FICO — Fair Isaac Corporation

FICO Q2 2026 Earnings Call Summary

1. Key Financial Results and Metrics:

• Revenue: $692 million, up 39% year-over-year.
• GAAP Net Income: $264 million, up 63%; GAAP EPS of $11.14, up 69%.
• Non-GAAP Net Income: $297 million, up 54%; Non-GAAP EPS of $12.50, up 60%.
• Free Cash Flow: $214 million for the quarter; $867 million over the last 4 quarters, a 28% increase.
• Share Repurchases: $605 million spent on buybacks, marking the largest quarterly repurchase in FICO's history.

2. Strategic Updates and Business Highlights:

• Scores Segment: Revenue of $475 million, up 60% year-over-year, driven by B2B scores, particularly in mortgage origination (up 127%).
• Software Segment: Revenue of $217 million, up 7%. Platform revenue grew 54%, while non-platform revenue declined 12%.
• FICO Score 10T: Pricing adjusted to $0.99 per score plus a $65 funding fee to encourage adoption. The score incorporates rental and utility payment histories, aiming to enhance mortgage accessibility.
• AI Initiatives: FICO has invested in AI, holding 137 AI-based patents, focusing on explainability and compliance with regulatory requirements.

3. Forward Guidance and Outlook:

• Revenue Guidance for FY 2026: Increased to $2.45 billion, a 23% year-over-year increase.
• GAAP Net Income Guidance: Raised to $825 million; GAAP EPS of $35.60, up 27%.
• Non-GAAP Net Income Guidance: Increased to $946 million; Non-GAAP EPS of $40.45, up 29%.
• Expectations: Conservative assumptions regarding score volumes, with no anticipated loss of market share to VantageScore in FY 2026.

4. Bad News, Challenges, or Points of Concern:

• Non-Platform Revenue Decline: Non-platform revenues fell by 12%, attributed to migrations and end-of-life products.
• Competitive Pressures: Concerns about VantageScore's potential market share growth, particularly with regulatory changes, although FICO remains confident in its competitive position.
• Market Volatility: There is uncertainty regarding consumer behavior and macroeconomic conditions, particularly in auto and credit card sectors, although no significant weakness has been observed yet.

5. Notable Q&A Insights:

• Pricing Strategy for FICO 10T: The new pricing model aims to distribute costs across the value chain and encourage broader adoption.
• VantageScore Competition: FICO's management expressed confidence that their scores remain more predictive and competitively priced compared to VantageScore, despite regulatory changes.
• Direct Licensing Program: Awaiting FHFA approval, with significant interest from lenders; expected to drive adoption of FICO Score 10T.
• Market Dynamics: Management highlighted that while VantageScore could gain some share, they do not foresee a significant impact on FICO's volume.
• AI in Credit Scoring: FICO's scores are designed to comply with regulatory requirements, making it challenging for AI-driven models to replace traditional scoring methods.

Overall, FICO reported strong financial performance in Q2 2026, with significant growth in both revenue and net income, while strategically positioning itself for future growth through innovative scoring models and AI initiatives. However, challenges remain, particularly from competitive pressures and the need for regulatory clarity regarding new scoring models.