FactSet (FDS) Q3 2025: Revenue Grows, But Margins Squeezed by Costs

Today, we're diving into the latest quarterly report from FactSet Research Systems (FDS), a major player in the financial data and analytics space. For anyone in the investment world, from asset managers to investment bankers, FactSet's software is a daily tool. Their latest 10-Q filing gives us a fresh look under the hood for the three months ending May 31, 2025. Let's break down the numbers and see what they tell us about the company's health.

Solid Revenue Growth Across the Globe

First, the good news. FactSet's revenue continues to climb, reaching $585.5 million for the quarter. This represents a healthy 5.9% increase compared to the same period last year. This growth wasn't isolated to one region; the company saw gains across all its geographical segments:

• Americas: The largest market, grew 6.7% to $380.5 million.
• EMEA (Europe, Middle East, and Africa): Saw a 3.2% increase to $145.7 million.
• Asia Pacific: Showed strong momentum with 7.9% growth, reaching $59.3 million.

This broad-based growth indicates healthy demand for FactSet's services globally, a positive sign of its strong market position.

The Margin Squeeze: A Tale of Rising Costs

While revenues grew, the story on the profit side is more complex. The company's net income (its bottom-line profit) actually decreased by 6.1% to $148.5 million. This resulted in a diluted earnings per share (EPS) of $3.87, down from $4.09 last year.

So, where did the money go? The income statement reveals a significant uptick in operating expenses. To see how revenue flows through costs to become profit, take a look at this chart I've put together based on the filing's data.

As the chart illustrates, the two main drivers of higher expenses were:

1. Cost of Services: This category, which includes expenses for data acquisition, technology infrastructure, and personnel to support their products, jumped 13.7% to $280.7 million. This suggests FactSet is investing heavily in the technology and data that form the core of its offerings.
2. Selling, General & Administrative (SG&A): These costs, related to sales efforts and corporate overhead, rose 7.1% to $110.6 million.

This classic case of revenue growth being outpaced by rising expenses led to a lower operating margin, which fell from 36.6% last year to 33.2% this quarter.

Investing for the Future

FactSet's quarter paints a picture of a company in an investment phase. The revenue growth is robust, but profitability is being squeezed by strategic spending on technology, talent, and recent acquisitions. The key challenge for FactSet, like many of its competitors in the fast-moving FinTech landscape, is to ensure these investments translate into sustainable, profitable growth down the line.

Despite the margin pressure, the company continues to return capital to its shareholders, distributing over $120 million through share repurchases and dividends during the quarter. This signals management's confidence in the company's long-term financial strength and its ability to navigate the current high-cost environment. The coming quarters will be crucial in showing whether these investments can successfully widen the profit margins once again.