheet gives us the flexibility to pursue these investments while also returning capital to shareholders. We ended the quarter with a gross debt leverage ratio of 1.4x, and our consistent free cash flow generation supports both our growth agenda and capital returns.

With our financial strength as a foundation, we are also committed to shareholder returns. Earlier today, we announced an increase to our share repurchase authorization from $400 million to $1 billion. During our first quarter, we purchased approximately 478,000 shares, leaving $860 million of capacity under the program. This increased authorization reflects confidence in FactSet's long-term fundamentals.

We also paid a quarterly dividend of $1.10 per share today to shareholders of record as of November 28. In total, we've returned $554 million to our shareholders over the last 12 months through dividends and buybacks, and we remain committed to delivering strong returns while investing for growth.

Let me finish with guidance. We are reaffirming our previously issued FY '26 guidance across all metrics, both GAAP and adjusted. Clearly, Q1 was a solid start, and we are encouraged by continued client demand. This sets us up well to deliver on full year targets. Looking ahead, our pipeline remains healthy, and we are confident in our ability to convert opportunities and successfully close on key renewals. With much of the year still ahead of us, we are maintaining a prudent and conservative approach to guidance. We are focused on executing against these commitments, and we'll provide updates as we gain additional visibility.

On quarterly phasing, we expect Q2 operating margins to reflect the step-up in investment outlined earlier as we bring on headcount and technology resources. This is deliberate and keeps us on track for our full year margin target.

In summary, we achieved a strong Q1 with a healthy demand environment, disciplined investments in growth and financial strength to deliver sustainable shareholder returns.

Thank you for your time today. Operator, please open for questions.

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

Alex Kramm, your line is open, please check your mute button.

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

I feel like recently, there's been a lot of discussion around FactSet's competitive positioning versus AI start-ups. I'm actually more curious to hear your perspective on how FactSet is positioned amongst the Big 4 data incumbents. I think everyone is investing in AI infrastructure, everyone is launching new AI products and FactSet is a smaller one of the bunch. So just curious to hear your strategy to maintain share or gain share within the incumbents.

Thank you, Kelsey, for that question. I'll reiterate what we said earlier, which is that we are very confident, very, very confident in what we view as proprietary assets that we have. You saw in the chart that the -- both in terms of data as well as tools and analytics what we bring to bear, there is a significant amount of capability that we bring that is not disruptible by others. At the same time, we also partner very actively with the full range of the AI ecosystem from the hyperscalers to start-ups. And we view the distribution through those as complementary to our existing distribution.

I'll just take a couple of examples and talk about how we think about our strategy. So when you look at our workstation, we view the workstation as a channel that distributes our data just like we distribute data through data feeds and through APIs. At the same time, as clients are starting to move into production workloads with AI, they demand security, they demand entitlements. They want a container through which they can consume their AI in a safe and secure way, all of which the workstation does and has been doing for decades.

So what we are really seeing, and this is evident in our -- in the strong quarter you just saw and in the pipeline that we see, there is a huge amount of demand from clients, from our core existing clients, who have been through, I would say, months, if not years of trialing and experimenting with different AI solutions coming to us and asking us to be a consolidator of these solutions and really driving demand. And we've seen multiple 5-year and 7-year contract renewals from some of our largest clients, where AI is a key component of what we are going to be delivering for them.

And let me ask Goran to add a little bit more color to this.

Kelsey, just in terms of how do we stack up versus the established competitors, we feel strongly about our competitive position. We're well-positioned to take share. We keep investing in our content assets. And we are pleased with the progress of some of those that really are the key to taking share, especially real-time price reference data and things of that nature. And data solution was a big driver of the Q1 results. I hope that answers your question.

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

Sanoke, thank you for your detailed comments regarding your priorities. A few things stuck out to me regarding commercial excellence. You talked about sort of simplifying pricing packaging, pricing to value and some of the changes around sales incentives, and it sounds like you're saying it's already led to faster sales motion and a richer pipeline. So would just love to hear a little bit more, sort of bring to life some of the changes that you have either already incorporated and the early results that you're seeing.

Thanks, Faiza. Yes, we are actively at work on a whole set of levels across the entire sort of sales enablement and sales force effectiveness. Incentives was one of the first things we worked on in this last quarter. And we've really aligned our incentives across the board, certainly in sales, but even more broadly across the company to focus on the motions that we are looking to achieve.

So first, new business development. There's a real renewed vigor and energy with which we are attacking new business development all the way up and down the funnel, and we are seeing significant expansion in our top of the funnel lead generation coming out of that.

The second area is obviously cross-selling and upselling, so driving retention and expansion in our core clients. This, we are seeing a big pickup, and the energy in our sales teams is palpable. We are seeing faster sales motion. It is definitely aided by the fact that our AI products are resonating, and there is an urgency in clients as well to move faster in terms of capturing the value from those products.

And in terms of some of the other levers I spoke about, we have a lot of work ahead of us. We are investing in our systems. We are applying more analytics to understanding what -- where we are trending in terms of client usage of our products and being able to flag and ultimately reduce the risk of churn. So we see a good upside from this coming through in the future quarters. And certainly, the idea is to build a sustainable long-term sort of high-performance commercial engine.

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

Hopefully, you can hear me now on this line. It seems like you are. Can you hear me, sorry?

Yes, yes. All clear.

All right. Good. Sorry. Tech difficulties today. All right. Anyways, I don't think this was asked when I disconnected, but the other question I'm getting related to AI a lot when it comes to you guys is also how the hiring picture is going to look for your customer base in the future because, obviously, not only you, but your customers are talking about using AI for efficiencies. And I think 50% of your business is still a desktop business. So maybe you -- with your discussions you've been having with clients, where do you hear that the most? Like what client types do you think you can actually see some maybe customer reductions in terms of the seats? So -- and how do you stack up in those areas, meaning where do you see the biggest reduction of force? And how does this impact your kind of desktop-related businesses or could?

Thanks, Alex. Yes, I've -- as I said, I've met with dozens of clients now around the world and across all our firm types. And certainly, I'd say there's a huge amount of experimentation and testing out and piloting of various AI solutions. What we're seeing on the ground in terms of real commitment and commitment of the larger dollars though is to folks like ourselves is ultimately, clients are looking for ways in which they can augment their FactSet solutions, and our own AI products are resonating.

We are not seeing yet any real reduction in headcount, frankly, not even in banking, where there has been a significant amount of discussion about it. What we are actually seeing this season is a strong recovery, driven by the M&A recovery more broadly. We're actually seeing increased headcount, increased hiring of bankers. And by the way, increased usage of all of the digital tooling, including our AI products. So our banking AI products, for instance, have seen over 100% in terms of usage growth just quarter-on-quarter.

So I actually think what is really likely to play out is that we are going to see consumption growth, which we are very well prepared for because of the way in which we are striking our contracts with clients and an increase in headcount as well. Again, I don't have a crystal ball, but so far, we're not seeing any reductions. There is certainly discussions about it, and there is an expectation that there will be greater efficiencies, but we are seeing those efficiencies if they are already coming through being put back into attempts to gain market share by our clients in our end markets.

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

I just had a question on the -- in the slide you had on the margin impact for the '26 investments. Just kind of following up the -- what is the cadence, I guess, by quarter, we should be expecting on that 250 basis points gross investment? Like how much is done this quarter, for example? And then, are these onetime investments? Or should we anticipate like '27, '28, et cetera, having more of these as well?

So, Manav, I'll take the second part of that question, and then, I'll ask Helen to cover the cadence through this year. So just to recap the sort of the nature of our investments, we have a good chunk of investments going into foundational elements, and I'd broadly put the foundational elements into 2 types. We are investing in our sales incentives as well as broad incentives across the organization such that we can attract and retain top talent.

And the second, we are investing in technology infrastructure, both cybersecurity as well as resilience, for the critical infrastructure that we are providing for our clients, both very essential to the core business that we deliver. So these are strong foundational enablers that set us up well for future operating leverage and for scale.

The bulk of the investments then is going into very specific targeted growth areas on the -- both on the content side, so explicitly expanding our data sets whether it's pricing and reference data, real-time data, deep sector data, and frankly, continuing to invest in the AI readiness of our data. And on the other hand, on deepening our workflows across the portfolio life cycle, both in the wealth space as well as in investing in areas like our trading and OMS and EMS systems.

So these things -- these investments all have clear line of sight into direct client demand. So we feel very good about this level of investment, and we are not planning to change this level of investment through the rest of this year. I think the idea is to -- we have a solid investment plan, and we expect that the benefits of this will play out in future years. We -- about the longer-term investment path, that's linked intrinsically to our long-term strategy development, which we are working actively on. I will come back and share more about that in future quarters.

So let me turn it over to Helen to hit the cadence for 2026.

Thanks. And thanks for that question, Manav. So we're pretty pleased with the progress we've made on our cost management program thus far. Those are the productivity benefits that we referred to earlier. When we think about the full year phasing, when we look at, for example, technology costs, which we would expect to continue to increase, amortization of capitalized software is increasing through the year, and that really reflects our prior investments. And then, also the full year run rate from recent acquisitions are going to start to lap going forward as well. So those are things that are impacting the phasing.

When we think about the strategic investments, they're really back half weighted across 3 areas: the incremental headcount, software infrastructure and then also professional services, which are really more largely onetime in nature. So we don't usually provide quarterly guidance, as you know, but you can sort of expect that similar pattern that we saw last year. That being said, Q4 can be impacted positively or negatively depending on our performance, which is what happened last year. But that's how I would think about the impact of margin over the rest of the year.

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

I had a broader question just on the environment. It seems like during the quarter, the company took a step forward in the organic growth in each of the geographic units. And what I'm trying to understand is how much of that is from the -- Sanoke, maybe you're letting a fire on your people more over the near term in terms of closing some of the business and getting things done? And how much of it is that you're really seeing an improvement out there in the environment in general? And I know that's not -- it's very hard to quantify it, but maybe you can give us some thoughts on what you're seeing with the environment versus how much of it is company-specific success?

Yes. I'll ask Goran to comment on this and add to it. But let me start by saying that we are seeing a very good positive sentiment across the board. There's high conviction we are seeing from our clients in our products and solutions. And the pipeline is certainly much stronger at this point in the year than it was this time last year. So we're quite pleased with the sales cycle. We're seeing a very diversified pipeline across firm types, which is giving us confidence that we don't see any risk to any particular type of situation. And frankly, it's -- some of the initiatives we are undertaking internally is leading to better retention.

So to your question, it's a complementary situation where there's certainly a bunch of things we are doing, which is helping our own organic pipeline, both in terms of retention and expansion. But the market environment is strong, and we see that in customer sentiment. There's lots of demand for new data products. There's expansion in the ways in which clients are looking at consuming our data and applying it to work. So we're seeing growing demand from the technology offices of clients, data science teams. So teams that were traditionally not perhaps in front of a FactSet Workstation, but are starting to consume our data in significant quantities across new channels whether it is APIs, direct data feeds, cloud connectors, MCP servers, et cetera.

Goran?

So Shlomo, as Sanoke said, it's a little bit of both. So the environment is more positive, more constructive. But I think it's also the things that we are doing. Investments that we have made are resonating. So we have seen an improvement in retention and banking, for example. And I would attribute that to our investment in aftermarket research and deep sector, which is certainly helping.

Our trading solutions are contributing significantly. So we are seeing better diversification across the product lines in terms of contribution. And then, the client demand is increasing, like we have seen some positive impact from relaxation in regulations in China, and we are seeing deals closing pretty fast, and I think demand for our content increasing in that region significantly. So it's well diversified in terms of contributions, and we are pleased with the progress so far.

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

This is Tom Roesch on for Andrew Nicholas. I was wondering if you could speak to how AI contributed -- your AI products contributed to ASV growth in the quarter. And kind of any color you could add on how it's driving new wins, displacing incumbents or just helping retention?

Thank you for that question. As we said last time, we've stopped calling out our AI products separately as a line item. And candidly, it was because we are seeing AI just deployed everywhere. So across the board, when we look at our solutions that we're delivering, both for the institutional buy side and wealth management as well as in -- on the sell side, we're seeing AI consumption just being a real complement and an accelerator. It's a real tailwind to the conversion of our core products as well. So it's definitely adding to the mix. And I'd say -- I'll point to adoption as probably the best way to describe the effect it's having on our clients.

So just the AI products we launched in this year, so if you look at what we launched in the first quarter of -- so back in January, February, March, sequentially, they've been growing at a very nice pace. Just this quarter, we saw the growth rate in adoption of all of that at over 45% just quarter-on-quarter. And we're just at the start of this journey. And we are both investing in new products as well as continuing to distribute and expand these products. So we see it as a real tailwind for the overall business.

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

You talked about leaning into productivity initiatives like ingesting data better, modernizing your tech platform and driving service team efficiencies. At the same time, you're investing in the sales and tech infrastructure, and that's causing operating margins to decline about 150 bps for the full year fiscal '26 just based on guidance. How do you think about balancing investments with your ability to drive margin expansion?

Thanks, George. The investments we are making are of 2 types. The structural investments we are making are going to help us in terms of operating leverage. So the example I gave about really organizing all our legacy applications into a new format where they are able to leverage a common technology infrastructure that essentially run. This takes a lot of the toil away from our developers at the front end and puts time back in their hands, which they can focus on really cutting-edge product development, which then creates that sort of flywheel effect for us of being able to ship products faster. So that investment, the structural investments are key to driving operating leverage.

The growth investments, as I said earlier, are directly aligned to client demand. We are investing in our content. We are investing in our delivery mechanisms and our workflows, and we're investing in AI, right? So the combination of all of this is going to directly resonate with clients, as it has -- as you've seen in the quarter, and we see a strong pipeline throughout the year. So we're really balancing these 2 investments, and we see value from both, both in the short term, but even more so in the medium to long term.

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

The organic ASV growth has been accelerating for the past 3 quarters and is better than I was expecting in this quarter. And so just based on the guide, it looks like you're expecting it to decelerate from the current level, and this is despite sort of the confidence and momentum, good pipeline and the investments. And so I was just wondering, is this just conservatism? Or is there something that you're seeing that would imply that growth slows towards the end of the fiscal year, maybe it's the tough comp? Just wanted to understand, what would drive the guidance or not to be a little bit higher and sort of what factors might go into sort of getting to the low end of the range versus the high end of the range on organic ASV?

Thanks, Toni. We remain very confident, as we've said, in the strength of the pipeline. Having said that, it's really early in the year, and there is a significant amount of business to be acquired throughout the rest of the year. So we want to be prudent, and we are obviously remaining very focused on winning deals, executing well in the market, and we hope to come back in future quarters and continue to support the sort of growth trajectory that we have been on in the last 3 quarters.

Our next question comes from the line of Jeff Silber with BMO Capital Markets.

I really appreciate the -- I think it was Slide 7 in your deck, where you try to calculate what of your products and services are proprietary versus nonproprietary. Can you give us a little bit of color how you came up with what exactly went in each bucket?

Sure. Thanks, Jeff. As we show in this slide, we have -- the vast majority of our businesses are proprietary. And I'll spend a couple of minutes just explaining how we've gone about the analysis. So as you can tell on the slide, 40% of our business is intrinsically linked to client proprietary data. We bring our proprietary models, our analytics, our solutions to work on their data, which is obviously proprietary. And we feed it back in terms of high-quality output that then feeds a number of downstream workflows. A good example is portfolio analytics. It's what we do with our adviser dashboards on wealth management advisers' desktops. Here, we are really supporting millions of portfolios of end clients that our advisers are managing and advising on, and we are enabling them to do their jobs better. So that's 40% clearly proprietary.

The remaining 60% of the work we do of our business is data that we distribute through multiple formats, the workstation being a flagship channel, but we also deliver through APIs, through other feeds, through -- and through more and more modern channels. When you look at the far right on that page, the 10% that we are really saying -- we are holding a high bar and saying that it's not proprietary, this 10%, we are labeling it enhanced and curated.

You could technically access the core data from public sources. But as you can see on the page, there are some very strong branded products there with a high degree of client loyalty to FactSet. An example would be StreetAccount. An example would be Shark, it would be GeoRev. Even these are enhanced with a lot of FactSet methodologies and content and humans, for example, StreetAccount reporters, who are working every day to deliver these services. But we're being intellectually very rigorous in saying these can technically be accessed through other sources because the raw data is publicly available, like news and filings and so on.

So that brings us to the 50%, what is -- what we are calling proprietary and enriched data and tools. So why do we say this is proprietary? This really is either because the data is proprietary, as in the case of CUSIP, or that the data is enriched significantly with our proprietary methodologies and know-how. I'll give you a very simple example. I mean, some of our strongest franchises, whether it's identifier assignment, benchmarks, normalized fundamentals, instrument-level cap structures, event-driven data, regulatory data sets, all of these -- these are not just historical artifacts. We rely on ongoing skilled domain expert labor and proprietary methodologies that are applied to this every day, every minute and often in milliseconds to actually deliver very high-quality structured intelligence to our customers.

So examples are the Revere Business Industry Classification, right, RBICS, which is the industry gold standard for industry classification. It's our real-time exchange and pricing and reference data feeds. It's our private capital data on private companies. It's deep sector data. And obviously, our absolute flagship products are standardized and point-in-time fundamentals and estimates, which is the gold standard for fundamentals in the market.

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

Sanoke, I just wanted to kind of ask about kind of the idea around medium-term targets here as you work towards establishing and you think about the growth in the margins. Like what are some of maybe the key considerations you're exploring here? It just seems that like with the pace of change, it's accelerating, how things might look out 2 or 3 years. There's just a lot of uncertainty. So would you be even able to build a medium-term outlook that you can have confidence in?

Absolutely, Surinder. This is our -- as you looked at my priorities that I described earlier, spending a lot of our time working on our strategy and our long-term vision. Of course, there's uncertainty in the marketplace. We like this uncertainty because we see the turn of opportunity in it. We are very well-positioned to take advantage of the changing dynamics, the form factor changing, the addition of new content sets, opening up of new end markets. We are excited by the opportunity set in front of us. And our strategy is working -- the way we are developing it, which we'll, of course, come back and share in future quarters, is designed to find ways in which we can differentiate ourselves better from competition, from our traditional and new competition, and finding ways in which we can capture new vectors of growth and continue to sweat our existing assets and capabilities better and capture more upside from those. So I do feel very confident that we can come back with strong medium-term guidance in the future quarters.

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

Based on some of the comments, it sounds like you're selling more AI-ready data through feeds and APIs, and presumably, your clients are going to be using that data with their own AI solutions. And I think there's a thought out there that this would be a first step to potentially those clients not needing as many workstation subscriptions. So I'm curious if you could comment on that. And then, it's related to, I want to also ask, are you able to talk about how the margins on those that like feeds business compares to the margins when you sell a workstation product?

Thanks, Jason. So a couple of things. The distribution of our high-quality data that is now ready for AI consumption, so, i.e., models can really read the data and make sense of the data because of all the enrichment we've done with the metadata to it, is certainly a growing opportunity for us. We don't see it as a risk of cannibalizing our existing channels for a couple of reasons. As I said earlier to one of the earlier questions, we see the workstation as a channel. It's a flagship channel, but ultimately, it's a channel for distribution to -- of the content, and we are well prepared with any new channel of consumption. And therefore, we will meet our clients' demand where they want us to meet them. If it is an MCP server, we'll deliver data through the MCP server. If it is the workstation, it is the workstation.

What we, ourselves, expect is that there's going to be more of both because any time we see digital adoption scaling, as we have seen historically with other sort of technology trends, 1 plus 1 equals 3, there's even more demand at the end markets to consume the data in multiple different ways.

Now, the other point I'd like to point out about the workstation is the workstation is deeply, deeply embedded in the workflows of our clients across the sell side and the buy side. So it's not just a portal where you look at the data, it is deeply intertwined in the investment workflows that our clients pursue, and we see the components of consumption through other channels actually complementing it and being ultimately brought back into the workflow that the workstation is anchoring today. So that's how we see this evolving. And of course, we are well-positioned in whichever way the market evolves.

As far as the margins are concerned, we see strong margin opportunity on both sides, right? The workstation has -- it's a high-margin product, but so are these data feeds through other channels. And we continue to anticipate that both will continue to deliver very strongly for us on the operating margin front.

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

Just wanted to ask on sort of private market data offering, and there's been a lot of, I think, investment in the space from yourself and your peers as well in terms of increasing the magnitude of data that you have on private companies. Just wondering, how you sort of feel about your competitive position with your private markets data and if that is an investment priority for you over the course of the next 12 months here.

Thanks, Scott. Private capital is clearly an area that we cannot ignore. And we've been investing in it already now for multiple years. And we have a very strong position now in the quality of our data sets that we're delivering. We cover over 10 million companies in our private company database at a very high-quality level, similar to the quality standards I talked about earlier when we talked about our proprietary data. And that -- if you think about how we operate and how we aim to support the client base, we think of it from the pre-deal stages, through the deal-making stages and into the post-deal sort of spectrum of activities.

Obviously, because of our strong position in portfolio analytics on the buy side, we have a very privileged position to support clients, as they look at their total portfolio views across public and private assets. And the data that we are today providing on private capital is enabling our asset owner clients and our asset manager clients and insurers to look at the risk in a normalized fashion, which historically has been very difficult. And with some of the market events that are happening, there is a growing need for risk assessments at a much more -- at a much greater frequency, which is playing well to our strengths in this space.

Our next question comes from the line of David Motemaden with Evercore ISI.

I wanted to just ask, it sounded like the pipeline is good, the environment is getting more constructive. Some of the changes to sales incentives and product investments have been gaining traction. But could you just help me reconcile that with the only 7 net new clients that were added this quarter?

Sorry, can you repeat that question a bit? We didn't hear it clearly.

Yes. I just -- it sounded like the pipeline is good. The environment is constructive for your clients. The product investments have been gaining some traction. When I look at the net new clients this quarter, it's up by only 7. That's the lowest amount of net new clients that you guys have had in quite some time. So is there -- so it seems like retention is solid, but the new logo adds might be lagging a little bit. So I was wondering if you could just explore that a little bit.

Sure. Sure. Thank you. The first, I would say the client count is broadly in line. It tends to be a little bit lower in the early part of the year. And we are not worried about the client count number itself. We actually have a very strong pipeline of new business opportunities. And if you look at our ASV growth from new business, it's actually very, very strong. So I wouldn't worry much about the client count number, and we actually see a really strong pipeline on that front through the rest of the year.

And maybe, Goran, you can add a little bit to that.

Yes, David, and if you look at historically, Q1 is slower in terms of net client growth. But I would just reiterate what you're saying. We're seeing lots of positivity. We're seeing strong pipeline and really expect to deliver for the rest of the year.

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

Thank you, operator, and thank you, everyone, for joining the call today. We are still early in this next chapter, as you can see for FactSet. And while there is much work ahead of us, the opportunity in front of us is very clear. Our structural advantages give us a strong foundation, and we are mobilizing with urgency to execute against these priorities. You will hear more from us in the coming quarters, as we move forward with speed and discipline. I want to thank once again all our FactSetters for your continued commitment to our clients.

Operator, that ends today's call.

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

Good day, and thank you for standing by. Welcome to the FactSet Fourth Quarter Earnings Conference 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 Toomy, Head of Investor Relations. Please go ahead.

Thank you, and good morning, everyone. Welcome to FactSet's Fourth Quarter and Fiscal 2025 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. [Operator Instructions]

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 2024 period. Also consistent with the past 3 quarters, please note that in fiscal '25, FactSet started reporting organic ASV, rather than organic ASV plus professional services, to focus on the recurring nature of our revenues.

Joining me today are Sanoke Viswanathan, Helen Shan, Chief Financial Officer; and Goran Skoko, Chief Revenue Officer. I will now turn the discussion over to Sanoke Viswanathan.

Thank you, Kevin, and good morning, everyone. Thank you for joining us today. I'm Sanoke Viswanathan, and I'm honored to speak with you as the new CEO of FactSet.

I want to begin by recognizing Phil Snow for his remarkable leadership. Over more than 3 decades, Phil has helped propel FactSet into a global leader in financial data and analytics, scaling our business to well over $2 billion, while staying relentlessly client-focused and innovating with purpose, establishing the company as an industry leader. He leaves behind the legacy underpinned by our open platform, superior client service and deep workflow integration. We're all grateful, and I'm personally inspired to build on that legacy.

Let me share why I'm here and what excites me about FactSet's future. We are at a strategic inflection point in our industry. AI and data-driven innovation are transforming how financial institutions operate, invest and serve clients, which is driving increased demand for quality data. My career has always been at the intersection of finance and technology, and I believe the next decade is going to be defined by those companies that can deliver trusted, integrated financial intelligence to their clients.

I've been a FactSet client for years and I have been studying the company deeply for the last 6 months, and I believe we have a unique opportunity to become the leading AI-powered financial intelligence platform for our clients. In my first week here, I've visited our major offices and met hundreds of colleagues. I'm inspired by the energy and passion across our teams to continue innovating and rolling out new products, data sets and solutions for our clients. I have kicked off reviews of our product road map and client implementations, including various AI initiatives. I've also been welcomed by dozens of senior clients and partners that are keen to explore opportunities for growth.

This last week has reinforced my long-held beliefs that I'm sure you all share as many of you are also direct users of FactSet Solutions. Number one, we provide unparalleled client service. Clients like their FactSet consultant and counting them to be their trusted partner when it comes to resolving the most complex and sophisticated questions. This level of client conviction and trust has been earned by delivering high-quality solutions for decades, anchored in deep domain expertise and a client-centric culture. The passion for client service runs throughout the company, and I see it in my leadership team, most of whom started their careers as a FactSet consultant.

Number two, we are deeply embedded in our clients. Across the buy-side, dealmakers and wealth clients, we are used in their front, middle and back offices to execute complex tasks every single day. Our data, tools, insights and solutions help clients research and create new business opportunities, perform complex analysis and execute transactions in the front office. We run performance, attribution and risk analytics for over 6 million institutional client portfolios every night, and help streamline reporting and operations, minimize risk and drive productivity. We also integrate more than 15 million wealth portfolios, enabling advisers to monitor their books of business like never before. We have a great starting point as an enterprise partner to enable clients to transform and even disrupt their existing workflows. And this is evident in our recent performance.

Number three, we are uniquely geared for collaboration. FactSet's open architecture is fundamentally designed to enable clients to combine their own proprietary knowledge with FactSet's proprietary data sets and insights, and with other third-party data our clients see value in. We are cloud-native, think API first, and partner every day with hundreds of data providers worldwide. We are not bogged down with legacy integrations or business model conflicts. This is a huge advantage when it comes to implementing AI and agenetic workflows at scale, with dozens and hundreds of integration points up and down the technology stack and across the ecosystem of our clients.

In sum, I believe we are extremely well positioned to become the leading AI-powered financial intelligence platform for our clients. I recognize there is significant work ahead of us as AI continues to transform our industry and creates new competitive dynamics. As I look ahead, my focus will be on engaging with clients on their top priorities, and continuing to build my knowledge base about FactSet's data, tools and services. I will be working closely with my leadership team to refine our long-term vision and strategy and product road map with particular emphasis on AI.

We are operating from a position of strength. FactSet has a long track record of profitable growth, a differentiated position in the market and a distinct value proposition for our clients. With more than $600 million of free cash flow, and a strong balance sheet, we are able to invest confidently in our future.

Given the growth we are experiencing, combined with the significant opportunity ahead of us, we are continuing to invest in the business this year, and Helen will share more details shortly. I believe in a disciplined measured approach to investing for long-term growth, guided by the needs of our clients and focused on generating attractive returns for our shareholders. I look forward to partnering with clients, colleagues and shareholders and sharing more of my vision in the spring.

With that, I'll turn it over to Helen to discuss our Q4 performance and FY '26 outlook.

Thank you, and good morning to everyone on the call. Let me start by welcoming you Sanoke. I look forward to working with you for the next phase of FactSet's journey. It's going to be an exciting time for everyone. With that, I will now share fourth quarter and full year fiscal 2025 results.

This year has been marked by change in the markets and economic policies and in technology. Against this backdrop, FactSet continued to perform well, executing against our plan and finishing fiscal 2025 with strength. We made meaningful progress against our multiyear AI road map, embedded FactSet deeper into client workflows by integrating liquidity book for seamless buy-side trading, and added [ IRN ] to serve corporate IR needs, all while continuing to advance our open platform strategy.

For FY '25, we added $127 million of organic ASV, which is near the top end of our guidance range. Annual revenue increased to $2.3 billion, while adjusted operating margin was 36.3%, and adjusted EPS grew to $16.98, all comfortably within our guidance ranges. We anticipate a better performance in the second half of the year, and I'm really pleased to report excellent fourth quarter results.

Our Q4 organic ASV of $81.8 million was the largest quarter in the company's history, representing a sequential acceleration in growth to 5.7%. This improvement was fueled by recent wins in wealth and asset management, underpinned by increasing demand for our data solutions. For Q4, [indiscernible] drivers came from data, wealth solutions and our analytics suite. Within data, demand for real-time and benchmarks was significant for the buy-side. We're pleased with the early success of our investments in AI as a number of trials were converted into signed deals in the quarter. We have top line momentum as we close fiscal 2025. With that, let's review the quarterly results in more detail.

Starting with our regional performance. In the Americas, organic ASV growth this quarter accelerated sequentially to 6%. What was encouraging was the breadth of growth, with asset managers increasing their technology investments and wealth continuing to be a standout performer with our platform capturing share from legacy providers.

In EMEA, organic ASV growth improved to 4%. We executed on strategic wins this quarter, including a competitor displacement at a large asset manager. While we are seeing a recovery in the U.K. market, midsized asset managers and asset owners in the region continue to face secular headwinds. Importantly, we're using this period to deepen our relationships and expand our footprint within existing accounts.

In Asia Pacific, organic ASV growth increased 7% this quarter. While we face pricing pressures in some markets, we're offsetting this through solution expansion and new client acquisition. The demand for middle office solutions and AI-ready data is strong here, as firms modernize their operations to compete globally. Our workstation growth reflects increasing adoption by local and regional players who recognize they need institutional-grade tools to serve sophisticated clients. Across all regions, we're seeing the same trend clients are consolidating vendors and choosing platforms that can deliver integrated AI-enhanced workflows. Clients want comprehensive solutions that transform how they operate.

Now turning our results from a firm type perspective. Wealth delivered strong Q4 performance with continued organic growth at greater than 10%, fueled by 7-figure deals, including two competitive displacements. We successfully captured market share from incumbent providers while driving higher expansion through our real-time and markets data offerings. Our land and expand strategy is proving effective, as existing desktop clients increasingly adopt our data feeds and digital solutions. Off-platform ASV with wealth clients grew more than 50% year-over-year, continuing to expand our enterprise footprint outside of the wealth workstation. For FY '25, Steelmakers organic ASV grew 4% year-over-year. Banking delivered strong quarterly results as clients are expressing confidence in our AI road map and choosing FactSet as their partner of choice in their own AI journey.

With multiyear contracts securely in place with all of our top 15 largest banking clients, including all of the global bulge bracket banks, and leading independent banks, we are leveraging our long-standing C-suite relationships to position for growth across the client's enterprise. Our banker productivity tools continue to drive demand with [ pitch creator ], [ logo intern ] and our market-leading office integration solutions helping both retention and expansion. Lastly, Improved market conditions led to better lateral and summer hiring trends as experienced across our bulge bracket clients.

Outside of banking, PVC and corporates also performed well during the quarter. The integration of [ Erwin ] and FactSet provides IR users with an end-to-end workflow solution, which is driving seat count growth and accelerating cross-sell momentum as we expand further into the office of the [ CFO ]. Back in June, we noted that most of our Q4 pipeline was from the institutional buy-side. It delivered its largest quarterly ASV increase on record, accelerating FY '25 organic ASV growth to 4%. This increase reflects stronger demand for our analytics solutions in the front and middle office and especially for data.

Asset managers experienced strong growth with multiple 7-figure wins with improvement in both retention and expansion. Hedge funds growth accelerated for the fifth consecutive quarter, driven by demand for data, our portfolio life cycle offering with liquidity book and street account. Asset owners stabilized from last quarter with acceleration driven by an increase in demand for our data solutions and strength in the middle office.

Both in partnerships and CGS accelerated to 8% in FY '25, reflecting significantly improved retention, continued high issuance activity and demand for our proprietary data offerings. Our results reflect, in part, the strategic investments we made throughout the year. We expanded our data content with real-time feeds, benchmarks and aftermarket research to create a more differentiated workflow ready data universe. And we immersed AI into our solutions, and launched 6 distinct offerings that help automate complex tasks and enable future agentive workflows. These initiatives improved renewal rates, expanded client opportunities and contributed approximately 2/3 of our organic ASV growth acceleration this year. These investments positioned us well to compete effectively in a challenging environment.

While we're encouraged by this quarter's momentum, we recognize that our success came against the backdrop of tight client budgets and evolving market dynamics. Clients are being strategic in their technology investments and look for battle-tested solutions with institutional credibility. This selectivity can mean longer sales cycles and rigorous scrutiny, but our performance reflects two key differentiators, the quality and breadth of our data and technology.

Our competitive advantage starts with something that simply cannot be replicated easily. Decades of curated connected financial data that improves every day. Here's what's changed. We're not just collecting more data. We're making it exponentially more valuable through AI enhancement and real-time integration. Our largest client wins this year demonstrated strong positioning, [ or were ] direct displacements at wealth and buy-side clients, three involved replacing clients' internal solutions and one was a new managed services mandate for an existing client.

Our largest losses tell a different story, with two clients acquired by other companies and two strategic cancellations we initiated in Q2 as we noted on a prior call. Importantly, we secured large renewals early, especially with premier global banking clients, generating momentum and pipeline visibility for fiscal 2026.

FactSet's ongoing investments in AI and continued progress driving tangible workflow improvements is being recognized by our largest clients. We are placing increased value in working alongside trusted partners to navigate the integration of AI advancements into their own businesses. This success translates into improved quality in our ASP.

While annual price increases contributed less this year due to lower CPI, significantly stronger retention largely offset this impact, demonstrating that our products are mission critical and our investments to enhance our data and incorporate AI into our offerings are resonating with clients. We've also steadily improved expansion with existing clients each quarter this year, while new business growth accelerated in the second half. We continue structuring competitive multiyear deals to win new logos when the total contract value creates strong customer lifetime value. As a result, our client count grew to 9,000, nearly a 10% increase year-over-year, driven by additions in corporate and wealth clients. Notably, we now have over 237,000 users with wealth driving growth in Q4 and for the full fiscal year.

Turning now to financial results. Fourth quarter revenues increased 6.2% year-over-year, reaching $597 million. In fiscal 2025, we delivered 5.4% overall revenue growth, and 4.4% on an organic basis. Marking more than 45 consecutive years of top line growth. This track record demonstrates our resilience and consistent performance throughout market cycles. Alongside top line growth, we continued disciplined expense management in Q4 to help self-fund our strategic investments while absorbing acquisition-related dilution. On an adjusted basis, operating expense for the quarter grew 9.5% year-over-year.

People-related expenses increased $27 million, or 13%, primarily due to higher bonus accruals and workforce expansion, which included employees from our [ Irwin ] and liquidity book acquisition. Our head count grew less than 2% in the quarter, primarily in low-cost locations. Technology expenses grew $8 million, or 13%, reflecting higher internal use software amortization, and increased cloud and software spend. As stated, we are concentrating our spend in AI capabilities to maintain market leadership through product innovation.

We have effectively managed our other major expense categories. Third-party content costs increased $3 million versus the prior year, reflecting investments made in new data sets to support the research workflow, but our real estate expense rose $2 million due to renewed leases and return to office expenses. Lower other expenses reflect better receivables collection and decisions to reduce discretionary spend. These efforts resulted in an adjusted operating margin of 33.8% for Q4.

Adjusted earnings per share in the fourth quarter rose 8% on a year-over-year basis to $4.05, helped by a lower tax rate and a reduced number of weighted shares. For a detailed breakdown of our expense progression from revenue to adjusted operating income, and reconciliations of adjusted results with comparable GAAP measures, please reference the appendix in today's earnings presentation.

On capital allocation, we repurchased approximately 260,000 shares for $107 million during the quarter, concluding our $300 million fiscal 2025 share repurchase program. As of September 1, we began executing against the new $400 million share authorization program approved by the Board in June. We paid a quarterly dividend of $1.10 per share today to shareholders of record as of August 29. As a reminder, we increased our dividend by 6% in Q3, marking our 26th consecutive year of dividend increases on a stock split adjusted basis. Combined, we returned over $460 million to shareholders in fiscal 2025 through dividends and share repurchases, demonstrating our consistent commitment to delivering shareholder value.

We strengthened our balance sheet by reducing our term loan, achieving a gross debt leverage ratio of 1.5x, which provides significant financial flexibility. As part of our ongoing portfolio review, we divested [ RMS Partners ], a noncore sell-side research platform within our deal makers offering, just before fiscal year-end. This divestiture enables us to concentrate resources on our core growth areas and led to a onetime gain recognized in our GAAP results that had no material impact on our adjusted results in FY '25. To clarify, RMS Partners is distinct from our leading buy-side research management solution. We remain committed to our internal research notes offering for institutional buy-side clients, where our core workstation now features AI-powered workflows designed to enhance research efficiency and insight generation.

We're already seeing early positive signals from our past year's investment, and we plan to lean into areas where clients have demonstrated strong demand, and where we can achieve clear outcomes. For fiscal 2026 we'll continue building on our momentum while investing for future growth. We're executing on data expansion efforts, widening our real-time and pricing reference data capabilities, while extending proprietary data coverage across deep sector, such as in [ TMT ], Power and Utilities. We're embedding deeper into client workflows through our portfolio life cycle solution, further integrating OMS and IBOR to our platform. And we plan to simultaneously develop a comprehensive suite of AI-ready data and our own agenetic platform as part of a multiyear AI road map. These investments will support growth in fiscal 2026 across all of our firm types.

Wealth remains our growth engine. While we expect to continue to capitalize on competitor displacement opportunities, we plan to expand our offerings in both data feeds and analytics solutions, which include risk in OMS to meet the growing sophisticated needs of the advisers. We expect that buy-side will benefit from the integration of liquidity book, enabling us to fulfill larger portfolio life cycle opportunities across performance, reporting and trading. We expect our markets, pricing and reference and [ debt spark ] data feeds to continue to drive top line growth.

We expect the enhanced offerings in our deep sector data and aftermarket research to support dealmakers growth, allowing us to expand to other banking teams such as TMT and credit risk. Our clients should further benefit from the AI capabilities we provide to enhance their workflows. Our AI-ready data enhancements benefit all firm types, including partnerships. We're strategically managing relationships with the growing number of AI startups used by our clients. We've maintained control over commercial relationships with our clients and have protections in place for our intellectual property. Moving forward, we plan to carefully balance content monetization through select providers while preserving our direct market presence and revenue streams.

We expect to accelerate our focus on productivity. With the help of AI, we've been able to increase the speed of our content collection and expand our coverage in both street account and call street. Applying what we've learned from developing AI solutions for our clients, we plan to invest to improve client service, reduce our technology debt and further strengthen our infrastructure in areas such as data connectivity and cybersecurity. Experience in AI implementation reveals that quality data and middleware are not expensive, but essential investments, as companies who do not prioritize these foundations can face costly delays and challenges in capturing future benefits.

With that context, let's discuss our fiscal 2026 guidance. We anticipate continued strong demand for our solutions. Our outlook is supported by a first half sales pipeline that's comparable to last year. We expect continued momentum in wealth, in-line activity in banking and partners and stability in the buy-side. Given these dynamics, we're guiding to organic ASV growth of $100 million to $150 million, representing approximately 5% growth at the midpoint. We are taking a conservative approach to our guidance to reflect the current environment of longer sales cycles, and more rigorous client approval processes, and not due to reduced confidence in our competitive positioning or market demand.

GAAP revenues are expected to be in the range of $2.42 billion to $2.45 billion. We expect GAAP operating margin range of 29.5% to 31%, and adjusted operating margin of 34% to 35.5%. This range incorporates expectations of higher technology and content costs and targeted investments in wealth and buy-side workflows. We expect some of these anticipated increases to be partially offset by productivity gains and cost discipline. Our wider margin provides us the flexibility to invest more if opportunities exceed expectations.

Our GAAP EPS guidance range is from $14.55 to $15.25. Our adjusted EPS guidance range is from $16.90 to $17.60. For fiscal 2026 modeling purposes, net interest expense is expected between $43 million to $48 million. Capital expenditures are projected at $110 million to $120 million. Effective tax rate is projected to be between 18% and 19%.

As we enter fiscal 2026, we're positioned at an inflection point where our strategic investments are beginning to translate into measurable competitive advantages. The convergence of client demand for workflow integration, data monetization, and AI-enabled solutions creates a compelling opportunity for FactSet to expand our market presence, while deepening existing client and partnership relationships. We're not expecting dramatic market shift to impact our growth. Instead, we're methodically building capabilities that address genuine client needs while positioning FactSet to capitalize on secular trends, reshaping help financial professionals access, analyze and act on information.

This measured approach, combined with our established market presence and proven execution capabilities, forms a foundation for sustained value creation in the years ahead. Thank you for your time today. We'll now open up the call for questions. Operator?

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

Welcome Sanoke to the call and the company. I'm actually going to start with the margin question. So I guess this is more for Helen. But maybe you can start by maybe breaking down how much of the kind of margin decline is really due to incremental investing versus just cost inflation? And where those investments are ultimately going in terms of new projects?

And looking a little bit further ahead, I know this is fiscal year '26 beginning, but do you view this as a onetime kind of investment phase? And when we get into 2027, we can start looking at margin expansion again? Or do you think this is kind of like the new normal? Sorry for the lot of questions.

Thanks for your questions, Alex. And let me kind of walk through. I think your question is both about '25 and then '26.

So when we gave a range of [ 36 to 37 ] where we had in there, of course, was a normalization of our bonus to begin with. And quite frankly, what we've shown in this year is the ability to not only expand, but absorb some of the dilution from our acquisitions. So the biggest impact from a dollar perspective was on the bonus. And then I think the other piece, quite frankly, is some of the additional hiring that we're supporting some of our investments. But had it not been for the dilution, we'd actually be above the midpoint of the range.

As I think about the guidance going forward, I'll give you a little bit more detail to help walk you through that. So when we think about the investments from '25 that we believe has given us some of that, I'll call them, green shoots of benefit. When we think about 2026, I would think the breakout there is really into two pieces. I would say that we're investing about, let's call it, 250 basis points really in growth investments. 2/3 of it would be in growth investments and 1/3, a bit more structural.

Now as we talked about on the call, the growth is in AI, in data and in PLC. All of that is meant to drive the top line. Structural will be on cyber and internal AI, as well as helping to support further growth as it relates to our AI-ready data. So when we think about going forward, we're only talking about 2026 right now, so I won't go into any more details. But we would expect to get the operating leverage off of our structural investments and then expect top line growth from the growth investments.

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

Welcome Sanoke from me as well. Maybe I'll ask you. You mentioned that you think FactSet is well positioned to become the leading AI-powered financial intelligence platform. And then you talked about significant work ahead of you, and alluded to new competitive dynamics.

So maybe expand on that a bit, sort of where do you think the focus will be for you over the next couple of years? And where do you think the end state is for you?

Thank you. And thank you for the question. I appreciate it. And thank you, everyone, for the warm welcome.

On AI, clearly, it is the biggest opportunity in front of us. We have already several products in the market. And as you've heard in our call so far, we are seeing real traction, and we are really leveraging those to make these competitive displacements that are adding value and adding to the growth rate.

What I meant by the work ahead is, this is an accelerating and really dynamic space. There is a lot of technology change. There is a lot of competitive dynamics as in new competitors, or start-ups, and traditional competitors, all in an AI arms race. So my focus in the next several weeks and months is going to be spending significant time with our clients to understand their top priorities, how they are transforming their own workflows, and spend tons of time with teams internally [ that our ] product evolution, and looking at our road map and understanding how we are meeting our client demand.

So there is a fair amount of work to be done here understanding our infrastructure, understanding our technology architecture and how it will integrate with our clients. But I am encouraged by what I've seen in just the last few days. Just within the last week, I've seen some really exciting projects and some products that I think you will also be excited when they come out in the coming weeks and months.

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

Sanoke, let me add my welcome and congratulations as well. I just wanted to parse the strength that we are seeing in wealth. Obviously, very strong momentum, really good displacement up incumbents. But as we think about growth going forward, how do you think about more 7-figure deals there, and as well as ability to add more through improved attach rate at existing clients?

Thank you Ashish. I will ask Goran to add in a minute with all the more recent sort of conversations that he's been having. But as you know, I've just most recently been, in my previous roles, very deeply ingrained in what's happening in wealth management. And I'd just start off by saying that the secular trends in the industry are all in favor of continued growth for FactSet.

When you think about what -- how a wealth manager thinks about their business, there is the ongoing activity of building the book and growing new business where there is an increasing application of analytics and AI in the business development workflows. And then there is the business of managing the existing book of business really efficiently, and continuing to add value to clients, and continue to improve their portfolio performance. Where, again, we have a strong presence with our adviser desktops and all the tools that we bring to bear. And I see only increasing -- ever-increasing demand for high-quality analytics that will add value to the advisers. Goran?

Ashish. I would say, I think, our opportunity is demonstrated by our success in the quarter. We had our strategy has been land and expand. I think we had the two 7-figure expansion deals in the quarter, both in terms of upselling our data, as well as upselling into in traditional departments in addition to advisers. That will continue. We see that as a significant opportunity [indiscernible] opportunities for AI solutions exist within the wealth management, and we are taking advantage of some of them.

There are still large 7-figure deals and large opportunity for us in. The market in addition to that. Geographic expansion, expansion for prospecting tools. So wealth will continue to be our growth driver for years to come.

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

I was just wondering if you could maybe talk a little bit more broadly about FactSet's AI strategy, both on enhancing internal efficiencies, as well as driving better client engagement. And in light of this, maybe also talk a little bit more about the [indiscernible] of access workstation in light of all of these emerging AI companies and startups.

I know you previously guided to was 30 to 50 bps ASV growth in 25 from GenAI products. So just wondering actual results, how does that compare to guidance? And if you're expecting the same type of growth from AI products in 2026?

Thanks, Kelsey. That's really a big expensive question. So I'll start off by just giving my general thoughts on how I see the strategy and what I've been learning in the last few days. And then Helen is going to cover your question around what the impact has been? And maybe Goran, you can highlight some of the ways in which AI is translating into competitive wins.

So if I come back to -- and I have to draw on my experience over the last decade or so where I've been working to implement various sort of iterations of AI at very large scale in my previous roles. And one of the things that I, and everybody else, always underestimated was how complex it was to capture the value. That the promise was always high, but the process it takes to put models into production in highly regulated environments that our clients have is not easy. It's really complex. And the core comes down to the implementation, the quality of implementation, the quality of the data. How reliable a partner are you working with?

And you can see that those trends starting to emerge now as you talk to enterprise CTOs and CIOs who are trying to implement, and data officers are trying to implement this. So this is why I'm personally incredibly excited about the opportunity for us because of the open architecture design, and fundamental sort of infrastructure that FactSet has built over the last 10 years, which enables us to partner much more actively and aggressively with both clients who want to bring in their proprietary data, FactSet's own data and insights, as well as on the fly, join up with third-party data that a client may find valuable. So I see incredible opportunity for us given that dynamic. Helen?

Yes. Thank you, and thanks, Kelsey. So I want to keep in mind that when we launched many of our products in January of this year. So it's been terrific to be able to see some of that go through. A lot of this has to do with adoption. But to answer your question more specifically, when we gave the guidance of 30 to 50 basis points, I'm really happy to say that we were exactly in the middle. So we were able to accelerate growth right in the middle of the range. And right within our expectations.

I think that it's important also to note that those are stand-alone products. Those are monetized products, but quite frankly, so much of our conversations with clients is around both the strategy and the road map, and how that influences their decision. So I'll let Goran talk more, because when you talk about the impact AI has, it's much broader than just the monetized products that we've been able to bring to market. So off of a PowerPoint page and on to actually used by clients.

Thanks, Helen. I just want to highlight a couple of things, and I have to take the opportunity. We really had a fantastic sales quarter and lots of momentum going into 2026. And AI was a significant contributor to that.

About 60% of what we have sold in terms of our AI tooling and content came in Q4. And I think that really bodes well for what is ahead of us and the opportunity that Sanoke spoke about. So in addition to discrete sales that we are referencing when we are talking about the numbers, our GenAI tooling and strategy has been pivotal in many of our renewals and new deals. So about 35% of our renewals in the quarter mentioned our GenAI tooling and strategy as a contributor to their decision to select FactSet in head-to-head competition versus others. So I think we are very happy with the progress and the momentum that these tools are beginning to us. Be it three very large banking renewals in the quarter, and all three mentioned, again, our AI tooling as one of the key points of that decision to go with FactSet as well. I hope that answers your question.

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

Sanoke, I want to join the others in welcoming you. And I just want to put this out in terms of -- I know it's early on, but there's been a lot of investment in AI, and it seems like it's very exciting and embedded in a lot of products and a little bit of growth also coming from that.

Do you feel that this investment is going to materially accelerate the growth rate for FactSet? Or do you think that with everything going on in the industry, realistically, all these investments that are going on are really to kind of maintain your market position and where you are in realistically, that's what you need to do to just kind of hold on to what's going on?

So trying to figure out, is there going to be -- is this just an increased investment that's necessary to keep you there? Or are we going to see a return to some kind of material growth? I know it's early on, but you must have thought about this before you took this job?

Thank you. Thanks for the question. It is one of the important questions that every provider is asking themselves when it comes to what is happening with AI-led transformation. My perspective is these transformations go through different phases. And I think we are still in a relatively early phase of embedding of AI in our clients' workflows. And at this phase, and FactSet has done incredibly well to get out ahead of competitors. The -- it is a discovery phase. And during this phase, clients are experimenting with lots of different ideas and tools. There are a lot of evolution in the dynamics of the technology itself, and it's going to take some time to settle down.

Usually, what happens then is there is a breakout phase that is well ahead of us in this context, where the winners start breaking away from the rest. Because the solutions are clearer. There is more client adoption. And when it really starts coming to committing real budgets, there is more conviction. And I think we're way early in the AI adoption cycle still for that and especially in our client base, which are, again, highly regulated, where the data and the outcomes have to be incredibly precise, and we are going to see that evolution curve ahead of us.

So to your question, I think my perspective is -- what I see is the investments underway right now is allowing FactSet to be a leader in client conversations. It is allowing for FactSet to have the right kind of progressive dialogue around where we see the market going. And I think a lot of this is going to translate into, ultimately, the real big winning products that are ultimately going to come out. And I have been personally quite excited about what I've seen in the last week, as I've gotten deeper into it, and I've been understanding the product road map. And there are some really exciting products and projects underway that will add a lot of value to our clients.

I don't know if Helen or Goran want to add anything to that in terms of your perspectives?

No, I think you've captured it well. I think the fact that we have some of these green shoots from the investments we already made is what gives us greater comfort and confidence of why we are investing more in those same areas of data, workflow and AI. And those are the winning combinations and I see that helping us grow going forward.

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

I'm curious if you could talk about what trends you're seeing in regards to bank hiring? And then we've heard this idea that the banks are already pretty fully staffed. So even if we see a continued rebound in IPO and M&A activity, that the banks don't need to hire a lot more [indiscernible]. I was curious if you could comment on that thought as well.

Thank you for that question. I'm going to just make a couple of general remarks about what I see in banking, and then I'll pass it on to Goran to give a bit more color from especially the recent large wins that you've seen.

What I see is the ongoing trend in banking is there's a continued strategic convergence across the full spectrum of banking activity from commercial banking, corporate banking, all the way to investment banking and deal making. There is a lot more of an integration that is happening at the universal banks in bringing these capabilities together, and being able to go to market, and go to their clients with a joined-up approach.

There is a huge focus on CRM convergence and bringing together their ability to understand their clients, which has not been easy for especially the largest institutions. And there is a continued focus on banker productivity, particularly obviously enabled by some of the advancements that we see in AI. So there is a fair bit of technology dollars that is being committed that -- at least in my experience over the last couple of decades, this is the highest intensity of technology and intensity of data and analytics being applied in banking that I've ever seen. And I think that's -- we are just at the start of that. Goran?

I would just add, I think so hiring in Q4 was a bit better than expected for us. So we did see contribution from banking hiring in our results. It wasn't material, but it was better than we had modeled throughout the year.

We are also seeing similar trends carry into Q1. So there is improved hiring in the sector. And I would also just want to highlight, I think, this is the area where some of our productivity tools, and some of our GenAI related tools, or AI related offerings are really receiving the most attention. And I think we expect momentum in that regard as well.

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

Helen, this question is actually for you. Can you help us maybe better understand some of the internal productivity initiatives here? And what you're expecting, if there's anything that you can quantify?

It seems that there's a narrative out there that AI should be a material beneficiary to margins. And yet in the near term, we're seeing all of this increased investment. So is this an idea where maybe you can do a lot more, rather than doing, I guess, the same amount with maybe lower resources? Like how do we think about that trade-off?

Thanks Surinder for your question. Go ahead.

And what it means for head count on a go-forward basis?

Yes, sure. No. Now you're absolutely right. There is a narrative out there of material change in terms of costs. And I think from our perspective, there's a couple of things you need to get right. When we talk about internal, we've already had some of the increased output in what we've been able to do for cost street, street account. We've seen some of the benefits from an engineering perspective in terms of productivity improvements.

But right now, what we're trying to do is get things done faster, be able to hit our deadlines quicker, bring products to market in a more efficient way, more and a speedier way quite frankly. I think that's actually what we're seeing in our top line improvement.

Now we do need to invest. And every company has the struggle of wanting to get their data connected in a way that can provide the insights, that can take away a lot of manual processes. As a finance person, always talk about the death of Excel, but I'll wait to see when that happens. But quite frankly, we do still have a lot of manual pieces out there. So my view is that you'll see a slowdown in employee growth. But a lot of our improvements will be about redeploying that talent, and then we're going to see that translate into greater productivity and higher output, which will drive top line growth. So that's where I see a lot of the efficiencies come from.

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

Congratulations as well. Wanted to ask you, we're looking at, obviously, a stock market that was up 23% to 24% each of the last 2 calendar years of about 12% year-to-date here. It probably can't do a whole lot better than that. You do cite that the environment has been holding your revenue growth back, and it's been up 4% to 5% organically as you know, the last 6 quarters here looking at my model.

What has to change in the environment out there in order to get accelerated organic revenue growth? [indiscernible] AI that you [ chat ] about here. What else can you point to here to help give us some confidence that the organic growth will accelerate above this 4% to 5% trend you've had the last 6 quarters?

Thanks Craig. Let me just make a couple of remarks, and then I'll suggest Goran gives a little bit more color based on our client conversations.

I think beyond AI, my perspective on what's happening in the industry, right, across all of the major clients that we serve is there is a continued increase in the use of analytics through and through the trade life cycle, the portfolio life cycle, the client life cycle. And I think that is an accelerating -- that AI is an accelerant to that. It was always happening, but AI is driving an acceleration in that trend, which leads to the demand for services such as FactSet, where we see growing opportunity across the board. And that's, again, starting to be reflected as you saw in this last quarter. Goran?

So just maybe to continue on that note, [indiscernible] accelerate significantly in the quarter from 4.5% to 5.7%. There is no change in the market conditions during this period. We believe we can continue this momentum. We have a new set of maturing products. We keep talking about GenAI, but our exchange data feeds, or price reference, data feeds, our managed services offerings, all of those will contribute and we do not have to see a significant change in the market conditions to accelerate. We have to execute on what's ahead of us, but we have plenty in our toolbox to accelerate our growth.

And maybe I can add on a bit to what both Sanoke and Goran have said. If I think about the trends that are out there, there are two pieces in particular. We have clients who are upgrading their own tech stack. They're moving from what, quite frankly on -- I think we've used the stat before, that less than 30% of them have even moved to the cloud. So that is a natural place for clients to reconsider who they want to use going forward. So that's one piece of it.

The second is, quite frankly, the need for more data. And not just data for the sake of data. Data that is a quality that's been tested that we have decades of historical information, and that is all concorded. And I think that's reflected this year where we have double-digit growth in our data ASC. And so I think that is a harbinger for what we see going forward.

So between -- and the third piece, which Goran touched on, is that I think become more sophisticated, managed services is a great way for clients to be able to then essentially focus on what they're best at, which is generating [ alpha ], and then moving towards using us where we're able to use our own technology, our AI to be able to do a lot of the middle office pieces in a more efficient manner.

So I would look at three things in addition to what has already been said that they're not really based off of a better stock market. One is the ability for the change in the tech stack, the focus by clients and what they're best at, and the movement of actually even greater data needs, quality data needs, refined data needs that I think we're best at.

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

I'll add my welcome to Sanoke as well. My question is for Helen and it's sort of a longer-term question. But at your Investor Day in November, you had expected 37% to 38% adjusted operating margins in the medium term. Obviously, at the midpoint of the guide here, you're below 35%.

My question is, do you think that 37% to 38% is off the table at this point for the next few years? Maybe what has changed from 10 months ago? And so a little bit of a longer-term margin question in terms of where this goes?

Thanks, Toni. Appreciate it. Let me talk a little bit about what's underneath the investments and the productivity that we're going through in '26, and that will give you a little bit of a sense. But I am going to focus on 2026 as opposed to the medium-term guidance. We're not making any changes to that. And when we do, we'll obviously come back and talk to that.

But in the investments that we're making, which we believe will drive that top line growth was the data expansion. The wealth, the PLC for what we call the portfolio life cycle, which now wealth is very -- advisers very much want, that's a driver on top line. And then, of course, as Sanoke has already talked about, everything we have is going to have AI, so that's going to be a driver. That's meant to help on the top line growth. That's about -- of what we're investing, which is about 250 basis points. 2/3 of that is coming into those buckets. The other 1/3, which I'm calling it structural, is really around things that will help on the efficiency side, or give us the operating leverage going forward.

For 2026 alone, we have about 100 basis points of what I'll call cost reduction, and productivity, and lower professional fees, and lower third-party content. So I sort of think about those going forward as we're going to get better and better on the productivity front. And we're going to get leverage both on that piece and driving our top line. So I'm going to stick with talking to 2026. I understand your question, but that's how we're thinking about it at this moment.

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

Sanoke Welcome. I just wanted to stick on the investment and margin side of topic here. And Helen, just wondering if you can maybe talk about, especially on the sort of growth investment side, if there are any specific payback periods you are sort of looking for when you guys are making these investments?

Yes. No. Thank you for that. So I'm going to answer that in a couple of different ways.

When we're talking about something that we're building out in a much -- which requires more, I'll call it, infrastructure costs, like real-time, or like deep sector, which are a much bigger investments and require more time. We have a period that we look at for a payback, which is around 3 years. It's kind of similar to how we think about with our acquisitions as well. And then there are other things that we expect quicker paybacks for -- especially as it relates to the sale of content. So I would say it's less than that period of time. And quite frankly, the scale on the content side can be quite quick. So that's how we measure the speed at which we can cover our costs.

Our next question comes from the line of Peter [ Knutson ] with Evercore ISI.

I'd love to ask, touching on an earlier question about pricing contributions. I know in the past, that's been a little bit under pressure. And last quarter, I think you said that's stabilized. So I'm just wondering if you could talk a little bit about your outlook for pricing contributions on new business in '26?

Yes. Thank you for the question. I'll take that one as well.

So when we talk about pricing discipline -- that is something that we go across the board. We believe the value we're providing our clients is appropriately priced. We have actually not seen too much change, as you referenced, over the year. There's been a little bit on new business, and it really depends on certain firm types. I would say, of the various ones, we managed to be able to maintain within a 5% range of our price realization.

So we're not doing more discounting than we had before. We actually saw an uptick in Q4 in terms of new business. So both in terms of ASV and in terms of number of deals. And our annual price increase, which is what we've done in the past was in line. And so we're not assuming anything different in our 2026 outlook.

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

Welcome Sanoke as well. Just, Sanoke, maybe just for you, just curious on your thoughts on capital allocation and particularly in this AI [ rates ] that you talked about, whether deal making is going to be a focus for you?

And Helen, I just wanted to follow up quickly. You mentioned a few times investments in cyber. I was hoping you could elaborate on that on -- I'm guessing it's more internal security, but just some thoughts on that?

Thanks, Manav. It's an important question. As I think about this, my first priority is to continue to really understand our product portfolio and the strength of our product road map. I've already started doing this. And what I observe is we have a really strong product set, and there is a huge amount of energy going into the innovation in the company. And historical acquisitions that have been made are also well integrated and adding quite a lot of value to our clients.

So in the coming months, I'm going to investigate this obviously in much more detail, both in terms of hearing what client priorities are and how they are shifting, and from our internal teams to understand our road map and where we are finding traction. And that will ultimately optimize the approach in terms of organic versus inorganic growth.

What I'd like to add, though, is that I'm not a believer in growth at any cost. I think it's important that we are prudent with our investments and with our capital allocation. And we'll continue to do that in the way that FactSet has done over the years. And frankly, I see so much opportunity for growth with the capabilities that are already in place here at FactSet.

Manav, your question on the cyber front. So yes, that is meant for internal. I think as we continue, obviously, to invest in AI, that's an important piece of it. And when you have over $6 million of portfolios on the asset management side, and over $15 million portfolios, and growing on the wealth side, we want to make sure that we are providing the best we can in terms of the security. So that's why that is part of the driver of our focus.

[Operator Instructions] Our next question comes from the line of George Tong with Goldman Sachs.

I'd also like to extend a welcome to Sanoke. So your fiscal 2026 guidance for organic ASV growth of around 5% at the midpoint, points to a deceleration from growth you saw in fiscal '25.

Can you talk a little bit more about the drivers of this deceleration? And what you're seeing competitive may be contributing to it?

George, thank you. Let me start, and then I'll hand over to Helen.

It's obviously day 9 for me today, and it's been a busy week and a bit. And I must say, through that period, I've had extensive discussions with the leadership team and the Board. And the guidance reflects our view of the business today, the dynamics that we see in the marketplace. And balancing that with our commitment to our -- to long-term growth.

So we clearly see continued growth opportunities in the areas that we've already talked about. Whether it's wealth, data solutions, and frankly, in quite a lot of the other places that I've seen. And we are continuing to make investments that are disciplined and balancing AI investments with all the other investments that we need to make where we see opportunity.

So the guidance reflects the state of play today. Clearly, I'm going to be spending a lot of time in the coming weeks and months with our teams, and with clients, and come back and talk about long-term vision and opportunities and strategy in the coming months.

Helen, would you like to add anything?

Sure. No, happy to do that, and thanks for your question, George.

As noted on -- in the script, I mean, we are taking a more conservative approach to our guidance exactly for the reasons that Sanoke just talked about. It is not due to reduced confidence either in market demand or competitive positioning. As we talked about in the top wins that we had, most of those were competitive wins. I'll ask Goran to talk about the pipeline, but the midpoint is just conservative in some cases because we know that there are longer sales cycles. We know that we can tell from some of the good green shoots that we've had on the AI front that you need to have the adoption from the client side, and that can take a little bit longer, especially as they go through their own compliance checks as well. And then we know there are some headwinds as it relates to some of the policy changes in Europe. But quite frankly, we feel very good about where we are, the fact that we are above our midpoint for this year and just to keep us all in line last year, we were at a range of [ 90 to 140 ], and we're up this year. So I think it just reflects a conservative and we're going to do everything we can to beat it.

So I would just reinforce what Helen just said. I think our guidance is conservative with a high level of confidence we'll be able to execute in the range we provided. That range is identical to last year. We feel good about the momentum. Our pipeline is a bit improved year-over-year. It's early in the year, so it's a little bit difficult to talk with certainty, but we do see improvement. And we saw quite frankly, significant acceleration in the pipeline over the last 5 weeks. So that is one of the main data points that I look at as we are entering the year. So we have a high degree of confidence we will execute on the range we have given you.

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

I wanted to touch again on AI. I hear your conviction on the medium-term opportunity and your belief in your competitive position. But I'm curious, I guess, one, how you'd characterize your suite of AI products and specific kind of execution around that relative to your peers at this early stage?

And then maybe conceptually, how important is it for you to be first? Or because the stickiness of your product, how heavily embedded you are with clients allow you to be a little bit more deliberate with product development, product investments, product rollout?

Thanks, Andrew. Really important question. And as I said earlier, we are very much in the sort of the early stages of the AI adoption curve with our clients.

When I look at the products that we have out in the market, and as I get to learn more about what's being -- it's still in the development phase. I think they are really very finely tuned to add value to our existing products, services and solutions with our customers. So an example being portfolio commentary in the buy side, or pitch creator on the banking side. These are natural adjacencies and absolutely synergistic with the kinds of solutions that we offer traditionally to our client base.

So I think the competitiveness of these products, I believe, is high. We are going to see continued traction with it. And the investments that we are making, and what I see in the hopper, are all constructive and logical, and natural extensions of where we are today.

To your question around the adoption curve and do we need to be first mover? I believe there is a trade-off between being too early and getting things wrong, and being too late and missing sort of the market share and the opportunity to leapfrog competition. And this is in a fine balance to strike. It's early for me to say if we've gotten it absolutely right or not. But I am confident that there is a lot of great talent here at FactSet, and I'll be working with the teams to get that balance as right as we can going forward.

Thank you. This concludes the Q&A session. I would now like to turn the call back over to Sanoke Viswanathan for closing remarks.

Thank you. Thank you, everyone, for joining the call today. As we begin fiscal 2026. It's an exciting time. Our strategic investments are driving strong momentum across the business as we execute on what matters most to our clients.

As I stated earlier, we are uniquely positioned to become the leading AI-powered financial intelligence platform for our clients. We provide unparalleled client service. We are deeply embedded in our clients. And we are uniquely geared for collaboration. I look forward to meeting many of you over the coming weeks and days. Operator, that ends today's call.

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