FICO's fundamentals remain strong on the surface. Third-quarter fiscal 2026 revenue rose 26% year-over-year to $674.2 million, with GAAP EPS up 41% to $10.45. Trailing twelve-month free cash flow reached $961 million. Management raised full-year revenue guidance to $2.53 billion, representing 20-27% growth. Platform ARR grew 62% to $413 million, surpassing non-platform ARR for the first time.
Yet the stock has pulled back sharply, down 16.75% over 30 days and 36.63% year-to-date as of early August. A 13% single-day drop on August 8 coincided with the Senate probe disclosure and Barclays' own prior target reduction to $1,950 from $2,400 in April. Director Eva Manolis sold 967 shares at an average $1,400 on July 29, reducing her direct holdings by 66% under a pre-arranged 10b5-1 plan.
The tension is clear: FICO's mortgage scoring franchise generates exceptional margins and growth, but its pricing power now sits at the intersection of regulatory pressure, interest-rate volatility, and competitive threats from VantageScore 4.0's GSE approval. Whether the current valuation gap represents opportunity or a fair discount for structural risk depends on how that intersection resolves. Can FICO sustain its mortgage royalty pricing if rates stay higher for longer and regulators push for affordability?
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