Jack Henry (JKHY)

Financial technology provider Jack Henry & Associates (NASDAQ:JKHY) reported Q3 CY2025 results beating Wall Street’s revenue expectations, with sales up 7.3% year on year to $644.7 million. The company expects the full year’s revenue to be around $2.5 billion, close to analysts’ estimates. Its GAAP profit of $1.97 per share was 15.2% above analysts’ consensus estimates.

Company Overview

Founded in 1976 by two entrepreneurs who saw the need for specialized banking software in the early days of financial computing, Jack Henry & Associates (NASDAQ:JKHY) provides technology solutions that help banks and credit unions innovate, differentiate, and compete while serving the evolving needs of their accountholders.

Payment processors facilitate transactions between merchants, consumers, and financial institutions. Growth comes from e-commerce expansion, declining cash usage globally, and value-added services beyond basic processing. Headwinds include margin pressure from merchant negotiating power, rapid technological change requiring investment, and emerging competition from technology companies entering the payments ecosystem.

Jack Henry & Associates competes with several major financial technology providers, including Fidelity National Information Services (NYSE:FIS), Fiserv (NASDAQ:FISV), Finastra (private), and Corelation (private), all of which offer core processing systems and complementary solutions to banks and credit unions.

Examining a company’s long-term performance can provide clues about its quality. Even a bad business can shine for one or two quarters, but a top-tier one grows for years. Unfortunately, Jack Henry’s 7.2% annualized revenue growth over the last five years was mediocre. This wasn’t a great result compared to the rest of the financials sector, but there are still things to like about Jack Henry.

Long-term growth is the most important, but within financials, a half-decade historical view may miss recent interest rate changes and market returns. Jack Henry’s annualized revenue growth of 6.8% over the last two years aligns with its five-year trend, suggesting its demand was consistently weak. Note: Quarters not shown were determined to be outliers, impacted by outsized investment gains/losses that are not indicative of the recurring fundamentals of the business.

Jack Henry also breaks out the revenue for its most important segments, Services & Support and Processing, which are 58.5% and 41.5% of total revenue. Services & Support revenue grew by 5.6% and 5.7% annually over the past five and two years, respectively. At the same time, Processing revenue increased by 9.6% and 8.4% per year over the past five and two years, respectively. These results outperformed its total revenue.

This quarter, Jack Henry reported year-on-year revenue growth of 7.3%, and its $644.7 million of revenue exceeded Wall Street’s estimates by 1.3%.

Revenue growth is one major determinant of business quality, and the efficiency of operations is another. For Payment Processing companies, we look at pre-tax profit rather than the operating margin that defines sectors such as consumer, tech, and industrials.

Financials companies manage interest-bearing assets and liabilities, making the interest income and expenses included in pre-tax profit essential to their profit calculation. Taxes, being external factors beyond management control, are appropriately excluded from this alternative margin measure.

Over the last four years, Jack Henry’s pre-tax profit margin has fallen by 2.6 percentage points, going from 23% to 25.6%. It has also expanded by 3.5 percentage points on a two-year basis, showing its expenses have consistently grown at a slower rate than revenue. This typically signals prudent management.

Jack Henry’s pre-tax profit margin came in at 29.5% this quarter. This result was 3.4 percentage points better than the same quarter last year.

Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

Jack Henry’s EPS grew at a decent 11.4% compounded annual growth rate over the last five years, higher than its 7.2% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.

Like with revenue, we analyze EPS over a shorter period to see if we are missing a change in the business.

For Jack Henry, its two-year annual EPS growth of 15.3% was higher than its five-year trend. This acceleration made it one of the faster-growing financials companies in recent history.

In Q3, Jack Henry reported EPS of $1.97, up from $1.63 in the same quarter last year. This print easily cleared analysts’ estimates, and shareholders should be content with the results. Over the next 12 months, Wall Street expects Jack Henry’s full-year EPS of $6.58 to shrink by 1.1%.

Return on equity, or ROE, tells us how much profit a company generates for each dollar of shareholder equity, a key funding source for banks. Over a long period, banks with high ROE tend to compound shareholder wealth faster through retained earnings, buybacks, and dividends.

Over the last five years, Jack Henry has averaged an ROE of 23.6%, exceptional for a company operating in a sector where the average shakes out around 10% and those putting up 25%+ are greatly admired. This shows Jack Henry has a strong competitive moat.

Jack Henry reported $36.24 million of cash and $20 million of debt on its balance sheet in the most recent quarter.

Given the company has more cash than debt, leverage is not an issue here.

We were impressed by how significantly Jack Henry blew past analysts’ Processing segment expectations this quarter. We were also glad its EBITDA outperformed Wall Street’s estimates. Overall, this print had some key positives. The stock traded up 4.2% to $158.95 immediately following the results.

Updated: December 4, 2025 at 11:08 PM EST

The latest quarterly earnings matters, sure, but we actually think longer-term fundamentals and valuation matter more. Investors should consider all these pieces before deciding whether or not to invest in Jack Henry.

In our opinion, Jack Henry is a solid company. Although its revenue growth was mediocre over the last five years and analysts expect growth to slow over the next 12 months, its stellar ROE suggests it has been a well-run company historically. Plus, Jack Henry’s expanding pre-tax profit margin shows the business has become more efficient.

Jack Henry’s P/E ratio based on the next 12 months is 27.8x. This valuation tells us it’s a bit of a market darling with a lot of good news priced in. Jack Henry is a good one to add to your watchlist - there are companies featuring superior fundamentals at the moment.

Wall Street analysts have a consensus one-year price target of $181.23 on the company (compared to the current share price of $180.29).