FICO delivered a third quarter that reinforced its position as the central nervous system of consumer credit in the United States. Revenue jumped 26 percent to $674 million and diluted earnings per share rose 41 percent to $10.45, driven by a surge in mortgage origination scoring volumes and pricing. The Scores segment, which generates roughly two-thirds of revenue, grew 41 percent year over year as lenders originated more mortgages and paid higher unit prices for each score pulled. Meanwhile the Software segment, though growing only 2 percent on the top line, saw its Annual Recurring Revenue climb 10 percent to $816 million with platform ARR accelerating 62 percent. Dollar-based net retention for the combined software portfolio reached 109 percent, masking a stark divergence between the platform business at 148 percent and the legacy non-platform business at 82 percent. Management raised full-year revenue guidance to $2.53 billion and non-GAAP EPS guidance to $42.43.
The investment case rests on FICO's quasi-utility position in U.S. mortgage lending. The FICO Score is embedded in the infrastructure of the three major credit bureaus and in the underwriting models of virtually every major bank and credit card issuer. That entrenchment creates pricing power that management has exercised aggressively, particularly in the B2B mortgage channel where unit prices have risen materially. The Scores segment operates at 90 percent operating margins, effectively converting every incremental dollar of revenue into operating income. The Software segment is in the middle of a platform transition that is diluting near-term margins but building a higher-growth, higher-retention recurring revenue base. Platform ARR now represents 51 percent of total software ARR, up from 31 percent two years ago.
Capital allocation has been aggressive. The company issued $2.5 billion of new debt in the last nine months , a $1.5 billion term loan and $1.0 billion of 2026 Senior Notes , and deployed $3.1 billion on share repurchases including a $1.5 billion accelerated share repurchase agreement. Total debt now stands at $5.6 billion against $248 million in cash, a leveraged balance sheet that reflects confidence in the stability of Scores cash flows. At $1,154 per share the stock trades at 33 times trailing earnings and 22 times forward non-GAAP estimates, a premium to peers MSCI (31x/25x), S&P Global (27x/22x), and Moody's (32x/27x). The premium is justified by FICO's superior margin structure and the defensive nature of its Scores franchise, but it leaves little margin for error if mortgage volumes normalize or if the platform transition stalls.