Prepared remarks
Welcome to the Company's Third Quarter Earnings Call. At this time, participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press *11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press *11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Kevin Toomey, Head of Investor Relations. Please go ahead.
Thank you, and good morning, everyone. Welcome to the Company's third quarter fiscal 2026 earnings call. Before we begin, the slides we referenced during this presentation can be found through the webcast on the Investor Relations section of our website. A replay of today's call will be available on our website. After our prepared remarks, we will open the call to questions. The call is scheduled to last for one hour. To be fair to everyone, please limit yourself to one question. You may re-enter the queue for additional follow-up questions, which we will take if time permits. Before we discuss our results, I encourage all listeners to review the legal notice on slide two. Discussions on this call may contain forward-looking statements. Such statements are subject to risks and uncertainties that may cause actual results to differ materially from results anticipated in these forward-looking statements. Additional information concerning these risks and uncertainties can be found in our Forms 10-K and 10-Q. Our slide presentation and discussions on this call will include certain non-GAAP financial measures. For such measures, reconciliations to the most directly comparable GAAP measures are in the appendix to the presentation and in our earnings release issued earlier today, both of which can be found on the Investor Relations website. During this call, unless otherwise noted, relative performance metrics reflect changes as compared to the respective fiscal 2025 period. Joining me today are Sanoke Vishwanathan, Chief Executive Officer, and Joshua Warren, Chief Financial Officer. I will now turn the discussion over to Sanoke.
Thank you, Kevin. Good morning, everybody, and thank you for joining the call. Q3 performance was strong, with our fifth consecutive quarter of acceleration in organic ASP growth. We grew ASV by 7.1% to $2.48 billion across all regions and client types. Adjusted operating margin was 34%, reflecting the investments that we have made this year. Adjusted diluted EPS was $4.53, up 6.1% year over year. Our client engagement and growth trends this quarter show that our four foundational strengths—connected data, embedded workflows, service excellence, and broad and deep distribution—are becoming even more valuable as our clients deploy AI widely. Five example client wins from this quarter demonstrate the breadth and depth of our solutions and the tangible impact of strategic investments we have made in new products such as managed portfolio services, deep sector content, and real-time data. We won a mandate to deliver turnkey performance, risk, and reporting managed services to one of the largest global sovereign wealth funds. We expanded our engagement with a large global OCIO to provide comprehensive reporting and digital capabilities, wrapped with managed services from our subject matter experts. We signed a five-year enterprise contract renewal at a major global bank; the scope has increased to include more data consumption, with deep sector content playing a key role. LPL Financial, the largest independent broker-dealer in the U.S., that supports over 32,000 financial advisers, selected our real-time data platform to support their cloud-native trading application and in-trade portfolio P&L workflows. We displaced a long-standing incumbent to expand our presence at a large global investment manager across their front and middle office, already a top-20 client seeking to further consolidate their operations with the Company. Each of these five wins represents an existing client expanding their relationship with the Company, underscoring meaningful room to grow within our current relationships. Last quarter, I shared the three priorities guiding a transformation in how we do business: commercial excellence, productivity improvement, and long-term strategy. This quarter shows tangible commercial and productivity outcomes, and our AI roadmap is taking shape, consistent with our strategy. First, our commercial excellence initiative is resulting in stronger new-business growth, retention, and expansion of ASV. As we roll out better tools, increase conversion at every step, and streamline our processes in marketing, sales, and customer success, we are seeing improvement throughout the sales life cycle. Our new website resulted in more top-of-funnel demand generation: bounce rates improved by 8%, engagement increased by 8%, and prospects, marketing-qualified leads, and sales-qualified leads grew by double digits. In Q3, our pipeline conversion from marketing activity was up 15% year over year, and win rates for these opportunities improved by 27%, with 76% of the resulting ASP coming from new business. Corporate, asset owner, and institutional asset management client types were particularly strong. We are rolling out a new AI-powered sales enablement to our entire team, targeted at improving the quality of our sales pitches, increasing deal velocity, and improving win rates. Beyond these traditional levers, we are transforming our model for retention and expansion as our clients adopt AI. Q3 was the fourth consecutive quarter of double-digit growth in ASV for our data solutions, with managed portfolio capabilities contributing to the momentum. Over 90% of our top 50 clients are now using four or more of the Company's AI solutions, and quarter over quarter, overall ASP growth among clients using our AI solutions was 50% higher than for the rest of the book—early evidence that our AI adoption is helping drive retention and expansion opportunities. The AI transition is also accelerating the shift in our business model from seat-linked contracts to flexible enterprise agreements that encompass our growing data, analytics, and workflow capabilities. The majority of ASV renewed in Q3 was in the form of enterprise agreements or renewed for durations of three years or more. Average contract term extended by roughly 30% while broadly preserving pricing, underscoring the foundational value attributed to the Company by our clients as they adopt AI. Second, we are rolling out AI agents, streamlining operations, and reducing complexity to generate sustainable productivity improvements and operating leverage. Let me highlight a few examples in engineering, data operations, and client service—our three largest operating cost centers. In Q3, we scaled AI use across our product and engineering teams. Coding-related token use grew 5x quarter over quarter, while committed lines of AI-written code grew almost 10x. Coding agents now author 27% of committed code in the engineering teams using these tools, with rollout continuing across the organization. With these efficiency gains, we initiated a roughly 10% reduction in our technology workforce and freed up significant capacity to accelerate strategic product development. We are embedding AI across the full data operations lifecycle from collection through quality assurance. Where we have fully implemented new tools, we have reduced operator touch time for data-table extraction by more than 50%. We are now scaling this playbook with clear goals to improve quality, timeliness, and unit cost. In M&A data, we have dramatically reduced turnaround time for deal updates. Within our fundamentals dataset—one of our largest datasets—we have consolidated multiple data pipelines into one, allowing us to redeploy significant capacity and reduce the size of this team by 5%. Our client service teams are seeing early positive results from digitization pilots we are running. These reduce the need for manual onboarding activities from our consultants, enabling them to spend more time on strategic user health and retention efforts. In Q3, approximately 4,000 bankers used our digital onboarding tools and the capacity unlocked resulted in a 22% quarter over quarter increase in live user interactions by our consultants. This helped drive a five-point increase in Net Promoter Score among our junior banker population in Q3, building on the momentum from last quarter. We are in the early stages of these efforts, but together they are aimed at a structural reduction in our cost to serve while improving overall quality. As we realize the full impact of these productivity initiatives, we expect to see further scale benefits and operating margin improvement. Finally, we are developing our strategy based on a strong foundation of connected data, embedded workflows, service excellence, and deep and broad distribution. These strengths make the Company a trusted, governed platform for institutional finance and are even more important to our clients as they make the AI transition. As a starting point for our clients, we have launched our AI solutions under the banner of the Company's Intelligence. It consists of three layers that accelerate our clients' AI adoption: a trusted data ecosystem, governed and optimized agentic infrastructure, and intelligent workflows built for hybrid workforces. First, a trusted data ecosystem, including our data, client data, and third-party data, is the fuel for AI and has to be high-grade to provide the right quality output. The Company's managed platform, built on a robust ecosystem of content APIs, has over 450 clients actively engaged under contracts and trials. API call volume is experiencing rapid growth, with Q3 volumes at 13x the level we experienced in Q2. We expect this to continue as we make more datasets available through the managed platform. Clients can now access our data through all major frontier model platforms, including Anthropic, OpenAI, Google, and Microsoft. Our managed platform enables access to high-quality, comprehensive, and auditable datasets presented through the same endpoints used by our own developers. The quality of our data delivery through the managed platform is driving expansion at clients where we are already embedded in high-value workflows. For example, we launched our portfolio analytics managed-platform capability just last week, bringing our signature portfolio analytics into agentic workflows. Portfolio analytics has long been central to how buy-side clients measure performance, manage risk, and meet reporting obligations, and we believe we will unlock significant value for clients by extending these capabilities to agentic use. We are also extending our AI solutions in the data layer to client internal data and third-party data. The Company's unique strengths in entity resolution, ontology, and concordance, in partnership with Snowflake, Databricks, Google, and AWS, position us well to help clients build out their enterprise knowledge graphs. Second, the Company has built a governed and optimized agentic infrastructure. Clients want to curate and optimize multiple horizontal and vertical AI solutions. To meet this demand, we are rapidly rolling out infrastructure to become the integrated agentic platform for our clients. We already support millions of models, and billions of formulas and data points across the nearly 250,000 users of our workstations every day. Users can discover our agents, soon build, test, and publish their own agents, and even integrate third-party agents, all while maintaining the security standards, data entitlements, audit logs, and cost optimization that clients expect. While the user interface may evolve as agentic workloads take off, we are confident in the value we deliver to our clients and are already seeing significant client interest in rationalizing various experimental efforts and consolidating their AI implementations with us. Third, intelligent workflows for hybrid workforces. As we roll out agentic capabilities, we are working closely with clients to redefine how they get work done with a hybrid workforce of humans and agents. Through the partnership we announced with FinStir in March, we have launched a transformation in investment banking workflows with our capital markets intelligence suite of agents. Senior bankers can now send an email to an agent describing what they need and receive insights and artifacts directly built on current Company data, comparable company analysis, and deal precedents—automatically generated and delivered back. What used to take hours or days now happens in minutes, freeing up capacity for higher-value client workflows and interactions. We are seeing strong early engagement with active or pipeline trials at over 30 of our top 100 banking clients. We will roll out similar capabilities to our buy-side and wealth clients in the coming weeks with our institutional research intelligence and adviser intelligence product suites. We announced strategic partnerships with several firms to advance these capabilities and supplement our internal agent development roadmap. Across all layers of the Company's Intelligence, we see significant growth opportunity as our clients consume more data through many new channels, consolidate their agentic deployments with us, and reimagine their workflows with our agentic solutions. To further accelerate our product innovation, we announced a strategic partnership with Google Cloud this week, expanding our distribution through Google Cloud's enterprise channels and unlocking new revenue opportunities. The partnership will focus on three main areas: enhancing the workstation with Google's enterprise search, deep research APIs, grounding, and other multimodal capabilities using Google Cloud's AI platform; bringing our financial intelligence directly into Gemini Enterprise and expanding our managed platform and agent sharing functionality to create interoperability between the workstation and Gemini Enterprise; and developing and launching a new generation of agents using the Gemini Enterprise Agent Platform designed to improve efficiency, execution, and decision-making in key client workflows. As AI reshapes financial institutions, the Company is becoming mission-critical AI infrastructure. We are transforming our business model to win in an AI-intensive future. We look forward to sharing our strategy and medium-term business plan at our upcoming Investor Day. I would like to now welcome Joshua Warren to the Company. Congratulations, Joshua, on your first earnings call as CFO. He will now discuss our Q3 performance in more detail.
Thank you, Sanoke. It is great to be here with everyone this morning. Before getting into the financials, I want to take this opportunity to thank all the employees who have made me feel so welcome since I joined in April. I would also like to specifically recognize Helen Shan, whose leadership over the last eight years as CFO and Chief Revenue Officer has put the Company on firm footing as we embark on a new chapter. This week marks the 30th anniversary of the Company's IPO, and I am excited to join the firm at this moment. As AI and agents reshape how information is sourced, synthesized, and acted upon, the Company is positioned for durable, structural growth that can deliver excellent outcomes for our clients, employees, and shareholders. In our results, I will highlight three things: first, our client franchise—its quality, breadth, and durability reinforce our financial profile; next, our operating leverage; and finally, our flexible balance sheet and disciplined capital allocation, which support our go-forward strategy. Expanding our client relationships drove this quarter's results, which I would like to recap. As of the close of fiscal Q3 at the end of May, our ASV exceeded $2.48 billion, representing 7.1% organic growth and acceleration by more than 250 basis points over the comparable growth rate in 2025. Revenue was $622.9 million, representing 6.4% growth over the previous year. Our adjusted operating income was $211.8 million, representing a 34% margin—down approximately 300 basis points relative to the comparable quarter in 2025—due to targeted investments to improve operating leverage, marketing, performance-related compensation linked to ASV momentum, and adjusted EPS grew 6.1% to $4.53. The Company serves clients across over 80 countries, including 95 of the top 100 asset managers, more than 85% of the top 50 global investment banks, and the world's top wealth managers, corporations, exchanges, central banks, and sovereign wealth funds. This breadth gives us meaningful exposure to all major geographies and client types in the financial services industry, so we are not dependent on any single market or segment while providing a substantial opportunity to expand wallet share within our current clients. With an average client relationship spanning more than 16 years, and nine of our top ten clients measured by ASV having been with us for more than two decades, we grow with our clients. Our longest-standing relationships have some of the most exciting opportunities for growth. ASV retention rates above 95% reflect the strength of our client relationships. Those relationships fuel our ASV bookings growth and provide a line of sight into future revenue. As of last year, ASV no longer includes one-time nonrecurring revenue, such as professional services. Our approach is to embed flexibility within enterprise agreements and importantly secure minimum commitments. These minimums give us a baseline so that we can support new consumption patterns and be rewarded for the value we deliver while preserving the forward visibility that we expect will remain central to our financial model as we deliver more AI solutions to our clients. Today, most of our recurring revenue comes from fixed subscription and license revenue. A growing portion of our recurring revenue streams are driven by initiatives that are activity-based, including workflows that are increasingly mission-critical for clients. We are seeing more client interest in consumption-oriented pricing, particularly for emerging AI-enabled offerings. While modest in size today compared to our total ASV, we expect these revenue streams to become an increasingly important driver of our growth over time. These revenue streams introduce a dynamic and growth-oriented dimension to ASV forecasting and subsequent revenue flow through that complements the traditional subscription base. As our delivery model evolves alongside our clients, we expect to review our approach to reporting to preserve transparency and alignment with our go-forward strategy. Our organic ASV is a like-for-like comparison that excludes the impact of foreign exchange, discontinued business lines, and acquisitions that closed within the last 12 months. For the third quarter, organic ASV accelerated to 7.1% year over year—an increase of $35 million during the quarter—the Company's highest ASV growth rate since Q1 2024. Growth was evident across all regions and client types, as the world's leading financial services firms continue to choose the Company as a trusted partner. Turning to our performance by geography, organic ASV accelerated in each region compared to the prior year. Americas grew 7%, EMEA grew 5%, and Asia Pacific, our fastest growing region, grew 10%. Now turning to results by client type: the institutional buy side, consisting of global asset managers, asset owners, and hedge funds, accelerated to 6% organic ASV growth; this represents slightly less than half of our overall ASV. Wealth remains our fastest-growing category and delivered 10% organic ASP growth. Organic ASV for dealmakers grew 9%; this category represents a broad range of clients, including investment banks, sell-side research teams, corporates, and private capital firms. Today, this represents nearly 40% of clients and less than 20% of ASV. The smaller-in-size but strategically important market infrastructure category saw organic ASV grow 7%, demonstrating strength across the platform. Third quarter revenues grew 6.4% year over year, or 7% on a like-for-like basis. Adjusted operating margin was 34% for the quarter as compared to 35% in Q2 and nearly 37% a year ago. This reflects a series of deliberate investments that we expect to deliver growth and operating leverage over time. Compensation-related expenses typically account for approximately 60% of our total cost base. Our Q3 margin reflects a 7% year over year increase in compensation expenses that were driven by performance incentives linked to the ASV acceleration delivered, not additional headcount. Because revenue from new ASV bookings is recognized over time, periods of faster ASV acceleration can temporarily compress margins in any quarter since the incremental ASV is not yet reflected in revenue. We will remain long-term focused and optimize for profitable growth. Despite the increased overall compensation expense, during Q3 we reduced overall headcount by approximately 1%, after holding it roughly flat during the first half of the year. While compensation-related expenses accounted for approximately 40% of the increase in operating expenses, the majority of the year-over-year growth came from noncompensation items tied to growth and productivity initiatives. More than a third of that noncompensation expense increase was technology spending, including to strengthen our core infrastructure and on token costs. We increased our marketing spending and have a variety of professional services engagements underway to drive future operating leverage. Margin this quarter was also negatively impacted by nonoperational items, such as our FX hedging program, which went from a gain in Q3 2025 to a loss in Q3 2026, creating an overall drag of approximately 60 basis points. Our earnings per share increased 6% year over year to $4.53. This was driven by higher revenue and a lower share count, partially offset by increased expenses and a higher effective tax rate. While we continue to drive ASV growth, we are focused on capitalizing on our scale to deliver long-term sustainable and profitable growth. To that end, we have launched a range of strategic projects aimed at running the Company with greater discipline and efficiency. Sanoke outlined multiple productivity initiatives, but from an operational standpoint, I will highlight two items we initiated during Q3 and completed in the past few weeks. We recently rightsized certain engineering teams as we standardize how we build and run software and take advantage of AI-assisted coding. Additionally, we entered into an arrangement with RepRisk to support our clients' needs as we discontinued the signals attribution service that was provided following a prior acquisition. We are continuing to review our product portfolio against appropriate hurdle rates, and while we expect to make additional efficiency improvements, our focus and our investments will remain on serving our clients with excellence. Consistent long-term free cash flow generation is a hallmark of our business model and a metric we actively manage toward. Our free cash flow grew to $254 million for the third quarter of fiscal 2026 compared with $228 million for the prior period, an increase of 11%. Our disciplined framework prioritizes organic investments in high-growth projects, followed by strategic inorganic activity, and finally returning excess capital to shareholders. During Q3, we accelerated our repurchase activity, buying back approximately 926,000 shares for $203 million. Fiscal year to date, we have deployed over $500 million to repurchase shares. Additionally, we increased our quarterly dividend for the 27th consecutive year. In total, during fiscal 2026 year to date, we have returned over $625 million to shareholders through a combination of dividends and repurchases, approximately double the amount returned over the same period last year, demonstrating our continued commitment to delivering shareholder value. Overall, we are committed to maintaining our investment-grade rating, which Fitch reaffirmed with a stable outlook this quarter. We continue to assess opportunities for optimizing our debt-maturity profile to align with our strategy. Our balance sheet continues to strengthen with a conservative level of gross debt leverage of 1.5x and net debt leverage at 1.2x, providing capacity and flexibility to support growth. Turning to our outlook, we remain confident in the guidance ranges that were previously set for ASV, revenue, operating margin, and EPS. On revenue and EPS in particular, we are tracking toward the high end of those ranges based on our business trajectory. We are pleased with our accelerating ASV growth, and our focus remains firmly on delivering long-term value for our clients and shareholders. During my first ten weeks here, I have seen that when clients are thinking through and making big decisions about the data powering their platforms, they turn to the Company as a partner. Our open architecture and partnership-oriented approach positions us to deliver excellence to our clients and compounding growth for our shareholders. With that, I will hand it to the operator to open the line for questions.
Questions and answers
Thank you. As a reminder, to ask a question, please press *11 on your telephone and wait. We ask that you please limit yourself to one question. Our first question comes from the line of Ashish Sabadra with RBC Capital Markets.
Thanks for taking my question. Really strong momentum on ASV, and it seems pretty broad-based. But as we look at the guidance, the guidance implies a moderation in the fourth quarter. I just wanted to better understand: is that purely conservatism, tougher comps, or are there any puts and takes that you could flag? Thank you.
Thanks, Ashish. As you noted, it has been a really strong quarter, and in fact the momentum continues into Q4. Just a month into the quarter, we see that momentum has continued. We continue to see a strong, diverse pipeline of clients. It is broad-based across regions and client types, and it continues to maintain the growth trajectory that we have seen. It is a tough compare. Just to remind everybody, Q4 of last year was our largest quarter ever, so it is a tough compare. But as we stand today, at the end of June and early July, we are ahead of last year in terms of our bookings, and we also see a pipeline that is as robust as we saw at this time last year. As you can imagine, AI is a tailwind for us and that is also helping. Now, in terms of reaffirming guidance, we do not change guidance quarter to quarter, and there is a lot to execute ahead of us. There are multiple seven-figure deals outstanding; it will come down to execution in the next eight weeks, and there could be timing issues there. The second thing is a lot of mid-market deals, which we are excited about because they are faster to close, and AI is very dynamic. With that, I think we are reaffirming the guidance and are very confident in our delivery. Thank you.
Our next question comes from the line of Faiza Alwy with Deutsche Bank. Your line is now open.
Hi, good morning. Thank you so much. I wanted to talk a little bit more about your AI monetization strategy. Thanks for the detail you provided that over 90% of your top 50 clients use four or more AI products, and that ASP growth among those clients is 50% faster. Could you give us context around how that monetization shows up? Is it direct pricing for usage of AI, access to more datasets, or something else? You also mentioned clients consolidating their AI workflows with you—are you agnostic as to whether they use the managed platform or specific tools inside the workstation? Sorry for the long-winded question, but I would love more context. Thank you.
Thank you, Faiza. There are a lot of questions in there, so I'll take a bit of time to answer because there's a lot of color to share. I'll start with the short-term picture on AI monetization and then discuss the longer term. In the near term, we are maximizing AI monetization with the lens of maximizing enterprise value. That means growth acceleration in ASV, increased retention, and expansion in our existing clients. To give you a bit of color, in this quarter over 10% of ASV growth came directly from AI SKUs, and there was a larger indirect impact across broader ASV growth as well. For example, one of the top ten clients literally doubled their data subscriptions with us because of AI, and a top hedge fund grew sixfold with us due to our managed-platform delivery. At this point, over 20% of our top 100 clients are using the managed platform on a paid basis. Those are some short-term statistics showing the momentum. For the medium term, we see multiple opportunities and view AI as a massive tailwind. Many people ask about our moats; we are now starting to see evidence that our connected data and embedded workflows create a strong moat. This is a leapfrog moment for us built on a stable subscription base. Our data solutions business—standard data feeds, APIs, and sharing on environments like Snowflake and Databricks—is well set up for AI. With ASV driven through AI, we are shipping faster and are able to flex into commercial agreements that are not just seat-linked but are true enterprise agreements: a stable large subscription base with a flexible construct on top that allows us to capture upside from consumption. In short, the short-term monetization is acceleration in ASV and contract value; the mid-term view is that AI consumption will create both discrete AI SKUs and multiplier effects across existing products. Happy to take follow-ups, but hopefully you can see momentum is picking up. Thank you.
Our next question comes from the line of Alex Kramm with UBS. Your line is now open.
Hey, good morning, everyone. I want to switch to margins for a second. Previously you commented that you were hoping to get close to the midpoint of your adjusted operating margin guide. Is that still what you're shooting for, given some one-time items like the FX hedge? What are the upsides and downsides? Also, there are a few items this year that are somewhat one-time—professional services, infrastructure investments. Can you remind us which of those items come out as we head into 2027 and help dimensionalize those? Thank you.
Thanks, Alex. We came in this quarter at a 34% adjusted operating margin, reflecting a combination of strong investments we've been making throughout the year. As we've said in prior quarters, those investments are second-half weighted, so you saw the effect in this quarter, and we also accrued performance incentives given ASP outperformance. We are happy with the pace of investments and are seeing strong progress on growth-oriented as well as foundational investments, both of which are starting to deliver operating leverage. We do not manage to a quarterly margin or guide to a quarterly margin, but we see significant acceleration in AI and continued opportunities for investment; we'll continue to entertain high-ROI opportunities as they arise. That said, we see a clear line of sight on margin improvement in future quarters. We are still focused on the midpoint of the guide for this year and have confidence in that, and we see line of sight from initiatives that we think will lead to margin improvement in the coming quarters. I'll ask Joshua to build on that and give more color on the puts and takes for this quarter and going forward.
Thanks, Alex. Appreciate the question. The biggest single item and main dynamic in the quarter is timing around pay-for-performance arrangements—not headcount growth—so compensation-related expenses were the single biggest item in our increased expenses. Technology spending is the second biggest category, which includes strengthening core infrastructure, programs related to cybersecurity and IT disaster recovery, and token costs. Token spending has increased year over year, and Sanoke mentioned some of the return we are seeing on that spending. The other category includes a series of initiatives in flight: increased marketing spending, professional services arrangements, and more. Looking forward, we see a clear path to expanding margins. Part of what we are counting on is continuing the momentum in the business, which we believe will position us well on both the top line and on margins. Thank you.
Our next question comes from the line of Kelsey Xu with Autonomous. Your line is now open.
Good morning. Thanks for taking my question and welcome to the call, Joshua. Many information services companies have talked about AI implementation driving accelerated data demands. Can you discuss the Company's strategy to monetize that trend both near term and long term? In relation to this, how should we think about incremental revenue opportunities brought by the managed platform, especially regarding extension to new user personas? Can you tell us more about that? Thanks a lot.
Sure, Kelsey. Some of this overlaps with earlier remarks. Short-term monetization is an acceleration in ASV growth, and the managed platform is a real accelerant. When deals involve a managed-platform component, we often see contract value improvements—roughly 90% of the time—so it is contributing to the overall ASV acceleration. Over time we'll see more discrete AI SKUs; as I noted, more than 10% of ASV this quarter came from those SKUs, up from virtually zero last year. On user personas, of our managed-platform trials and paid implementations, roughly 20% of the endpoint users are net new users—new workflows and new workloads enabled by AI. Being available as first-class data connectors on major frontier marketplaces supports discovery and connectivity and grows users. Importantly, AI consumption through the managed platform tends to lead to upsizing of our existing products—workstations, other APIs, and standard data feeds. This is the AI flywheel effect I mentioned earlier: early stages, but we're seeing it in action. Thank you.
Our next question comes from the line of Manav Patnaik with Barclays. Your line is now open.
Thank you. Good morning. I wanted to understand the partnership strategy and how it fits with broader capital allocation. You mentioned a number of partnerships; are these step one into potential deals or acquisitions, or should we not think about it that way?
Thanks, Manav. The diversity of partnerships is deliberate and consistent with how we've thought about our network and ecosystem historically. We have always been open architecture. In this cycle, we are focused on three things that connect to the Company's Intelligence layers: the data layer, agentic infrastructure, and intelligent workflows. At the data layer, initiatives to help clients build enterprise knowledge graphs require partnering with firms like Snowflake and Databricks. Partnerships on the agentic workflows accelerate the work we are building focused on user personas in buy-side and wealth. The Google partnership cuts across the whole stack: it helps enhance the workstation with advanced frontier models, provides preferential pricing for model usage, and supports joint product development and innovation. The idea is to accelerate product development while being prudent in capital allocation and staying at the cutting edge for clients as they make the AI transition. Joshua can comment more on capital allocation.
Manav, our capital allocation framework prioritizes investments with the highest risk-adjusted returns. We are focused on investing in growth—building out products and solutions for clients. Beyond that, we consider excess uses of free cash flow, including buybacks, dividends, and M&A. Our acquisition approach will be surgical and focused on areas of highest impact. Because of our open architecture and robust ecosystem, much inorganic activity will be de-risked—many potential acquisitions flow naturally from current integrations and partnerships. Expect a pipeline that is informed by day-to-day execution and partnerships. Thank you.
Our next question comes from the line of Shlomo Rosenbaum with Stifel. Your line is now open.
Thanks. I want to ask about the Q3 2026 renewals that extended contract length by about 30% on average. Are you trading price to get extended terms? With the evolving monetization model, is there a risk of locking into contracts that may not be ideal in a couple years? Clients seem willing to go out that far despite evolving models—what feedback have you received on potential future contract adjustments? Also, Joshua, welcome to the company and the call. One more: you don't report client account, user account, or employee count. Is that a sign those metrics are less relevant now?
Thanks for the welcome. On the question about client and user counts, our user count is up about 12% year over year. You should expect those numbers in our filings that we'll post after market today. We're committed to providing the metrics that matter, but user counts are often in the long tail and don't always flow directly to revenue or profitability in the short term.
Shlomo, on contract terms: we are excited about the transition from shorter-term, seat-based contracts to longer-term enterprise agreements that give both the client and the Company flexibility. The operative word is flexibility, because the future is uncertain and clients are unsure of exactly where their consumption will be. At the same time, there is a high degree of trust between clients and the Company, which has allowed us to structure contracts that are value-based. Any price improvement we've seen in these extensions is based on the value we deliver; we can confirm we are not taking price compression in return for contract extensions. We are delivering a lot of new functionality and datasets through multiple channels—managed platform, Snowflake, Databricks, Google, and AWS—so clients are finding value in multichannel delivery. These enterprise agreements have a large subscription base and include provisions for new consumption patterns, such as diversity of datasets or increased volume tiers depending on the workloads clients are experimenting with. We feel comfortable about this transition, but it's still early days and we'll keep you updated in future quarters. Thank you.
Our next question comes from the line of Surinder Thind with Jefferies. Your line is now open.
Thank you. Can you discuss the review of the product portfolio? How comprehensive is it, are there certain themes, and where does M&A fit in that strategy?
Sure. From an AI perspective, consider the stack I described earlier in the prepared remarks. We play across that stack and position ourselves as the AI infrastructure for institutional finance. Our capabilities in data concordance, data quality, and entity resolution are essential as clients build enterprise knowledge graphs, which is the first layer. The workstation is a container with trusted infrastructure that already bakes in trusted data, entitlements, model libraries, and security standards; the user interface may evolve into a more agentic interface, and we're actively adapting it. We're starting to see clients consolidate experimental efforts onto our agent infrastructure. Product development here is the transition from a traditional workstation to an AI-native or agentic workstation, leading to brand-new workflows infused with agentic capabilities, developed with forward-deployed engineers and consulting teams. On the broader data and analytics axis, we continue to invest in fixed income analytics, performance and portfolio analytics, private markets datasets, deep sector data, and real-time pricing and reference data. These areas are resonating in the market and we will continue to invest across both the vertical AI stack and horizontal data and analytics disciplines.
Our next question comes from the line of Toni Kaplan with Morgan Stanley. Your line is now open.
This is Yehuda Silverman on for Toni. A quick question on payback period: you previously mentioned three years for some of the heavier investments. Any difference in payback for recent AI-related investments, and where do you currently stand on the timeline for investments made over the past quarters and years?
Two points: we are making investments in a number of areas. Some investments—sales productivity, tooling, marketing, website improvements—are very fast payback initiatives that pay back in months. Structural investments in core infrastructure take longer, but we still believe paybacks are in line with prior expectations. Thank you.
Our next question comes from the line of Andrew Nicholas with William Blair. Your line is now open.
Hi, good morning. Thanks for taking my question. A lot of the AI discussion centers on the institutional business. How do you think about differences in opportunity, pace of adoption, and right to win within wealth? Is there a different strategy for AI in that space versus the rest of the business?
Thanks. We are seeing differences in trends. Institutional progress is tied to the stack I discussed earlier. In wealth and consumer finance, there's an exciting opportunity to power up the adviser experience, which is undergoing transformation but is still early. The partnership we announced with Tiffin AI is focused on improving the adviser experience. There's also a growing opportunity to serve the end-customer experience in wealth management and retail consumer finance. Historically we have had a digital business that reaches directly into client portals and client-facing experiences. For advisers, the big problem is staying on top of customer portfolios, market events, and analytics to deliver high-quality experiences and improve coverage ratios. Agent solutions can help marry market data, internal signals, and research to deliver high-quality adviser workflows. We see significant opportunity in the long tail of advisers, particularly RIAs, where the way advisers do their job can be rethought and the Company can play a role.
I'll just add that clients are in different stages of evolution across sectors. We're excited about conversations on adviser experience in the long tail of advisers. Across the board, as more work shifts from humans to agents, the quality of output depends on the quality of data. That creates a real opportunity for the Company.
Our next question comes from the line of George Tong with Goldman Sachs. Your line is now open.
Hi, good morning. Can you unpack the contribution of pricing to organic ASP growth this quarter? How much is coming from realized pricing increases versus seat expansion, product mix, or broader workflow adoption as you roll out AI capabilities?
Thanks, George. We view price increases in the context of value delivered to clients. Our focus is on retention and expansion of enterprise clients rather than inflationary price hikes. Pricing this quarter was better than the same quarter last year and reflects the continued increase in value and flexibility we are delivering to clients.
Our next question comes from the line of Jason Haas with Wells Fargo. Your line is now open.
Good morning. Just circling back to implied margin cadence for the rest of the year: if I model to the midpoint of your guidance, I get flattish year-over-year adjusted operating margins. Given Q3 was down over 250 basis points year over year, that implies pretty nice expense run-rate improvement. Was there pull-forward of compensation from Q4 into Q3? Did the headcount reduction lower run-rate expenses going forward? Can you match qualitative commentary to what guidance implies?
Jason, we have a big quarter ahead and continue to see strong ASP momentum. We retain flexibility in the margin range: if we continue to outperform on ASP delivery and want to pay for performance, we retain flexibility. That is part of how we manage the year and the guidance ranges.
Our next question comes from the line of Curtis Nagle with Bank of America. Your line is now open.
Thanks for squeezing me in. Maybe for Sanoke or Joshua: can you talk about the impact of higher token costs? You mentioned margins and expected returns on that spend. Sounds like the Google partnership may help. Can you unpack a little more?
Thanks for the question. Tokens were not a material line item in 2025, so this is net new spending. We treat tokens like any other resource and have operational controls around monitoring them, including developer training and intelligent model routing to use the right model for the right job. We budget and manage token use carefully. Sanoke mentioned that we are seeing ROI from token investments, and we are pleased to be increasing our investment in them.
I would now like to hand the call back over to Joshua for closing remarks. Thank you, operator, and thank you all for joining us today. Accelerating ASP growth, strengthening commercial performance, and measurable productivity gains are positioning us well for the remainder of the year and beyond. Before I close, I want to thank every employee for their continued focus and commitment to delivering for our clients. We are executing from a position of strength and look forward to updating you on our progress next quarter.
This concludes today's call. Thank you for your participation. You may now disconnect.