Why FICO fell 17% on the day it raised guidance

Fair Isaac reported its June quarter after the close on 29 July. Revenue rose 26%. Diluted earnings per share rose 41%. The chief executive’s quote in the release was “we are pleased to announce that we are raising our full year guidance,” and the company then raised every line of it — revenue, GAAP net income, GAAP EPS, non-GAAP net income, non-GAAP EPS.

The stock fell 17.0% the next day.

That combination is unusual enough to be worth taking apart. A company that beats and raises does not normally lose a sixth of its value in a session. When it does, the disagreement is not about the year being guided. It is about what the guided numbers are made of.

The quarter, and the raise

Nothing was cut. Revenue guidance went up 3.3% and non-GAAP EPS guidance up 4.9%.

Where the growth came from

FICO reports two segments. In the June quarter they behaved almost nothing alike.

Scores is 68.1% of revenue and earns a 90.8% segment operating margin. Software grew 2%, and its segment operating income fell $12.9 million year over year as segment expenses rose $16.1 million against a $3.2 million revenue gain.

Put the two together and the growth is not distributed at all.

Scores increase       $458.9M − $324.3M = $134.6M
Total increase        $674.2M − $536.4M = $137.8M
──────────
Scores share of growth                      97.7%

And within Scores, the company is specific about the driver. Both the earnings release and the 10-Q attribute the business-to-business increase to the same thing:

The increase in business-to-business scores revenue was primarily attributable to a higher mortgage origination scores unit price.

Not volume. Not new products. Not a new market. Unit price, on mortgage origination scores.

So: 97.7% of the growth came from one segment; the majority of that segment’s growth came from raising the price of one product sold into one end market. That is an extremely efficient business and an extremely concentrated one, and those are the same fact viewed from two sides.

The earnings-per-share amplifier

EPS grew 41.2% while net income grew 30.5%. The gap is not operations.

The company bought back $2.28 billion of its own stock in a single quarter, against a market capitalisation of roughly $22.4 billion. Nine-month repurchases were $3.05 billion, three and a half times the prior year.

This is not hidden and it is not improper — it is a deliberate capital allocation choice, and it is disclosed. But it does mean that a reader comparing EPS growth to revenue growth is comparing two numbers that are not measuring the same thing. Roughly ten of the forty-one percentage points of EPS growth came from there being fewer shares.

It also shows up on the balance sheet. Treasury stock stands at $10.28 billion and total stockholders’ equity is negative $4.10 billion. In March the company issued $1.0 billion of 6.250% senior notes due 2034, with stated uses including repayment of revolver borrowings, the redemption of $400 million of 2026 notes, and general corporate purposes “which may include repurchases of common stock.”

What the filing does not discuss

Here is the part that a reader checking the primary documents will notice.

The 10-Q filed the same day runs to 149,000 characters. Searching it for the words that dominated the commentary around this stock — the name of the competing score, the housing regulator, the direct licensing programme — returns nothing. The management discussion attributes growth to a higher unit price and does not address what happens to that price.

This is not a disclosure failure. Quarterly reports commonly carry risk factors by reference rather than restating them, and Item 1A of this 10-Q does exactly that — it directs readers to the risk factors in the annual report for the fiscal year ended 30 September 2025. Whatever the competitive picture is, the place it is described is a document written ten months earlier.

What that means is narrower than it sounds, but it is real: on 29 July the filing and the market were answering different questions. The document answers what happened in the June quarter and what the year will look like. The market was pricing what the price of a mortgage score will be after that.

Guidance covers a fiscal year ending 30 September 2026. Two months of it remained.

We are not going to model the competitive outcome here, because we cannot source it to a document. What can be sourced is the shape of the exposure: 68% of revenue, 91% segment margins, and a growth rate that the company itself attributes to unit pricing.

The stock

Unlike some post-earnings selloffs, this one is not lost in ordinary volatility. Two other quarters covered here ended the same way from different causes: Sandisk fell after a record quarter, and monday.com paired record non-GAAP operating income with decelerating guidance.

The shares closed at $1,373.08 on 29 July, opened at $1,150.00 the next morning — a 16.2% gap — and closed at $1,139.54. They had not recovered by 11 August, closing at $1,038.23, which is 24.4% below the pre-release close.

At that price, against guided fiscal 2026 GAAP EPS of $36.86, the stock trades at 28.2 times the earnings the company has just told the market to expect.

That is not a distressed multiple. It is not a growth multiple either. It is roughly what you pay for a highly profitable business whose next act is genuinely uncertain — which is a fair reading of a company earning 91% segment margins on a product whose price is the entire growth story.

What would make this wrong

• Fiscal 2026 is nearly over and largely locked. The guidance raise is close to a statement of fact about the year, not a forecast about the business model. Treating the raise as evidence the market was wrong would be a mistake, and this article does not make that argument.
• We did not verify consensus estimates. Reporting attributed the decline in part to guidance landing below expectations. That figure is not in any filing, so it is not used here as evidence.
• The absence of competitor discussion in the 10-Q proves nothing about the competitive situation. It is normal practice to carry risk factors by reference. What it establishes is narrower: the document does not address the question the market appeared to be asking.
• Segment margins are as the company allocates them. $57.0M of corporate expense and $52.3M of share-based compensation are unallocated. A different allocation would produce different segment margins; the 90.8% figure is FICO’s own presentation, and total segment income reconciles to reported operating income of $362.6M.
• Price data is not from a filing and is labelled where it appears.
• These are unaudited quarterly figures. The fiscal-year 10-K will follow.

Check it yourself

The earnings release, the guidance table, and the 10-Q are all linked below and were filed on the same day. The segment table is in Note 11 of the 10-Q; the guidance table is near the end of the release. Every figure above other than the daily closes comes from those two documents.

If a number here does not match, tell us and it will be corrected on the article and on the corrections log, with the date.