Actuals vs. estimates

Verdict

• Revenue of $634 million beat the $629.8 million estimate by 0.7%, and adjusted EPS of $4.52 beat the $4.35 estimate by 3.9%.
• Organic ASV grew 7% to $2.56 billion, with $86 million added in the quarter and $168 million across fiscal 2026 - more than 30% above the fiscal 2025 figure.
• Fiscal 2027 guidance steps down: organic ASV growth of 5%-6.5% and reported revenue growth of 5%-6%, against the 7% ASV growth and 6.7% revenue growth just delivered. Management confirmed no contracts were pulled forward into fiscal 2026.
• Margin guidance is 25 to 75 basis points of improvement on a fiscal 2026 adjusted operating margin of 34.5% that sat approximately 180 basis points below 2025, and roughly 2 percentage points of fiscal 2027 EPS growth goes to a higher tax rate and the refinancing of $500 million of 2.9% notes maturing in March.
• The one thing that matters: the guided 25-75 basis points of fiscal 2027 margin improvement rests on the same assumption as the 5%-6.5% ASV guide. Incentive comp is expensed upfront while the revenue ASV delivers is recognized over time, so the margin recovery is easier if ASV growth slows from the 7% just delivered.

Guidance & KPIs

Management commentary

• Management confirmed no contracts were pulled forward into fiscal 2026 and described the fiscal 2027 ASV range as higher and tighter than the guidance given in the last two years, with renewals back-half weighted.
• The CFO called fiscal 2026 operating margins a floor and sized the below-the-line items - a tax rate above the approximately 19% booked in fiscal 2026, plus the notes refinancing - at about 2% of EPS growth.
• AI offerings made up more than 10% of the $86 million of organic ASV added in the quarter, and MCP API call volume ran at seven times the prior quarter's level across more than 650 engaged clients.
• Asked whether MCP carries a pricing premium, the CEO disclosed none and said the majority of workstation users who added it "have grown anywhere from 20%-50% more in terms of their overall ASV with us".
• Medium-term targets were deferred to a November 10 Investor Day, which management said will carry the multi-year financial algorithm.

Quality of earnings

• Adjusted EPS growth outran the operating line. Adjusted EPS rose 11% to $4.52 while adjusted operating income of $209 million came at a 33% margin, down from 33.8% a year ago - the extra growth came from a lower share count, with approximately $644 million repurchased in fiscal 2026 cutting shares outstanding by almost 7%.
• Execution is what compressed the margin. Compensation-related expenses rose 9% year-over-year on performance-based arrangements rather than headcount, against a record $86 million of organic ASV in the quarter, because that incentive comp is expensed upfront while the revenue the ASV delivers is recognized over time.
• Cash generation is a full-year story, not a fourth-quarter one. Fiscal 2026 free cash flow of $707 million rose over 14%, while the quarter's $177 million was roughly in line with the prior year on one-time restructuring costs - and management expects similar impacts in the first quarter of 2027.

Gotchas & watch items

• The 5%-6% fiscal 2027 revenue guide is approximately 100 basis points better on a like-for-like basis, the gap covering the exit from the ESG Signals attribution business, FX rates and other one-time items.
• Revenue may diverge from ASV: a growing, consumption-based share of recurring revenue sits inside the 7% ASV growth, but management factored in no acceleration for fiscal 2027 when setting the 5%-6% revenue guide.
• Headcount fell in fiscal 2026 for the first time in several years and further reductions were implemented earlier this month, so the guided 25-75 basis points of margin improvement leans on cuts already taken rather than on volume.
• $500 million of notes at a 2.9% rate mature in March 2027 and management assumes refinancing at higher rates, sized at $0.30-$0.40 of EPS against the $18.01 delivered in fiscal 2026.