Equifax (EFX) Q3 2026 earnings review
Equifax cuts its sales outlook, but signs more government contracts
Equifax's businesses outside mortgage kept growing, while a weaker mortgage market forced it to cut this year's sales outlook. Revenue rose 10%, but by our math about three points came from FICO score fees that Equifax passes on at no profit. Chief executive Mark Begor cut the year's sales plan by $84 million, all of it mortgage, but kept profit per share almost unchanged through cost savings.
| Revenue growth excluding FICO score fees | +7% reported growth 9.6% |
|---|---|
| Profit per share, excluding one-offs | $2.26 +10.8% from a year ago |
| Government contracts signed this year | about $550M about $300M three months ago |
| Full-year revenue outlook | Cut $84M middle of the range: 9.65% growth |
⚖️ Verdict: 🔴 Bearish
The story got worse because the mortgage market weakened faster than the July plan allowed. The fourth-quarter plan shows growth of only about 3% once the FICO fees are set aside. The good news: government revenue grew again, as promised in July, and contracts signed this year reached about $550 million.
The question now is whether the government contracts turn into revenue before the FICO fees stop helping in 2027. One answer is that about $150 million of new business lifts government revenue by double digits next year. The other is that state implementations slip while the FICO comparison turns first. February's 2027 outlook will tell.
🐂 Bull Case
AI Cost Savings Lift Margins Past the Plan
Equifax set itself a goal of $150 million in savings from putting AI to work inside its own operations, with software agents that take customer calls, read paper documents and write code. Chief executive Mark Begor said those savings should allow Equifax to "principally recover the gross margin impact from lower Mortgage revenue".
The savings showed up this quarter. Profit margin excluding FICO score fees and one-offs reached 35.2%, up 1.3 percentage points from a year ago. That beat the July plan by 0.4 points. The FICO fees are score charges Equifax collects for FICO at no profit, so it reports margins without them.
- Selling and administrative costs: 23.1% of revenue, down 2.2 points by our math after setting aside last year's restructuring charge
- USIS margin excluding FICO fees: 42%, up more than 3.2 points
- Full-year margin gain excluding FICO fees, now planned: 1.0 point, up from 0.75 points in July
This matters because the savings arrived as sales slowed, so Equifax kept its full-year profit per share almost unchanged despite cutting the sales plan by $84 million. But the slides note that part of the savings "may be re-invested in accelerating AI initiatives", and Begor has not said how much he keeps.
What to watch: the fourth-quarter margin excluding FICO fees, planned at 34.6% to 35.0%, a smaller gain than this quarter's. A result above that range would mean the savings run ahead of the plan rather than merely covering lost mortgage profit.
Government Sales Grow Again as Signings Reach $550M
Equifax sells income and employment checks to US state and federal agencies, which use them to decide who qualifies for benefits such as food assistance and Medicaid. This government business, part of Workforce Solutions, shrank about 4% last quarter, and Equifax's case for 2027 rests on it growing again.
This quarter the line turned. Government revenue rose by a mid-single-digit percentage, chief executive Mark Begor said, and the value of contracts signed so far this year reached about $550 million, up from about $300 million in July. By our math, about $50 million of the quarter's new signings is new business rather than renewals.
- Contract value signed this year: about $550 million, of which about $150 million is new business
- Renewals: about $400 million, or 73% of the total by our math
- New products: Continuous Evaluation for SNAP, which flags changes in a recipient's income, and Medicaid Community Engagement Verify, which checks hours worked
The risk side of the same story has not gone away: Equifax still reports no government revenue figure in dollars, and the slides frame the signings as momentum for 2027 rather than revenue now. Renewals keep existing revenue rather than adding to it. But the growth came in the quarter the company said it would, which argues for the implementation schedule.
What to watch: a government growth figure for the fourth quarter and, in February, whether the 2027 outlook puts a dollar value on the new contracts. Faster growth in the fourth quarter would mean signings are converting on schedule.
Businesses Outside Mortgage Grow 8%, as Planned
Equifax calls everything except its mortgage work Diversified Markets: employment checks for lenders and employers, credit reports for banks and car dealers, and its businesses abroad. Chief executive Mark Begor's plan has these businesses growing by a high-single-digit percentage this year, and he kept that plan while cutting the mortgage part.
Revenue from these businesses rose 8%, which Begor called "broad based across all business units". Talent Solutions, the service employers use to check job applicants, grew more than 20% even though US hiring is weak, and consumer-lending checks grew by a high double-digit rate.
- Verification Services outside mortgage: up 13%
- USIS outside mortgage: up 6%, led by banks and auto lenders
- International, at constant currency: up 7%, with Australia up 11%
- Revenue from products launched in the last four years: a record 17% of the total
This matters because these businesses are where the long-term case lives: the FICO fee pass-through stops helping in January and mortgage volumes are falling, so Equifax needs this group to carry 2027. Growth of 8% is inside the plan. The fourth-quarter plan calls for 6% to 7% at constant currency, which is slower.
What to watch: Diversified Markets growth in the fourth quarter against the 6% to 7% planned. A number above that range would mean the slowdown is confined to mortgage.
Positives This Quarter Didn't Test
Two standing positives got no reading in the release or slides, so the claims stand as they were and each needs a specific disclosure to move.
- Defence of Equifax's own data against AI tools that gather income information elsewhere: the slides define the protection but add no new evidence; the call transcript would show whether chief executive Mark Begor argued it again.
- Ignite AI Advisor, the AI assistant Equifax planned to bring to Canada this quarter: no update; the next release would show whether it launched.
🐻 Bear Case
Weaker Mortgage Market Cuts $84M From the Year
Mortgage lenders buy credit reports and income checks from Equifax for every application, so the number of US mortgages drives a large share of its revenue. In July the plan assumed the market would fall by a low-single-digit percentage this year. In the second half of this quarter, chief executive Mark Begor said, mortgage rates "increased substantially".
Begor now expects US mortgage originations to fall 6.5% to 7.5% this year. Hard credit checks for mortgages fell 9% in the quarter. Mortgage revenue still rose 15%, but mainly because of the FICO fee pass-through and share gains, and next quarter the plan has it falling by a mid-single-digit percentage.
- Full-year revenue outlook: cut $84 million at the middle of the range, all of it mortgage
- Full-year mortgage revenue: now up a high-double-digit percentage, from above 20% in July
- Fourth-quarter mortgage revenue: down mid single digits, and down mid double digits excluding FICO fees
- Fourth-quarter revenue: $1,605 million to $1,635 million, about 3.5% to 5.4% growth
This matters because Equifax cut the plan only three months after holding it in July, so the market moved faster than the company allowed for. By our math the new fourth-quarter range sits about $81 million below what the July full-year plan implied for the quarter, and the whole shortfall is mortgage.
What to watch: fourth-quarter mortgage revenue against the mid-single-digit decline planned. A deeper decline would mean the February 2027 outlook starts from a lower base, in the same year the FICO fees stop helping.
Growth Excluding FICO Fees Slows to 3%
When a lender orders a mortgage credit report, Equifax collects the fee for the FICO credit score and passes it to FICO, the score's owner, at no profit. After a FICO price increase this year, about $100 million of this quarter's revenue, roughly 6% by our math, is money Equifax merely handles. The release headlines "Strong 10% Revenue Growth". Excluding the fees, revenue grew 7%.
The fourth-quarter plan shows the gap widening. Equifax plans reported growth of about 4.5% for the quarter. Without the fees, the same plan shows 2% to 4%. In January 2027 the fees appear in both years, so the help ends.
- Profit margin excluding one-offs, as reported: 33.1%, up 0.4 points
- Same margin excluding FICO fees: 35.2%, up 1.3 points
- Cost of services, the line that carries the fees: 44.5% of revenue, up 1.5 points by our math
- Full-year revenue growth excluding FICO fees, now planned: 6.3% to 6.8%, down from 7.2% to 8.4%
This cuts against the company's own framing because every headline number sits on the flattering basis, while the plan on the other basis was cut too. Reported growth of 10% with a margin only 0.4 points higher tells the same story: the extra revenue brought no extra profit. The slowdown is not only mortgage, because the full-year figure excluding the fees fell as well.
What to watch: first-quarter 2027 revenue growth, the first quarter with FICO fees in both years. A figure near the 2% to 4% in the fourth-quarter plan would mean that is Equifax's real growth rate until the government contracts arrive.
VantageScore Prize Shrinks Again, to $35 Million
VantageScore is a credit score that Equifax co-owns and prices at $1 "to drive conversion" away from the higher FICO fee, because it keeps a margin on VantageScore and none on FICO. This quarter the housing regulator FHFA allowed every mortgage lender to use it, and about 2,000 lenders now do, roughly seven times April's count by our math.
The prize keeps getting smaller. Equifax now puts the margin gain from full conversion at about $35 million a year, against about $160 million at the start of the year. The slides also disclose a new risk: if the government-backed loan buyers accept two credit reports instead of three, Equifax could lose about $38 million of margin.
- VantageScore price: $1, now held through 2028, a year longer than before
- Lenders using it: about 2,000, of which more than 200 use it alone
- Mortgages securitised with VantageScore in September: about 5%
- Potential loss if these loans move to two reports: about $80 million of revenue and $38 million of margin
This matters because the two numbers nearly cancel: the best case from the score Equifax has promoted for a year is worth about as much as the new risk could cost. Equifax calls the two-report risk "Manageable", because these loans are only about 40% of originations and FHA and VA loans should keep three reports.
What to watch: the share of mortgages securitised with VantageScore, 5% in September, in the February update. A share in the double digits would mean conversion is real but worth $35 million at most, by the company's own arithmetic.
Risks This Quarter Didn't Answer
Four standing concerns got no decisive reading from the release and slides, and each needs a specific disclosure to move one way or the other.
- Litigation: no new settlement charge this quarter after the $40 million net accrual in the second quarter; the quarterly filing's legal note will show whether small-claim volumes keep rising.
- AI substitution of Equifax's data: nothing in the release or slides; the call transcript would show whether chief executive Mark Begor again defended the data.
- Employer Services, the part of Workforce Solutions that sells to employers rather than lenders: revenue down 5% from a year ago after a small rise last quarter; it needs a quarter of growth.
- Canada and Europe: up 4% each at constant currency, below the 7% for International overall; a quarter at the group rate would ease it.
👓 Other Themes
Buyback Slows Ahead of the Círculo Purchase
Equifax spent $92 million on buybacks this quarter, down from $300 million last quarter, ahead of the Círculo de Crédito purchase. Círculo, Mexico's second-largest credit bureau, costs $750 million and should close in the fourth quarter, the company said. Equifax has also replaced short-term borrowing with long-term bonds: short-term debt fell to $158 million from $1.4 billion in June.
💲 Other KPIs
Up 12% from a year ago, faster than the 10% of last quarter. The Work Number is Equifax's database of payroll records, which it uses to verify a person's income and employment; more records mean more inquiries answered, so it tends to lead Verification Services revenue, which grew 9%. More than 5 million employers now contribute.
By our math from the nine-month figures, free cash flow of $437 million was level with a year ago. That is 26% of revenue. Nine-month free cash flow of $763 million is down 4%, because receivables and other current assets absorbed cash. The year's plan of more than $1 billion looks achievable, since last year's fourth quarter alone brought in more than the remaining gap.
Down 4.8% from a year ago, the fifth straight quarter of decline, as buybacks since mid-2025 removed shares faster than stock awards added them. The lower count turned 6% growth in profit excluding one-offs into 11% growth per share, by our math. With the buyback slowing, that help shrinks from here.
🔮 Guidance
Cut. The middle of the range fell $84 million, to 9.4% to 9.9% growth, and Begor attributed all of it to lower US mortgage revenue. The plan has moved three times this year: up $25 million in April, unchanged in July, down $84 million now. The fourth quarter carries the whole cut, because the first nine months are already reported.
Cut, but only slightly: the middle of the range fell 4 cents to $8.50. Cost savings offset most of the lost mortgage profit, so the plan still has profit per share rising about 11% this year. By our math the fourth quarter needs $2.12, about 1% above a year ago.
Raised. Equifax now plans a 1.0-point margin gain this year excluding FICO fees, up from 0.75 points in July. Its long-term framework assumes 0.5 points a year. The reported margin, which includes the zero-profit fees, is planned at 31.7% to 32.0%, roughly level with last year. The raise comes from the AI savings programme, which is why profit per share held while sales fell.
New. The plan calls for 3.5% to 5.4% growth, well below this quarter's 10%. Mortgage revenue should fall by a mid-single-digit percentage while other businesses grow 6% to 7% at constant currency, Equifax said. By our math the range sits about $81 million below what July's full-year plan implied for the quarter. Equifax beat its own quarterly midpoint in four of the last five quarters; this quarter it landed just below.
New. The middle of the range, $2.12, is about 1% above a year ago. This quarter's growth was 11%. Begor expects the weak mortgage market to continue through the rest of 2026, and the share count helps less now that buybacks have slowed, so the fourth quarter has little room for a beat.
New. The reported margin is planned at 33.0% to 33.4%, slightly above a year ago. Excluding FICO fees the gain is about 0.9 points, smaller than this quarter's 1.3. Adjusted EBITDA should grow faster than revenue, so cost savings continue to do the work while mortgage profit falls.
Cut. In July the plan had mortgage revenue up just above 20%; it is now up by a high-double-digit rate, and only low single digits once the FICO fees are set aside. Behind it sits a market assumption of originations down 6.5% to 7.5%, from down low single digits before. Hard credit checks for mortgages fell 9% this quarter, so the fourth quarter starts from a weak base.
Unchanged. Equifax still expects more than $1 billion of free cash flow this year and to turn at least 100% of profit excluding one-offs into cash. Nine-month free cash flow is $763 million, so the fourth quarter needs about $237 million, by our math. Last year's fourth quarter delivered $341 million, so the floor looks achievable.
❓ Key Questions
How much government revenue does Equifax book, in dollars?
Equifax reports signed contract value, now about $550 million, but no government revenue line. Without the dollar base, readers cannot judge what $150 million of new business adds in 2027 or how long state implementations take.
Why did the VantageScore prize fall to $35 million?
Equifax valued full conversion at about $160 million of profit in February and about $35 million now, with no bridge between the two. Which volume and pricing assumptions changed, and does the $1 price through 2028 explain the gap?
What is 2027 growth without the FICO fee help?
The fourth-quarter plan shows 2% to 4% growth excluding the fees. From January they appear in both years, so reported growth converges on that rate unless government contracts and mortgage volumes offset it.
How will Equifax pay for Círculo, and what does it add?
The $750 million purchase should close in the fourth quarter after Equifax issued about $1 billion of bonds this year. Year-one revenue, profit contribution and the leverage ratio after closing are not yet disclosed.