Fair Isaac Corporation (FICO)

Credit scoring and analytics company FICO (NYSE:FICO) reported revenue ahead of Wall Streets expectations in Q4 CY2025, with sales up 16.4% year on year to $512 million. On the other hand, the company’s full-year revenue guidance of $2.35 billion at the midpoint came in 3.7% below analysts’ estimates. Its non-GAAP profit of $7.33 per share was 3.5% above analysts’ consensus estimates.

Company Overview

Creator of the three-digit number that can determine whether you get a mortgage or credit card, Fair Isaac Corporation (NYSE:FICO) develops analytics software and the widely used FICO Score, which is the standard measure of consumer credit risk in the United States.

A combination of increasing reliance on data and analytics across various industries and the desire for cost efficiency through outsourcing could mean that companies in this space gain. As functions such as payroll, HR, and credit risk assessment rely on more digitization, key players in the data & business process services industry could be increased demand. On the other hand, the sector faces headwinds from growing regulatory scrutiny on data privacy and security, with laws like GDPR and evolving U.S. regulations potentially limiting data collection and monetization strategies. Additionally, rising cyber threats pose risks to firms handling sensitive personal and financial information, creating outsized headline risk when things go wrong in this area.

FICO's competitors in the credit scoring market include VantageScore (a joint venture of the three major U.S. credit bureaus), CRIF Ratings in Europe, and in-house analytics developed by financial institutions. In software, FICO competes with Experian (EXPN), Equifax (EFX), Nice Actimize (NICE), Pegasystems (PEGA), SAS, IBM, and Adobe across various application areas.

A company’s long-term sales performance can indicate its overall quality. Any business can experience short-term success, but top-performing ones enjoy sustained growth for years.

With $2.06 billion in revenue over the past 12 months, Fair Isaac Corporation is a mid-sized business services company, which sometimes brings disadvantages compared to larger competitors benefiting from better economies of scale. On the bright side, it can still flex high growth rates because it’s working from a smaller revenue base.

As you can see below, Fair Isaac Corporation’s sales grew at an impressive 9.5% compounded annual growth rate over the last five years. This is a great starting point for our analysis because it shows Fair Isaac Corporation’s demand was higher than many business services companies.

Long-term growth is the most important, but within business services, a half-decade historical view may miss new innovations or demand cycles. Fair Isaac Corporation’s annualized revenue growth of 15.3% over the last two years is above its five-year trend, suggesting its demand was strong and recently accelerated.

This quarter, Fair Isaac Corporation reported year-on-year revenue growth of 16.4%, and its $512 million of revenue exceeded Wall Street’s estimates by 1.8%.

Looking ahead, sell-side analysts expect revenue to grow 24.6% over the next 12 months, an improvement versus the last two years. This projection is eye-popping and suggests its newer products and services will catalyze better top-line performance.

Fair Isaac Corporation has been a well-oiled machine over the last five years. It demonstrated elite profitability for a business services business, boasting an average operating margin of 43%.

Looking at the trend in its profitability, Fair Isaac Corporation’s operating margin rose by 7.8 percentage points over the last five years, as its sales growth gave it immense operating leverage.

This quarter, Fair Isaac Corporation generated an operating margin profit margin of 45.7%, up 4.9 percentage points year on year. This increase was a welcome development and shows it was more efficient.

We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.

Fair Isaac Corporation’s EPS grew at an astounding 24% compounded annual growth rate over the last five years, higher than its 9.5% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.

Diving into the nuances of Fair Isaac Corporation’s earnings can give us a better understanding of its performance. As we mentioned earlier, Fair Isaac Corporation’s operating margin expanded by 7.8 percentage points over the last five years. On top of that, its share count shrank by 19.6%. These are positive signs for shareholders because improving profitability and share buybacks turbocharge EPS growth relative to revenue growth.

Like with revenue, we analyze EPS over a more recent period because it can provide insight into an emerging theme or development for the business.

For Fair Isaac Corporation, its two-year annual EPS growth of 24.6% is similar to its five-year trend, implying strong and stable earnings power.

In Q4, Fair Isaac Corporation reported adjusted EPS of $7.33, up from $5.79 in the same quarter last year. This print beat analysts’ estimates by 3.5%. Over the next 12 months, Wall Street expects Fair Isaac Corporation’s full-year EPS of $31.45 to grow 41.5%.

Although earnings are undoubtedly valuable for assessing company performance, we believe cash is king because you can’t use accounting profits to pay the bills.

Fair Isaac Corporation has shown terrific cash profitability, enabling it to reinvest, return capital to investors, and stay ahead of the competition while maintaining an ample cushion. The company’s free cash flow margin was among the best in the business services sector, averaging an eye-popping 34.9% over the last five years.

Fair Isaac Corporation’s free cash flow clocked in at $165.4 million in Q4, equivalent to a 32.3% margin. The company’s cash profitability regressed as it was 10.2 percentage points lower than in the same quarter last year, but we wouldn’t read too much into the short term because investment needs can be seasonal, causing temporary swings. Long-term trends carry greater meaning.

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? Enter ROIC, a metric showing how much operating profit a company generates relative to the money it has raised (debt and equity).

Fair Isaac Corporation’s five-year average ROIC was 56.8%, placing it among the best business services companies. This illustrates its management team’s ability to invest in highly profitable ventures and produce tangible results for shareholders.

We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. Fortunately, Fair Isaac Corporation’s ROIC has increased significantly over the last few years. This is a great sign when paired with its already strong returns. It could suggest its competitive advantage or profitable growth opportunities are expanding.

Fair Isaac Corporation reported $162 million of cash and $2.81 billion of debt on its balance sheet in the most recent quarter. As investors in high-quality companies, we primarily focus on two things: 1) that a company’s debt level isn’t too high and 2) that its interest payments are not excessively burdening the business.

With $1.17 billion of EBITDA over the last 12 months, we view Fair Isaac Corporation’s 2.3× net-debt-to-EBITDA ratio as safe. We also see its $104.2 million of annual interest expenses as appropriate. The company’s profits give it plenty of breathing room, allowing it to continue investing in growth initiatives.

It was encouraging to see Fair Isaac Corporation beat analysts’ revenue expectations this quarter. We were also glad its EPS outperformed Wall Street’s estimates. On the other hand, its full-year revenue guidance missed. Overall, this was a softer quarter. The stock traded up 1.8% to $1,553 immediately following the results.

Updated: January 28, 2026 at 5:47 PM EST

Before deciding whether to buy Fair Isaac Corporation or pass, we urge investors to consider business quality, valuation, and the latest quarterly results.

Fair Isaac Corporation is one of the best business services companies out there. For starters, its revenue growth was impressive over the last five years and is expected to accelerate over the next 12 months. On top of that, its powerful free cash flow generation enables it to stay ahead of the competition through consistent reinvestment of profits, and its impressive operating margins show it has a highly efficient business model.

Fair Isaac Corporation’s P/E ratio based on the next 12 months is 34.3x. Some good news is baked into the stock given its multiple, but we’ll happily own what we believe is one of the best businesses in our coverage. Investments like this should be held patiently for at least three to five years as they benefit from the power of long-term compounding, which more than makes up for any short-term price volatility that comes with relatively high valuations.

Wall Street analysts have a consensus one-year price target of $2,034 on the company (compared to the current share price of $1,553).