Verisk (VRSK) Q3 2026 earnings review
Verisk's subscription sales speed up, but its cash flow drops
Verisk, which provides underwriting and claims data to insurers, sped up its core subscription growth while its cash flow fell behind. Sales from businesses owned a year ago, at constant exchange rates, rose 7% as subscription growth climbed for a second quarter and one-off transactional sales turned positive. Chief executive Lee Shavel and finance chief Elizabeth Mann kept the full-year outlook unchanged, and by our math the middle of that plan leaves profit per share excluding one-offs up just 1% in the fourth quarter.
| Sales from businesses owned a year ago (constant currency) | +7.4% +5.8% last quarter |
|---|---|
| Subscription underlying sales growth | +8.2% +8.0% last quarter |
| Profit per share, excluding one-offs | $1.96 +14% from a year ago |
| Full-year 2026 outlook | Unchanged middle of the range: $3,215M revenue, $7.60 EPS |
⚖️ Verdict: 🟢 Bullish
The story got better because subscription growth expanded for a second consecutive quarter against a tougher prior-year comparison, easing fears of a prolonged slowdown. Deferred revenue also returned to growth, confirming last quarter's drop was billing timing. The bad news: free cash flow fell 41% as cash interest payments tripled on the debt raised for share buybacks, and management still gives no numbers for its artificial intelligence products.
The question now is whether rising subscription growth comes from new AI software pricing or just the final wave of past insurance premium inflation. If AI tools are driving renewals, underlying growth will stay near 8% next year; if lagged insurance pricing is doing the work, growth will cool as property rates soften. Fourth-quarter subscription growth and the 2027 outlook in February will settle it.
🐂 Bull Case
Subscription Growth Sped Up for a Second Quarter
Verisk sells data analytics and risk models to property and casualty insurers, collecting more than four-fifths of its sales from multi-year subscriptions. Subscription sales from businesses owned a year ago, at constant exchange rates, slowed for four straight quarters from 10.6% in early 2025 to 7.0% in the first quarter of 2026. That slide raised fears that softer insurance pricing was eroding the company's renewal increases.
The subscription stream has now accelerated for two consecutive quarters, rising 8.0% in the second quarter and 8.2% in the third against a tougher 8.7% prior-year comparison. Finance chief Elizabeth Mann said total results "returned to levels in line with our annual Investor Day targets and reflect the continued sequential acceleration in growth we previously articulated." Annual price increases in forms, rules and loss cost services led the gain.
What to watch: subscription underlying sales growth in the fourth quarter, when the prior-year comparison eases by a full percentage point to 7.7%. Holding above 8% would show that multi-year contract renewals can sustain the company's 6% to 8% target range even as insurers compete harder on policy prices.
Transactional Sales Turned Positive After Five Shrinking Quarters
Transactional sales, which make up roughly a sixth of revenue and come from one-off data queries, auto underwriting checks and storm-repair estimates, shrank in every quarter of the past year. Management had warned that strong second-quarter demand tied to insurance-linked securities would not repeat in the third quarter. Instead, transactional underlying revenue grew 3.2% from a year ago, ending five straight quarters of contraction.
Claims underlying revenue rose 6.7%, driven by "strong price realization and adoption of new innovations in anti-fraud analytics, as well as growth in property and restoration solutions." Part of the rebound reflects an easy comparison against the third quarter of 2025, when unusually calm weather pushed transactional revenue down 8.8%. One positive quarter against a depressed baseline does not yet prove normal volume demand.
What to watch: fourth-quarter transactional underlying growth against last year's 6.5% decline. Staying positive through the winter quarter would show that anti-fraud and restoration demand is strong enough to stop dragging down the subscription business.
Cost Discipline Lifted Margins Above the Full-Year Plan
Verisk expanded its operating profit margin excluding one-offs, depreciation and amortization (adjusted EBITDA margin) by 0.9 percentage points from a year ago to 56.7%. Operating expenses inside that measure — cost of revenues plus selling, general and administrative overhead, excluding one-offs — fell by 0.9 percentage points of revenue to 43.3%, by our math. Underlying adjusted EBITDA grew 7.5%, outpacing the 7.4% underlying sales growth.
Through nine months, adjusted EBITDA margin sits at 56.7%, already above the company's 56.0% to 56.5% full-year target range. Reported GAAP net income margin fell 2.2 percentage points to 27.1%, because the insurance data provider recorded $16.7 million in write-downs on cost-based investments and $10.4 million in acquisition-related fees.
What to watch: fourth-quarter adjusted EBITDA expenses as a share of revenue. By our math, the unchanged full-year outlook implies a fourth-quarter margin of 55.1%, so holding near 56.7% would push full-year profitability above the top of management's plan for a second consecutive year.
Positives This Quarter Didn't Test
Three product and data drivers from earlier in the year received no numerical update in the earnings release, because management typically reports them on the conference call.
- Core Lines Reimagined modules: Verisk noted annual price increases in forms, rules and loss cost services, but did not update progress toward its goal of 25 module releases in 2026.
- Verisk Synergy Studio migrations: the release cited "selling expanded solutions to new and existing customers within catastrophe and risk solutions", without naming how many clients migrated to the new platform.
- Contributory data additions: no update on new core lines or excess-and-surplus insurance carriers contributing policy data to Verisk's database.
🐻 Bear Case
Free Cash Flow Dropped 41% on Interest and Taxes
While operating profit grew, cash generation went the other way. Operating cash flow fell 33.8% from a year ago to $267.2 million, and free cash flow fell 40.5% to $200.0 million. The company said the drop was "primarily due to higher cash tax payments, increased interest payments, as well as unfavorable working capital movements related to the timing of cash collections."
- Cash interest paid: $75.2 million, more than triple the $24.9 million paid a year ago
- Cash income taxes paid: $70.9 million, up from $51.7 million a year ago
- Accounts receivable cash impact: a $12.4 million cash outflow this quarter, against a $173.1 million cash inflow in the prior-year period
- Nine-month free cash flow: $824.3 million, down 10.0% from a year ago
Collection timing swings between quarters, but the interest bill is structural after Verisk borrowed $1.5 billion in the first quarter to buy back shares. Nine-month cash interest paid has more than doubled to $187.4 million, reducing the share of operating profit that turns into cash.
What to watch: fourth-quarter operating cash flow and accounts receivable on the year-end balance sheet. A rebound in collections would confirm the working capital drag was temporary timing rather than slower payment by insurers.
Debt-Funded Buybacks Carry the Per-Share Profit Growth
Headline profit per share excluding one-offs rose 14.0% from a year ago to $1.96, but the business itself did not grow profit at that pace. Net income excluding one-offs grew 5.4% to $253.8 million, by our math, while GAAP net income fell 2.8% to $219.2 million on "losses related to cost-based investments and higher net interest expense." Net interest expense rose 25.6% to $53.0 million.
The gap between 5.4% profit growth and 14.0% per-share growth came from retiring stock. Verisk funded $1.9 billion of buybacks in the first nine months, including a $100 million accelerated repurchase in the third quarter, cutting its diluted share count by 7.7% from a year ago. Those buybacks pushed total debt to $4.50 billion and left stockholders' equity in a $1.11 billion deficit.
What to watch: whether Verisk repays its $267.5 million in short-term debt over the next two quarters or refinances it at current interest rates. Retiring that debt with cash would begin lowering the interest burden on net income.
Verisk Still Will Not Size Its AI Revenue
Chief executive Lee Shavel said the company is executing by "accelerating AI-powered innovation at scale" to support long-term growth. Across the previous two quarters, management credited new artificial intelligence features in its underwriting and claims software with lifting renewal prices and driving rapid user adoption.
In the earnings release, Verisk again attached zero numbers to those claims. The release mentions "adoption of new innovations in anti-fraud analytics", but does not disclose how many basis points of its 7.4% underlying sales growth came from AI tools, how many customers pay extra for them, or whether growth in catastrophe and risk solutions returned to double digits.
What to watch: any concrete dollar or percentage figure for AI revenue contribution in the conference call remarks. Until management provides a checkable number, investors cannot tell how much of the 8.2% subscription growth comes from new AI tools versus standard annual price increases.
Risks This Quarter Didn't Answer
Four standing risks from prior quarters cannot be read from the earnings release alone and await the conference call transcript and quarterly Form 10-Q filing.
- Softening insurance market: whether softer commercial property insurance pricing is starting to cap the lagged premium inputs that feed roughly a fifth of Verisk's subscription renewals.
- Extended AI sales cycles: whether enterprise insurers are still taking longer to approve new AI software purchases, as management noted in the first half.
- Customer-built AI substitution: whether large insurers are using their own language models to analyze internal claims data instead of licensing additional Verisk analytics.
- Litigation and broken-deal costs: Verisk booked another $10.4 million in acquisition-related fees this quarter ($29.6 million over nine months), and the 10-Q legal footnote will show the status of the AccuLynx, telematics and Daniel's Law lawsuits.
💲 Other KPIs
Current deferred revenue — cash customers have paid upfront for subscriptions not yet delivered — rose 2.7% from a year ago, by our math, reversing last quarter's 14.5% drop. In the first quarter the balance was up 16.5% from a year ago, showing that quarterly invoice timing drove last quarter's dip rather than a drop in contract renewals.
Uncollected customer bills fell 7.2% from a year ago, by our math, but rose $5.3 million from the second quarter. Together with a $7.2 million bad-debt provision — up from $2.5 million a year ago — receivables absorbed $12.4 million of operating cash this quarter, compared with a $173.1 million collection inflow a year earlier.
Spending on software development and equipment was unchanged from $67.4 million a year ago and down slightly from $68.1 million in the second quarter, representing 8.3% of sales. Through nine months, capital spending is up 12.7% to $199.3 million, tracking the unchanged $260 million to $280 million full-year plan.
🔮 Guidance
Unchanged. The middle of the range calls for $3,215 million, or 4.6% reported growth for the year. By our math, that leaves $817 million for the fourth quarter, or 4.9% reported growth and roughly 6.4% underlying growth once the December 2025 sale of Verisk Marketing Solutions is stripped out — a slowdown from 7.4% in the third quarter.
Unchanged. Management kept the middle of the range at $1,810 million, up 4.8% for the year. After $1,360 million in the first nine months, the middle of the range leaves $450 million for the fourth quarter, by our math, slowing to 3.1% growth from 7.0% in the third quarter. Last year Verisk finished $7 million above the top of its final range.
Unchanged. The plan still calls for full-year operating profit margin excluding one-offs, depreciation and amortization to average 56.25% at the middle of the range. Because Verisk delivered 56.7% across the first nine months, the middle of the range implies a fourth-quarter margin of 55.1%, by our math, down 1.6 percentage points from the third quarter.
Unchanged. The middle of the range sits at $7.60, or 6.1% full-year growth. With $5.76 already earned in the first nine months, the middle of the range leaves $1.84 for the fourth quarter, by our math — just 1.1% above last year's $1.82, after growing 14.0% in the third quarter.
Unchanged. The plan holds the full-year effective tax rate at 24.5% at the middle of the range. Nine-month taxes sit at 24.8% after a 25.7% rate in the third quarter.
Unchanged. At the $270 million middle of the range, capital spending will rise 10.6% for the year. By our math, that leaves $70.7 million for the fourth quarter, up from $67.2 million in the third quarter.
Unchanged. The $280 million middle of the range leaves $74.3 million for the fourth quarter, by our math, up from $69.5 million in the third quarter as new software modules enter service.
Unchanged. With $43.1 million recorded through nine months, the target implies $16.9 million in the fourth quarter, by our math, up from $14.4 million in the third quarter following the McKenzie Intelligence Services acquisition.
Unchanged. At the $195 million middle of the range, full-year net interest expense rises 14.1% from 2025. After $149.0 million in the first nine months, that leaves $46.0 million for the fourth quarter, by our math, down from $53.0 million in the third quarter.
Unchanged. The board approved the fourth-quarter payment of $0.50 per share on November 2, completing the $2.00 annual total, an 11.1% increase over 2025.
❓ Key Questions
Why keep the full-year outlook unchanged after this beat?
Nine-month adjusted EBITDA margin is 56.7% and third-quarter underlying revenue grew 7.4%, yet the unchanged full-year midpoint implies fourth-quarter EPS growth of just 1.1% and a 55.1% margin. Is management building in higher fourth-quarter spending or just leaving a cushion?
How much did AI tools add to subscription renewal prices?
Subscription underlying growth stepped up to 8.2% and management credits AI innovation across underwriting and claims, but the release gives no revenue or licensee figures. How many basis points of the 8.2% growth came from priced AI products?
What are the $10.4 million of third-quarter acquisition fees for?
Verisk added back $10.4 million of acquisition-related fees to adjusted EBITDA in the third quarter and $29.6 million over nine months, even though it spent only $25.6 million on acquisitions all year. How much of that line is AccuLynx termination litigation?
What drove the $185 million swing in receivables cash flow?
Accounts receivable changes used $12.4 million of cash in the third quarter after generating $173.1 million a year ago, while the quarterly bad-debt provision nearly tripled to $7.2 million. Which customer segments paid later this quarter?