Fair Isaac Corporation

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Fair Isaac Corporation stock analysis FICO overview
Bullish +75

Fair Isaac Q2 Earnings Beat Estimates on Scores, Revenue Up Y/Y

📈 FICO reported non-GAAP earnings of $12.50 per share, exceeding analyst estimates by 13.33% and representing a 60.1% year-over-year increase.

💰 Total revenue reached $692 million, surpassing consensus expectations by 10.64% and growing 38.7% compared to the same quarter last year.

🏠 Mortgage originations revenue surged 127% year over year, driven by strong performance in the business-to-business scoring channel where revenue jumped 72%.

💳 Auto originations revenue grew 13%, while credit card and personal loan originations increased 6%, indicating broader demand beyond just mortgages.

🖥️ Software revenue rose 7% to $216.7 million, fueled by a 54% increase in platform revenue as the FICO Platform gains market penetration.

📉 Non-platform software revenue declined 12% due to customer migrations, though total software annual recurring revenue increased 10% year over year.

💵 The company achieved a non-GAAP operating margin of 65%, expanding from 58% in the prior year as revenue growth outpaced expenses.

📉 Adjusted EBITDA climbed 55.8% to $448.5 million, with margins reaching 64.8% compared to 57.7% in the previous year.

💰 Cash and cash equivalents totaled $219.4 million as of March 31, 2026, up from $162 million at the end of December 2025.

🚀 Free cash flow generated was $214.3 million in the quarter, compared to $165.3 million in the prior quarter.

📉 The company repurchased 484,000 shares worth $605 million, marking its largest quarterly share buyback by dollar amount.

🎯 Management raised full-year fiscal 2026 revenue guidance to $2.45 billion, an increase from the previous estimate of $2.35 billion.

📈 Projected non-GAAP earnings for the full year 2026 are now expected to be $40.45 per share.

💻 R&D expenses as a percentage of revenue decreased by 120 basis points to 7.8%, while SG&A expenses dropped by 330 basis points.

📉 Total debt stands at $3.64 billion, reflecting the company's capital structure following recent buybacks and operational cash flow generation.

Bullish Signals
  • Non-GAAP earnings of $12.5 per share beat the Zacks Consensus Estimate by 13.33% and surged 60.1% from the year-ago quarter.
  • Revenues reached $692 million, beating analyst consensus by 10.64% and growing 38.7% year over year.
  • Mortgage originations revenue jumped 127% year over year, driven by higher volumes, unit pricing, and increased mortgage origination scores in the business-to-business channel where revenue grew 72%.
  • Scores segment revenue rose 60% year over year to $475.0 million, highlighting the durability of FICO's franchise in U.S. credit markets.
  • Software revenue climbed 7% year over year to $216.7 million, supported by strong FICO Platform penetration and a 54% increase in platform-specific revenue.
  • Total software annual recurring revenue (ARR) increased 10% to $789 million, with platform ARR reaching $349 million representing 44% of total ARR.
  • Dollar-based net retention rate improved to 109%, including a robust 136% for the platform segment, reflecting expansion in use cases even as legacy products face headwinds.
  • Non-GAAP operating margin expanded to 65% from 58% as revenue growth outpaced incremental spending on R&D and administrative expenses.
  • Management raised full-year fiscal 2026 guidance, increasing the revenue expectation to $2.45 billion from the prior view of $2.35 billion.
  • The company returned significant capital by repurchasing 484,000 shares for $605 million, citing it as its largest quarterly repurchase in dollar terms.
Risk Factors
  • Non-platform software revenue declined 12% year over year as customers migrate to the new FICO Platform.
  • The legacy non-platform segment had its annual recurring revenue (ARR) growth outpaced by migration effects, with dollar-based net retention dropping to 90% compared to 136% for the platform.
  • FICO carries $3.64 billion in total debt, which represents a significant leverage liability against its $219.4 million in cash and cash equivalents as of March 31, 2026.
  • The company spent $605 million on share repurchases in the quarter, potentially consuming free cash flow that could otherwise be used for strategic investments or deleveraging.
Full Analysis
Fair Isaac Corporation (FICO) delivered a strong second-quarter fiscal 2026 performance, reporting non-GAAP earnings of $12.50 per share, which represents a 60.1% increase year over year and a significant beat against the Zacks Consensus Estimate by 13.33%. Revenue reached $692 million for the quarter, rising 38.7% year over year and exceeding market expectations by 10.64%. This growth was primarily driven by robust momentum in credit-related activities, with mortgage originations revenue surging 127% year over year to become the largest contributor among revenue segments. The company's core Scores segment saw its revenue climb 60% to $475 million for the quarter, propelled largely by business-to-business channels where revenue jumped 72%. Within this segment, mortgage originations scores accounted for the vast majority of the growth, reflecting high volumes and favorable pricing in the U.S. credit markets. Auto origination revenues grew 13%, while credit card and personal loan originations increased 6%, indicating broad-based demand beyond the mortgage sector. Additionally, the Business-to-consumer Scores revenue increased 5% year over year, supported by indirect channel partners. FICO also made notable progress in its decisioning software strategy, with total software revenue increasing 7% to $216.7 million. The FICO Platform itself saw substantial adoption, causing platform-specific revenue to jump 54%, while overall Total Software Annual Recurring Revenue (ARR) grew 10% to $789 million. Operating efficiency improved markedly as research and development expenses contracted 120 basis points year over year, and selling, general, and administrative expenses decreased 330 basis points. Consequently, non-GAAP operating margins expanded to 65%, and adjusted EBITDA rose 55.8% to $448.5 million. Regarding financial position and strategy, FICO maintained a healthy cash balance of $219.4 million as of March 31, 2026, while total debt stood at $3.64 billion. The company generated $223 million in cash flow from operations and free cash flow of $214.3 million for the quarter. FICO prioritized capital return by executing a major share repurchase program, buying back 484,000 shares for $605 million, its largest quarterly dollar-value buyback on record. Reflecting this strong performance, management raised its full-year fiscal 2026 revenue guidance to $2.45 billion from the previous outlook of $2.35 billion and increased projected non-GAAP earnings to $40.45 per share.