FICO
T2Fair Isaac Corporation
OverviewFair Isaac Corporation (FICO) provides analytic, software, and data management products, best known for its credit scoring solutions. Its Scores segment, genera
Fair Isaac Corporation (FICO) provides analytic, software, and data management products, best known for its credit scoring solutions. Its Scores segment, generating about 69% of revenue, offers B2B and B2C credit scores. The Software segment, contributing around 31%, delivers the FICO Platform, an AI decisioning platform, and other solutions to global financial services and businesses.
- What They Do (Plain English & Analogies)
- FICO acts like a financial GPS and a smart decision-making engine for businesses, especially banks and lenders. As a financial GPS, FICO provides credit scores (like the well-known FICO Score) that tell lenders how likely someone is to repay a loan. This helps them decide if they should offer a mortgage, car loan, or credit card, and at what interest rate. It's a quick, standardized way to understand a borrower's financial reliability. As a smart decision-making engine, FICO also offers powerful software, called the FICO Platform, that helps businesses automate and improve complex decisions in real-time. Imagine a bank needing to decide instantly whether to approve a transaction, detect fraud, or offer a personalized product to a customer. The FICO Platform uses artificial intelligence (AI) and deep industry expertise to make these critical decisions quickly, consistently, and in a way that can be explained, which is crucial for regulated industries like financial services. It helps businesses manage customer relationships, prevent fraud, and optimize various operations.
- Very Brief History
- Fair Isaac Corporation, originally known as Fair Isaac & Company, Inc., was founded in 1956 by Bill Fair and Earl Isaac. The company revolutionized credit decisioning with the introduction of the FICO Score. It changed its name to Fair Isaac Corporation in July 1992 and has since evolved from its origins in statistical credit scoring to a broader focus on predictive analytics, decision management, and AI-driven solutions for various industries.
- "Street Stereotype"
- FICO is generally perceived as the "gold standard" and dominant player in consumer credit scoring in the U.S., holding a near-monopolistic position in the domestic credit scoring industry. However, there's increasing market focus and some concern around regulatory shifts and competition from alternative credit scores like VantageScore, particularly in the mortgage market, which could impact FICO's pricing power. Investors also track the growth of its Software segment, especially the FICO Platform, as a key driver for future growth and diversification. The market is closely watching the adoption of FICO Score 10T and the direct licensing program in mortgages, as well as the ongoing competitive dynamics with VantageScore.
- Subsidiaries On Linked In*
- {"subsidiaries":[]}
- Customer Sectors & Example Clients
- FICO's customers are primarily in **financial services**, including banks, lenders (mortgage, auto, credit card, personal loan providers), and financial institutions. They also serve other industries such as **insurance, telecommunications, health care, and retail**. Specific clients and partners mentioned include: * **Mortgage Direct Licensing Program participants:** Xactus, Cotality, Ascend Companies, CIC Credit, MeridianLink. * **Partnerships:** Plaid (for UltraFICO Score). * **General:** 90% of top U.S. lenders use the FICO Score. Fannie Mae and Freddie Mac are also key relationships in the secondary mortgage market.
- New Customers / Segments They'Re Targeting
- FICO is committed to broadening its reach beyond financial services, getting traction in telco and other verticals through its partner program and marketplace. The company aims for 500 named accounts globally, with 350 in financial services and 150 outside, noting there are 'several hundred to go' in financial services. The FICO Platform is designed to be horizontal and appealing to other verticals.
- Supply Chain And Sourcing Geographies
- The provided transcript and existing knowledge do not offer specific details regarding FICO's supply chain or the geographic sourcing of its products or components. FICO primarily provides software, analytics, and data management products and services, which are intellectual property-driven rather than manufacturing-driven. Therefore, a traditional physical supply chain with sourcing geographies is not directly applicable in the same way as for a manufacturing company.
- Sales Geographies And Expansion Plans
- FICO currently sells its products and services globally. In Q2 2026, 90% of its total company revenues were derived from the **Americas region** (North America and Latin America). The **EMEA region** (Europe, Middle East, Africa) generated 7% of revenues, and the **Asia Pacific region** delivered 3%. Management indicates plans to expand sales by broadening its reach into other verticals beyond financial services, particularly through its partner program and the FICO Marketplace. The FICO Score has also been made available in over 40 other countries.
- How Key Themes May Help/Hurt
- **Help (AI '25: Apps & Edge Deployment):** FICO is exceptionally well-positioned to benefit from the "AI '25: Apps & Edge Deployment" theme. Its FICO Platform is explicitly designed with an "agentic-by-design" architecture, enabling real-time, always-on customer profile engines for hyper-personalized consumer experiences. This aligns perfectly with the theme's focus on embedding AI into workflows for tangible ROI and delivering measurable business outcomes. FICO's 137 AI-based patents, including those for explainability and ethical AI, directly address the critical need for robust governance and observability in agentic AI, especially in highly regulated financial services. The platform's ability to operationalize AI at scale across multiple connected use cases for over 150 clients globally demonstrates successful application-layer monetization and deep verticalization, reinforcing the theme's bull points. The company's focus on "always-on, real-time customer insights" and "real-time decisions at scale" directly translates to the theme's emphasis on AI workflow automation and productivity gains. **Hurt (AI '25: Apps & Edge Deployment):** While largely beneficial, FICO could face challenges if the broader market struggles with the complexities of deploying and managing agentic AI at scale, particularly regarding resource optimization and managing rising token consumption, which could impact client adoption rates or increase FICO's own operational costs for platform delivery. The bear points of the theme highlight human and organizational resistance to change and critical gaps in data quality, security, and governance frameworks, which, if not adequately addressed by FICO's clients, could slow down the "land and expand" strategy for the FICO Platform. However, FICO's strong emphasis on explainability and trust aims to mitigate these risks in its primary target market.
3 Main Long-Term Bull Details
- Dominant and Evolving Credit Scoring Franchise: FICO maintains its position as the industry standard in credit scoring, continuously innovating with solutions like FICO Score 10T, which is highly predictive and incorporates new data like rental and utility payments to expand financial inclusion. The strategic partnership for Cash Flow UltraFICO Score with Plaid further enhances its offerings, and the direct licensing program is designed to encourage widespread adoption and competitive pricing.
- Accelerating Growth of the AI-Powered FICO Platform: The FICO Platform is a world-leading AI decisioning platform for financial services, recognized by top analysts, and is experiencing rapid growth in annual recurring revenue (ARR) and bookings. Its agentic-by-design architecture, deep domain expertise, and ability to operationalize AI at scale for critical business decisions (risk management, fraud, customer experience) position FICO for sustained software growth and expansion beyond traditional scoring.
- Strong Financial Performance and Shareholder Returns: FICO consistently delivers robust financial results, including significant revenue growth, expanding GAAP and non-GAAP net income and EPS, and strong free cash flow generation. The company actively returns capital to shareholders through substantial share repurchases, demonstrating confidence in its business model and commitment to enhancing shareholder value.
3 Main Long-Term Bear Details
- Regulatory and Competitive Headwinds in the Mortgage Market: Significant uncertainty persists regarding the timeline and specifics of credit score modernization initiatives by the FHFA and GSEs, including the adoption of FICO Score 10T and the competitive landscape with VantageScore. Potential delays in approvals, complexities in LLPA grids, and the possibility of "gaming" in a two-score system could create market friction and impact FICO's highly profitable mortgage scores business.
- Reliance on Legacy Software and Migration Challenges: While the FICO Platform is growing rapidly, the non-platform software revenue is declining, driven by migrations and end-of-life products. Although FICO is not forcing migration, a prolonged transition or resistance from customers to move from legacy systems could create a drag on overall software segment growth and profitability, requiring careful management of its diverse product portfolio.
- Macroeconomic Sensitivity and Volume Volatility: FICO's Scores segment, particularly revenues from mortgage, auto, and credit card originations, remains sensitive to macroeconomic factors such as interest rate fluctuations and overall lending volumes. Despite conservative guidance, unforeseen economic downturns or sustained periods of low origination activity could temper revenue growth and impact the company's financial outlook.
- Competitors And Differentiation
- FICO's primary competitor in credit scoring is **VantageScore**. Other alternatives or proprietary scores built by lenders also exist. **Differentiation:** * **Predictiveness:** FICO asserts that its FICO Score 10T is the most predictive credit score for all borrowers, including first-time home borrowers, and is more predictive than VantageScore. FICO 10T incorporates rental and utility payment history, enabling more consumers to qualify for mortgages. * **Market Standard & Integration:** FICO Score remains the "trusted industry standard used by 90% of top U.S. lenders" and has deep ecosystem integration. * **Pricing:** FICO has adjusted its FICO Score 10T performance model pricing to be competitive with VantageScore, offering $0.99 per score plus a funding fee, which is at parity with Vantage's pricing. This encourages widespread use, especially in the prospecting phase. * **Regulatory Comfort & Explainability:** FICO scores are supported by strict regulatory requirements on credit underwriting outcome explainability and model governance, carrying 32 reason codes that are shared with consumers. This provides a level of comfort with regulators and consumers that AI-based black-box underwriting currently lacks. * **Proprietary Data & AI Patents:** FICO's scoring models are supported by proprietary data access, mainly with the credit bureaus. FICO has also been issued 137 AI-based patents, including those in blockchain technology helpful for traceable and explainable decision-making. * **Software Platform:** The FICO Platform is recognized as the world's leading AI decisioning platform for financial services, architected to be agentic-by-design, delivering decision-grade analytics, deep domain expertise, and an enterprise platform for precision, consistency, explainability, and trust.
- Recent Performance & What The Market'S Focused On
- **Recent Performance:** FICO reported a very strong Q2 2026, with revenues of $692 million, up 39% year-over-year. GAAP net income was $264 million (up 63%) and GAAP EPS was $11.14 (up 69%). Non-GAAP net income was $297 million (up 54%) and non-GAAP EPS was $12.50 (up 60%). Free cash flow for the quarter was $214 million. The Scores segment revenue grew 60% year-over-year to $475 million, driven by B2B scores (up 72%) and mortgage originations (up 127%). The Software segment delivered $217 million in Q2 revenues, up 7%, with platform revenue growing 54% and non-platform declining 12%. Total software ARR was $789 million (up 10%), with Platform ARR at $349 million (up 49%). FICO also repurchased $605 million of shares in Q2. The company increased its fiscal 2026 guidance, with revenue now projected at $2.45 billion (up 23% year-over-year). **Market Focus:** The market is intensely focused on the adoption and go-live of FICO Score 10T in the conforming mortgage market, particularly the timing of FHFA approval for the direct licensing program and the release of LLPA grids. The competitive dynamics with VantageScore, especially regarding pricing and predictiveness, and the potential for "gaming" in a two-score system, are also key areas of scrutiny. Investors are also tracking the continued acceleration of the FICO Platform's ARR and bookings growth, and the successful migration of customers from legacy software. The role of AI in credit underwriting, particularly FICO's explainable AI capabilities, is also a significant point of interest.
- Revenue Segments And Estimated Mix
- Scores — Mix: ~68.6%; Source: Q2 2026 transcript; Trend: Up 60% YoY, B2B up 72%, B2C up 5%
- Software — Mix: ~31.4%; Source: Q2 2026 transcript; Trend: Up 7% YoY, Platform revenue up 54%, Non-platform revenue declined 12%
- Product Brands
- FICO Score
- myFICO.com
- FICO Platform
- FICO Score 10T
- UltraFICO Score
- Cash Flow UltraFICO Score
- FICO Mortgage Direct Licensing Program
- FICO Score Mortgage Simulator
- FICO Marketplace
- FICO Assistant
- FICO Focused Foundation Model
- Enterprise Fraud Solution on FICO platform
- FICO TRIAD Customer Manager
Bull / Bear DetailsFICO, a dominant data owner in financial services, is poised for robust growth driven by its proprietary credit scoring and advanced AI-driven FICO Platform. St
Thesis
FICO, a dominant data owner in financial services, is poised for robust growth driven by its proprietary credit scoring and advanced AI-driven FICO Platform. Strong Q2 performance, increased FY26 guidance, and strategic FICO Score 10T pricing are accelerating adoption. Coupled with surging software platform ARR and significant share repurchases, FICO's core offerings and AI investments reinforce a compelling long-term outlook, despite ongoing regulatory complexities. (Updated: 2026-05-03)
Bull case
The Scores segment continues robust growth, with Q2 revenue up 60% and mortgage originations revenue surging 127% year-over-year. Strategic pricing for FICO Score 10T ($0.99 plus $65 funding fee) aims to accelerate widespread adoption, while the next-generation UltraFICO Score with Plaid is nearing go-live, further expanding FICO's market reach and solidifying its industry leadership.
FICO's Software segment demonstrates significant momentum, with platform revenue growing 54% and platform ARR up 49% year-over-year. Record ACV bookings and a 136% platform NRR underscore the successful "land and expand" strategy for the FICO Platform, which is recognized as the world's leading AI decisioning platform for financial services, leveraging 137 AI-based patents.
FICO delivered a very strong Q2 with 39% revenue growth and 54% non-GAAP net income growth, generating $214 million in free cash flow. Management increased fiscal 2026 guidance across all key metrics and demonstrated strong commitment to shareholder value through a record $605 million in Q2 share repurchases, with additional buybacks post-quarter.
Bear case
Significant uncertainty persists regarding the timeline for FHFA sign-off on the Direct Licensing Program and the release of FICO Score 10T historical data. Delays in LLPA grids and the potential for a "gaming problem" in a two-score system could complicate market adoption and create operational hurdles for lenders, impacting FICO's mortgage segment.
While the FICO Platform thrives, non-platform software revenue declined 12% year-over-year, indicating a continued drag from legacy solutions. Additionally, FICO's Scores segment remains sensitive to macroeconomic factors like interest rates and overall lending volumes, leading management to maintain conservative volume assumptions despite recent strong performance.
Despite FICO's confidence in its superior product, the competitive environment with VantageScore, particularly concerning potential regulatory mandates for multiple scores, remains a long-term concern. Furthermore, widespread AI adoption in credit underwriting faces strict regulatory requirements for explainability and model governance, posing challenges for black-box AI solutions and potentially slowing innovation.
Bull / Bear Case
- Bear Case
- The bear case for Fair Isaac Corporation centers on persistent regulatory and competitive pressures, particularly in the mortgage market. Significant uncertainty surrounds the FHFA's final sign-off for the Direct Licensing Program and the release of FICO Score 10T historical data, potentially delaying market adoption and creating operational complexities for lenders. The threat of a "gaming problem" in a two-score system with VantageScore, despite FICO's dismissal of its market share, remains a concern. Macroeconomic factors, such as interest rate fluctuations and overall lending volumes, introduce unpredictability, leading management to maintain conservative assumptions. Furthermore, the decline in non-platform software revenue (down 12%) indicates a drag from legacy solutions, and the strict regulatory requirements for AI explainability could slow innovation in credit underwriting.
- Bull Case
- Fair Isaac Corporation presents a compelling bull case driven by its dominant and innovating Scores segment, which saw a 60% revenue increase in Q2 2026, fueled by a 127% surge in mortgage originations. The strategic pricing of FICO Score 10T at $0.99 aims to accelerate widespread adoption, while the upcoming UltraFICO Score with Plaid promises further market expansion. In the Software segment, the FICO Platform is demonstrating significant momentum with 54% revenue growth and 49% ARR growth, underpinned by a 136% net retention rate and 137 AI-based patents. FICO's strong Q2 performance led to increased fiscal 2026 guidance, and aggressive share repurchases, including a record $605 million in Q2, highlight financial strength and commitment to shareholder returns. The company's entrenched position and continuous AI-driven innovation solidify its market leadership.
- More Compelling & Why
- Bull. FICO's current valuation, with a Free Cash Flow Yield of 3.61% (35% above its 10-year median) and DCF analysis suggesting a 29.1% undervaluation, indicates the market has overcorrected for perceived risks. The company's strong Q2 results, increased FY26 guidance, and aggressive share repurchases demonstrate robust underlying business performance and management confidence, suggesting the stock is currently trading below its intrinsic value despite known headwinds. My view would flip if FICO's Scores segment experiences tangible market share loss to VantageScore in the conforming mortgage market, or if regulatory delays for FICO Score 10T and the Direct Licensing Program extend significantly beyond current expectations, leading to a material negative impact on revenue and profitability.
Key Factors
| Key Factor | Why It Matters | What To Watch | What It Signals | Where/How To Track | Free Alt Data | Paid Alt Data |
|---|---|---|---|---|---|---|
| FICO Mortgage Direct Licensing Program (DLP) Go-Live with Resellers | The official go-live of the DLP with key resellers is crucial for widespread adoption of FICO Score 10T and the new performance-based pricing model, driving Scores segment revenue and market penetration. | FHFA final sign-off for resellers to calculate scores and public announcements from FICO or its reseller partners (e.g., Xactus, Cotality, Ascend Companies, CIC Credit, MeridianLink) confirming the DLP is officially live. FICO has 3 of the top 5 resellers signed. | Bullish if FHFA approval is granted and at least 3 of the top 5 major resellers publicly confirm going live with the DLP. | FICO press releases, FHFA announcements, reseller partner press releases. | FHFA.gov for official announcements. Industry news outlets covering mortgage lending. | |
| Software ACV Bookings and Platform ARR Growth Acceleration | Sustained high growth in Software ACV bookings and Platform ARR indicates strong demand for FICO's AI-driven decisioning platform, successful land-and-expand strategy, and future recurring revenue expansion. | FICO's Q3 2026 earnings call (expected late July/early August 2026) for updated ACV bookings and Platform ARR growth rates. Specifically, watch for Q3 ACV bookings exceeding Q2's $28 million and H2 2026 bookings exceeding H1 2026, and Platform ARR growth sustaining or accelerating above Q2's 49% year-over-year. | Bullish if Q3 ACV bookings exceed $28 million and Platform ARR growth is sustained or accelerated above 49% year-over-year. Bearish if ACV bookings decelerate significantly or Platform ARR growth falls below 49%. | FICO's quarterly earnings calls and investor presentations. | FICO's investor relations website for updated presentations. | Thinknum: FICO job postings for 'Platform Sales' or 'Software Engineer - Platform' (growth/decline). |
| Launch of Enhanced UltraFICO Score with Plaid | The official launch of UltraFICO with Plaid expands FICO's market reach by leveraging alternative data (cash flow), enabling more consumers to qualify for credit and solidifying FICO's position in innovative scoring solutions. | Public announcement from FICO or Plaid confirming the official launch and distribution of the enhanced UltraFICO Score solution, expected in the first half of calendar 2026. Management stated they are 'moving closer to the go-live dates'. | Bullish if the official launch occurs by June 30, 2026, demonstrating successful product innovation and market expansion. | FICO press releases, Plaid press releases, FICO investor relations website, FICO World 2026 (May 19-22, Orlando). | Google Trends: 'UltraFICO Score', 'Plaid FICO partnership'. | Thinknum: FICO and Plaid job postings related to 'UltraFICO' or 'cash flow lending' (growth/decline). |
| FICO World 2026 Announcements and Product Showcases | FICO World is a key event for showcasing innovations, connecting with customers and partners, and potentially announcing new products, partnerships, or strategic initiatives that can drive future growth and market perception. | Keynote speeches and product showcases at FICO World 2026 (May 19-22, Orlando). Specifically, look for updates on UltraFICO, FICO Platform enhancements, new AI-driven solutions, or significant customer wins/partnerships. | Bullish if FICO announces new product capabilities, major customer adoptions, or strategic partnerships that demonstrate continued innovation and market leadership, particularly regarding AI-driven solutions or UltraFICO. | FICO's website (FICO World section), FICO press releases during/after the event, industry news coverage of FICO World. | Social media (Twitter, LinkedIn) monitoring for FICO World hashtags and attendee posts. | |
| General Availability of FICO Score 10T (GSE Approval and Data Release) | Official approval and a clear timeline for FICO Score 10T's general availability in the conforming market is a major catalyst, solidifying FICO's competitive advantage and driving adoption of its most predictive score. | Official announcements from the FHFA or GSEs (Fannie Mae, Freddie Mac) regarding the approval and implementation timeline for FICO Score 10T in the conforming market, including the release of FICO Score 10T historical data to the marketplace. | Bullish if FHFA/GSEs announce official approval and a clear timeline for FICO Score 10T's general availability and data release. | FHFA announcements, Fannie Mae and Freddie Mac websites, FICO press releases. | FHFA.gov for official announcements. Industry news outlets covering mortgage lending. |
Key Reported Metrics
| Metric | Why It Matters | Last Period |
|---|---|---|
| Software Platform ARR Growth | Platform ARR growth is key to FICO's strategic shift and aligns with the 'AI '25: Apps & Edge Deployment' theme. It reflects successful migration from legacy systems, new customer wins, and expanded use cases, driving recurring revenue. | 49% |
| Software ACV Bookings Growth (Trailing 12-month) | Strong ACV bookings are a leading indicator for future Software segment revenue and ARR growth. The increasing deal size and frequency signal robust demand for FICO's platform and its AI-driven solutions. | 36% |
| Software Platform ARR Growth | Platform ARR growth is key to FICO's strategic shift and aligns with the 'AI '25: Apps & Edge Deployment' theme. It reflects successful migration from legacy systems, new customer wins, and expanded use cases, driving recurring revenue. | 33% |
Key QuestionsWill the FICO Mortgage Direct Licensing Program (DLP) receive FHFA final sign-off and go live with key resellers, and will FICO Score 10T data be released by th
Will the FICO Mortgage Direct Licensing Program (DLP) receive FHFA final sign-off and go live with key resellers, and will FICO Score 10T data be released by the GSEs, driving adoption and Scores segment revenue growth in the coming quarter?
- Question 2
Can FICO sustain the accelerating Software Platform ARR growth and achieve its expectation for higher ACV bookings in the second half of fiscal year 2026, driven by new customer wins and expanded use cases on the FICO Platform?
- Question 3
Will FICO's increased fiscal 2026 guidance prove conservative, or will persistent macroeconomic uncertainties and competitive dynamics, particularly with VantageScore in the mortgage market, temper its full-year outlook?
Earnings Transcript Summary
· 2026Q2 Earnings Call
| 3 Things Management Is Most Focused On | Call Takeaway & Tone | Prior Quarter'S Y/Y Growth By Segment | 3 Things Analysts Most Pressed On (And Mgmt Responses) | Revenue Segments |
|---|---|---|---|---|
| 1. Driving adoption of FICO Score 10T and the Direct Licensing Program (DLP): Management is actively adjusting pricing (e.g., $0.99 per score plus $65 funding fee) to encourage widespread use of FICO 10T, which they believe is the most predictive score, and to get the DLP live with resellers. 2. Accelerating growth in the FICO Platform within the Software segment: They highlighted 54% platform revenue growth and 49% platform ARR growth, emphasizing the "land and expand" strategy with existing customers and new wins, leveraging AI capabilities. 3. Returning capital to shareholders: Management underscored their commitment to share repurchases, noting a record $605 million buyback in Q2 and an additional $170 million post-quarter end, viewing it as an attractive use of cash. | The call conveyed a positive and confident tone, with management highlighting a very strong second quarter and a great start to the fiscal year, leading to an increase in fiscal 2026 guidance. The key takeaway is FICO's robust performance driven by strong Scores segment growth, particularly in mortgage originations, and accelerating momentum in the FICO Platform. Management is strategically positioning FICO Score 10T for widespread adoption through competitive pricing and advancing the Direct Licensing Program. While acknowledging regulatory complexities and competitive dynamics in the mortgage market, management expressed strong confidence in FICO's superior product and market position, downplaying the threat from VantageScore. They also emphasized continued shareholder returns through aggressive share repurchases. | In Q1 2026, total revenues were up 16% year-over-year. Scores segment revenues increased by 29% year-over-year, with B2B revenues up 36% and B2C revenues up 5%. Mortgage originations revenues grew by 60%, auto originations revenues by 21%, and credit card, personal loan, and other originations revenues by 10%. Software segment revenues increased by 2% year-over-year, with platform revenue growth of 37% and a 13% decline in non-platform revenue. SaaS revenues grew 12%, while on-premises revenues declined 12%. | 1. FICO Score 10T pricing philosophy and competition with VantageScore: Analysts questioned the rationale behind the $0.99 pricing and how FICO views its competitiveness against VantageScore. Management responded that the pricing encourages 10T adoption and offers parity with VantageScore on price, while FICO 10T is superior in predictiveness. They also stated they are largely indifferent between the per-score and performance models as it's revenue-neutral for FICO. 2. Timeline and hurdles for FICO 10T adoption and Direct Licensing Program (DLP) go-live: Analysts inquired about delays in the DLP and the release of 10T historical data. Management acknowledged that the process has taken longer than initially expected but stated they are "closing in on it," primarily awaiting FHFA sign-off for resellers to calculate scores. They also noted that the release of 10T data is up to the FHFA and GSEs. 3. VantageScore's market share and potential impact on FICO: Analysts repeatedly asked about VantageScore's market share in various segments and the potential for it to take share, especially in conforming mortgages. Management asserted that VantageScore's market share is "trivial" (ballpark 2%) and largely unpaid for. They expressed confidence that FICO 10T is highly competitive on both predictability and price, and they "don't see good reasons to switch," anticipating no volume loss to Vantage in the current fiscal year. | Total revenues were up 39% over last year. Scores segment revenues were $475 million, up 60% versus the prior year. Within Scores, B2B revenues were up 72%, B2C revenues were up 5%, mortgage originations revenues were up 127%, auto originations revenues were up 13%, and credit card, personal loan and other originations revenues were up 6%. Software segment revenues were $217 million, up 7% over last year. Within Software, platform revenue grew 54%, non-platform revenue declined 12%, SaaS revenues grew 19%, and on-premises revenue declined 4%. |
· 2026Q1 Earnings Call
| 3 Things Management Is Most Focused On | Call Takeaway & Tone | Prior Quarter'S Y/Y Growth By Segment | 3 Things Analysts Most Pressed On (And Mgmt Responses) | Revenue Segments |
|---|---|---|---|---|
| 1. **Innovation and product adoption**: Management is heavily focused on the adoption of FICO Score 10T, the FICO Mortgage Direct Licensing Program, and the new UltraFICO Score solution, highlighting their benefits for lenders and consumers. They are also focused on the general availability of the next-generation FICO platform and Enterprise Fraud Solution. 2. **Software business growth and platform migration**: Management emphasized strong bookings and ARR growth in the software segment, particularly for the FICO Platform, and the ongoing strategy to migrate customers from legacy non-platform solutions to the more efficient platform. 3. **Shareholder returns**: The company continues to return capital to shareholders through share buybacks, repurchasing 95,000 shares in Q1 at an average price of $1,707 per share. | The overall takeaway from the call is one of cautious optimism. FICO delivered a strong first quarter, with significant year-over-year growth in its Scores segment, particularly in mortgage originations, and continued momentum in its Software platform business. Management expressed confidence in exceeding their fiscal 2026 guidance, although they chose to reiterate it for now due to macro uncertainties. The tone was positive regarding innovation and strategic initiatives, especially around the Direct License Program, FICO Score 10T, and the FICO Platform, but cautious when discussing external factors like mortgage market timelines and regulatory developments. | In Q4 2025, total revenues were up 14% year-over-year. Scores segment revenues increased by 25% year-over-year, with B2B revenues up 29% and B2C revenues up 8%. Mortgage originations revenues grew by 52%, auto originations revenues by 24%, and credit card, personal loan, and other originations revenues by 7%. Software segment revenues were flat year-over-year (0%), with platform revenue growth of 17% and a 7% decline in non-platform revenue. | 1. **FICO Score 10T availability and LLPA grids**: Analysts inquired about the timeline for 10T's official approval and use, as well as the release of LLPA grids. Management stated they do not have a timeline for GSE approval but expect 10T to be available for Direct Licensing in the first half of calendar 2026. They also highlighted significant challenges with developing LLPA grids, especially for VantageScore, due to issues like gaming, adverse selection, and potential objections from the securitization market. 2. **Concerns regarding the Direct License Program (DLP) and Performance Model**: Analysts raised concerns about potential miscalculation of scores by resellers in the DLP and how regulators might view passing performance fees to consumers. Management clarified that scores calculated by resellers will be identical to those from bureaus, and the performance model is an optional offering for lenders, not a mandatory one. 3. **Reiterating fiscal year guidance despite strong Q1**: Analysts questioned why FICO maintained its fiscal 2026 guidance instead of raising it after a strong first quarter. Management explained that despite confidence in exceeding guidance, they prefer to wait until the Q2 earnings call due to ongoing macroeconomic uncertainties, particularly regarding interest rates and overall mortgage volumes, to provide a more accurate updated outlook. | Total revenues were up 16% year-over-year. Scores segment revenues increased by 29% year-over-year, with B2B revenues up 36% and B2C revenues up 5%. Mortgage originations revenues grew by 60%, auto originations revenues by 21%, and credit card, personal loan, and other originations revenues by 10%. Software segment revenues increased by 2% year-over-year, including 37% platform revenue growth and a 13% decline in non-platform revenue. SaaS revenues grew 12%, while on-premises revenues declined 12%. |
Transcript Tidbits
| About Expanding Eligible Market | About Competition | About The Broader Industry | Where Things Are Headed | Updates On Theme | Broader Themes Emerging | Bullish-Leaning Quotes (Short) | Bearish-Leaning Quotes (Short) | Hiring |
|---|---|---|---|---|---|---|---|---|
| FICO Score 10T incorporates rental and utility payment history, enabling more consumers to qualify for mortgages. The company updated its FICO Score 10T performance model pricing in the FICO mortgage direct licensing program from $4.95 per score plus $33 funding fee to $0.99 per score plus $65 funding fee to encourage adoption. FICO added 11 more lenders to its FICO Score 10T early adopter program, bringing the total to 55 lenders who account for more than $495 billion in annual serviceable originations. FICO is moving closer to the go-live dates of its next-generation Cash Flow UltraFICO Score with strategic partner Plaid. The $0.99 pricing for 10T is designed to encourage widespread use of the score in the prospecting and customer acquisition phases, with the goal of encouraging more housing and mortgages. | FICO does not anticipate share loss competition in any vertical. FICO Score 10T is positioned as the most predictive credit score for all borrowers. FICO believes that FICO 10T at $0.99 is at parity with VantageScore at $0.99 on price, and is 'highly competitive' on both predictability and price. The company stated that VantageScore's market share is 'trivial,' estimated at around 2%. In the nonconforming mortgage market, lenders use FICO Classic and FICO 10T, not Vantage. The securitization market is 'not ready to accept Vantage,' and Vantage data only goes back to 2013, meaning it has 'never been tested through a full cycle,' leading to a 'lack of understanding' around prepayment and default risk. FICO highlighted challenges for AI displacing its score due to strict regulatory requirements on credit underwriting outcome explainability and model governance, noting that the CFPB previously shut down Upstart's black box underwriting experiment. | The FHFA and FHA are driving an initiative to get FICO Score 10T into the market in the coming months. AI adoption is accelerating, and stakeholders are weighing associated opportunities and risks, particularly in highly regulated industries like financial services where explainability and trust are non-negotiable. Mortgage originations revenues were up 127% year-over-year, attributed to decent volume growth during a period when interest rates dropped. There is market sentiment for being able to evaluate FICO 10T and VantageScore at the same time. FICO noted that in a two-score system, a 'gaming problem' is 'almost inevitable' where one score might be more beneficial to the consumer at different times. The mortgage market is a $13 trillion market, and regulatory changes are typically foreseeable. While there has been a 'falloff in the subprime' auto and card market, it has been 'picked up throughout the rest of the prime, super prime'. | FICO is increasing its fiscal 2026 guidance, with revenue guidance now at $2.45 billion (up 23% versus prior year), GAAP net income guidance at $825 million (up 27%), and non-GAAP net income guidance at $946 million (up 29%). The company anticipates the release of FICO Score 10T data and the timeline provided by the FHFA and GSEs. Bookings in the second half of the year are expected to exceed the first half. Operating expenses and interest rate expenses are expected to trend modestly upward from the Q2 run rate into the back half of the fiscal year, mainly due to personnel and marketing for FICO World. FICO World 2026 will be held from May 19-22 in Orlando to showcase innovations. The UltraFICO Score is 'likely to be a pretty significant factor in the Scores business in the future'. FICO's guidance assumes no loss of volume to Vantage in this fiscal year, and the direct licensing program's performance model may push some revenue from late this fiscal year to early next due to timing. | Data | The transcript highlights the broader themes of 'Agentic AI Moving from Pilots to Production with ROI Focus' through FICO Platform's agentic-by-design architecture and its ability to operationalize AI at scale for real business outcomes. 'Responsible AI' and 'AI Security as a Core Differentiator' are emphasized by the strict regulatory requirements for explainability, model governance, and non-discrimination in credit underwriting, as well as FICO's patents in ethical AI and blockchain for traceable decision-making. The company's deep domain expertise and proprietary data access reinforce 'Deep Verticalization and Data Moats'. The FICO Platform's ability to integrate multiple functions and drive a 'self-reinforcing cycle of value generation' aligns with 'AI Workflow Automation Platforms'. | We had a very strong quarter and a great start to the first half of our fiscal year. Based on our results and outlook, we are increasing our fiscal 2026 guidance. FICO Score 10T is the most predictive credit score for all borrowers. FICO Platform is the world's leading AI decisioning platform for financial services. At FICO, AI is already driving meaningful results today while creating significant opportunities that we are well positioned to capture. We continue to view share repurchases as an attractive use of cash. UltraFICO is likely to be a pretty significant factor in the Scores business in the future. | Results included... a 12% decline in non-platform revenue. Although I can't give you a date, I can tell you that we're closing in on it. I think that some of the expectations were a little on the optimistic side. Vantage data only goes back to 2013. It's never been tested through a full cycle. I'm not really sure -- what does that mean? It means that downstream, investors are going to demand some kind of a premium for the lack of understanding around the prepayment risk and default risk. We don't necessarily think that's going to continue. So we tend to take the same conservative approach for the rest of the year. Near as we can tell, nobody is paying for VantageScores and the bureau send along the VantageScore for free when someone buys a FICO score. I would not hold my breath. I think that's going to take a long time. | Operating expenses for the quarter... an increase of 4% quarter-over-quarter, driven by personnel expenses. We expect operating expense dollars to trend modestly upward from the Q2 run rate into the back half of the fiscal year, driven mainly by personnel expenses and marketing. |
| About Expanding Eligible Market | About Competition | About The Broader Industry | Where Things Are Headed | Updates On Theme | Broader Themes Emerging | Bullish-Leaning Quotes (Short) | Bearish-Leaning Quotes (Short) | Hiring |
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| FICO announced the addition of 4 new strategic reseller participants (Xactus, Cotality, Ascend Companies, and CIC Credit) to the FICO Mortgage Direct Licensing Program, and signed a DLP agreement with MeridianLink. FICO Score 10T is expected to be available for Direct Licensing in both conforming and nonconforming markets in the first half of calendar '26. A strategic partnership with Plaid was announced to deliver the next generation of UltraFICO Score, which will launch for distribution in the first half of calendar 2026. FICO continued to expand adoption of FICO Score Mortgage Simulator by partnering with SharperLending Solutions, Credit Interlink, and Ascend Partners, bringing the total to 5 resellers, with another large reseller expected to sign shortly. In the software business, FICO is committed to broadening its reach beyond financial services, getting traction in telco and other verticals through its partner program and marketplace. The company aims for 500 named accounts globally, with 350 in financial services and 150 outside, noting there are 'several hundred to go' in financial services. | FICO Score 10T offers significant improvements in predictive accuracy, fairness, and model stability, providing tremendous benefits for lenders, investors, and borrowers compared to 'other alternatives on the market'. Research suggests that the FICO Score and VantageScore are 'more than 20 points different 30% of the time in both directions', making it difficult to substitute one for the other. Significant problems need to be overcome with LLPA grids for VantageScore, including gaming, adverse selection, and potential objections from the securitization market. FICO Score 10T is architecturally very similar to FICO Classic, built on the same kinds of attributes weighted in a similar way, which is 'very different from Vantage'. The FICO Score continues to be the 'trusted industry standard used by 90% of top U.S. lenders'. | The conforming mortgage market is anticipating the general availability of FICO Score 10T. There is significant uncertainty in the macro environment, including the Fed's actions, which impacts overall volumes. The time line for the release of LLPA grids is unknown, and there are 'tremendous challenges with figuring out how to make those work because of the gaming and adverse selection issues'. The industry has a preference for FICO 10T and Vantage grids to come out simultaneously, as indicated by a letter from 35 economists and industry groups to the FHFA director. Discussion around moving from tri-merge to bi-merge credit reports highlights concerns about gaming, adverse selection, and potential costs to Fannie and Freddie and the U.S. taxpayer. There is 'chatter around a potential 10% cap on card APR', which could put more pressure on lenders to understand subprime credits. Lenders are reportedly struggling with their cost base this year. | FICO is reiterating its fiscal 2026 guidance and is 'well positioned to exceed' it, with a plan to revisit guidance on the Q2 earnings call. FICO Score 10T is expected to be available for Direct Licensing in both conforming and nonconforming markets in the first half of calendar '26. The enhanced UltraFICO Score solution will launch for distribution with Plaid in the first half of calendar 2026. The company expects to go live soon with multiple Direct License Program partners. FICO World 2026 will be held from May 19 through 22 in Orlando, Florida, to showcase innovations. Software ARR growth is expected to continue to accelerate in FY '26, driven by strong bookings. FICO anticipates a gradual migration of non-platform customers to its platform for greater efficiency. The next-generation FICO platform and Enterprise Fraud Solution on FICO platform will soon be generally available. FICO expects operating expense dollars to 'continue to trend upward modestly throughout the fiscal year'. The company expects FY '26 ACV bookings to be 'significantly higher than FY '25', with an increasing frequency of bigger deals. | Data | The emphasis on 'always-on, real-time customer insights' and 'real-time decisions at scale' aligns with the broader industry trend of embedding AI into workflows for tangible ROI, reflecting the 'Agentic AI Moving from Pilots to Production with ROI Focus' and 'AI Workflow Automation Platforms' themes. The discussion of FICO Focused Foundation Model and the platform's horizontal appeal suggests a move towards 'Hyper-Specialized Agentic AI' and 'Deep Verticalization and Data Moats'. Concerns about gaming, adverse selection, and regulatory scrutiny in the mortgage market, particularly regarding LLPA grids and score compatibility, highlight the growing importance of 'AI Security as a Core Differentiator' and 'Responsible AI' in regulated industries. | We had another strong quarter and are reiterating our fiscal 2026 guidance. We're pretty confident we're going to be able to beat our guidance. Our strong bookings in recent quarters gives us increased confidence that our ARR growth will continue to accelerate in FY '26. We had a great start to the year and are well positioned to exceed our fiscal year guidance. The deal size is going up, the frequency of it and the amounts. We think the FY '26 ACV bookings are going to be significantly higher than FY '25. | There's just a lot of questions out in the macro environment. I don't think anyone knows what the time line for the LLPA grids looks like. There are tremendous challenges with figuring out how to make those work because of the gaming and adverse selection issues. It's unlikely that grids will be a parity. I don't think anybody really knows what's going to happen in mortgage. There's some potential noise in that market [credit card]. | Operating expenses grew 4% quarter-over-quarter, excluding restructuring, driven primarily by personnel expenses. FICO is investing in go-to-market across both the software and Scores segments. The company has been 'fairly aggressive this year in expanding that headcount' in direct sales and partner sales. |
Notes
| Date | Comment | Comment Type | Comment Sentiment | Link | IS CHANGE | Price Reaction |
|---|---|---|---|---|---|---|
| 2026-04-28 | FICO reported a strong Q2 2026, with revenues up 39% and non-GAAP EPS up 60%, leading to increased fiscal 2026 guidance. Scores segment growth was robust, driven by mortgage originations. The company adjusted FICO Score 10T pricing to encourage adoption and anticipates the Direct Licensing Program going live soon. The stock outperformed SPY (2.47% vs. 1.26%), indicating positive market reception to the strong results and optimistic outlook. | Earnings Transcript | Neutral | False | +2.47% (vs SPY: +1.21%) |
Upcoming Events
| Catalyst ID | Estimated Timing | Estimated Date Start | Estimated Date End | Catalyst | Why It Matters | Ticker Or Theme Specific | Transcript Date | Source Type |
|---|---|---|---|---|---|---|---|---|
| FICO_47ed9fae | on our Q2 earnings call | 2026-04-28 | 2026-04-28 | FICO's Q2 2026 earnings call where management will revisit and potentially update their fiscal year 2026 guidance. | A guidance update could materially impact investor sentiment and valuation, especially if the company raises guidance significantly due to better-than-expected volumes or other factors. | Ticker | 2026-01-28 | earnings_transcript |
| FICO_1e0c14a2 | first half of calendar '26 | 2026-04-24 | 2026-06-30 | FICO Score 10T becoming available for the Direct Licensing Program (DLP) in both conforming and nonconforming markets. | This could drive further adoption and usage of FICO Score 10T, enhancing FICO's competitive position and potentially increasing Scores segment revenue. | Ticker | 2026-01-28 | earnings_transcript |
| FICO_803202dd | first half of calendar 2026 | 2026-04-24 | 2026-06-30 | The launch of the enhanced UltraFICO Score solution, combining FICO Score with real-time cash flow data from Plaid. | This new product could expand FICO's market reach, particularly for consumers with limited credit history, and drive new revenue streams by offering superior consumer risk assessment. | Ticker | 2026-01-28 | earnings_transcript |
| FICO_28d7363e | soon with multiple partners | 2026-04-24 | 2026-06-30 | Multiple strategic reseller participants in the FICO Mortgage Direct Licensing Program (DLP) completing integration testing and going live. | Successful go-live of DLP partners will validate the program, streamline Score access for lenders, and could lead to increased B2B Scores revenue through enhanced price transparency and cost savings for lenders. | Ticker | 2026-01-28 | earnings_transcript |
| FICO_4b77c7bb | at a later date | 2026-09-01 | 2027-04-24 | General availability and adoption of FICO Score 10T by Fannie Mae and Freddie Mac for the conforming mortgage market, following FHFA approval. | This is a critical regulatory decision that could significantly impact FICO's Scores segment revenue and competitive landscape in the mortgage industry, as 10T offers improved predictive accuracy. | Ticker | 2026-01-28 | earnings_transcript |
| FICO_52602fbf | new pricing based on the updated models | 2026-04-24 | 2027-04-24 | The release and implementation of Loan-Level Price Adjustment (LLPA) grids by the FHFA for FICO Score 10T and VantageScore. | The structure and timing of these grids will directly impact the competitive dynamics between FICO and VantageScore in the mortgage market, potentially affecting FICO's market share and revenue. | Theme | 2026-01-28 | earnings_transcript |
| FICO_29b2f0ad | will soon be generally available | 2026-04-24 | 2026-06-30 | General availability of FICO's next-generation platform and the Enterprise Fraud Solution on the FICO platform. | These product ramps are expected to drive further growth in software bookings and ARR, enhancing FICO's competitive offering in decision intelligence and fraud detection. | Ticker | 2026-01-28 | earnings_transcript |
| FICO_46be2569 | sometime in the summer | 2026-06-01 | 2026-09-30 | FHFA and GSEs release FICO Score 10T historical data to the market and subsequently accept FICO 10T for use in the conforming mortgage market. | Bullish if released and accepted promptly, as it solidifies FICO's position and drives adoption of its most predictive score, potentially increasing Scores segment revenue. Bearish if delayed or if acceptance comes with unfavorable conditions. | Ticker | 2026-04-28 | earnings_transcript |
| FICO_76c23242 | moving closer to the go-live dates | 2026-05-19 | 2026-06-30 | FICO and Plaid officially launch the next-generation Cash Flow UltraFICO Score for distribution, with plans to be discussed at FICO World 2026 (May 19-22). | Bullish if launched successfully with strong adoption, as it expands FICO's market reach, particularly for first-time borrowers and those with thin credit files, driving new revenue streams. | Ticker | 2026-04-28 | earnings_transcript |
| FICO_cc3ab022 | closing in on it | 2026-05-01 | 2026-06-30 | FHFA provides final sign-off allowing resellers to calculate scores for FICO's Mortgage Direct Licensing Program (DLP). | Bullish if approved promptly, as it enables wider adoption of the DLP and FICO 10T through reseller channels, potentially increasing Scores segment revenue. Delays could hinder adoption. | Ticker | 2026-04-28 | earnings_transcript |
| FICO_a4fb5323 | waiting on the selling guidelines | 2026-07-01 | 2026-12-31 | FHFA and GSEs release definitive selling guidelines and Loan-Level Price Adjustment (LLPA) grids for both FICO Score 10T and VantageScore in the conforming mortgage market. | Crucial for market clarity and adoption. Bullish if grids are favorable to FICO 10T and mitigate gaming issues. Bearish if they create significant competitive disadvantages or introduce complexity that hinders FICO 10T adoption. | Theme | 2026-04-28 | earnings_transcript |