FICO has long been one of the market’s favorite compounders. It was viewed as a near-untouchable business with a wide moat and extraordinary pricing power, and for years the stock delivered. From the end of 2011 through 2024, shares rose more than 50x, compounding at 36% annually.

Few investors have backed the company harder than Dev Kantesaria of Valley Forge Capital Management. The firm first reported a FICO position in 2018, and as of its latest 13F, the company made up 26% of Valley Forge’s $3.1B disclosed U.S. equity portfolio.

If you look across social media, the overwhelming consensus seems to be that FICO is a bargain. The share price has collapsed, the multiple has compressed, and many investors push back on the idea of any threat by pointing to recent growth rates. But that’s also where I think investors need to be careful. There are real changes underway in the mortgage scoring market that could alter the economics that made FICO such an incredible business in the first place.

In this review, I’ll break down the latest quarter, the valuation, and what has changed. I’ll also touch on the larger risks hanging over the business and share where I stand on the stock today.

Let’s dive in.

Disclaimer: This is not financial or investment advice. I'm sharing my personal investment decisions and reasoning for educational and informational purposes. Always do your own research before making any investment decisions.

FICO operates two businesses: Scores, which licenses the industry-standard FICO Score across mortgage, auto, and card underwriting, and Software, which sells FICO Platform to financial institutions. Q3 was another strong quarter, with mortgage pricing continuing to drive Scores, while Platform remained strong underneath weak headline Software growth. The quarter also gave us the first real signs of VantageScore gaining adoption in the mortgage market.

Quarter at a Glance

What Mattered

1/ Vantage Enters The Picture

Scores revenue grew 41% YoY to $459M, with mortgage once again carrying the segment. Mortgage origination revenue increased 97% despite underlying volumes growing only low-single digits, indicating pricing continues to be the main driver. Mortgage now accounts for 62% of total Scores revenue. Auto and card/personal loan revenue grew 15% and 9%, respectively, while newer initiatives like UltraFICO remain early in adoption.

The most interesting development around Scores was the first real sign of VantageScore gaining adoption. During the earnings call, an RBC analyst said Vantage appeared to be closer to 20% share at UWM and Rocket, while noting that both VantageScore and FICO were being pulled initially. Lansing first said FICO was not seeing any loss in score volume, suggesting lenders were still pulling both. Later in the same call, however, he acknowledged that measuring this is “not that easy” and said FICO’s conclusion is largely based on comparing its own volumes against forecasts, bureau-reported volumes, and broader mortgage-market data.

Lansing said FICO’s own math puts Vantage’s theoretical ceiling somewhere “in the 20s,” based on the percentage of borrowers who receive a better outcome from a higher VantageScore. That is a clear numerical step up from the 9% figure he gave at the Barclays Analyst Conference in May, although the two estimates measure slightly different things. The earlier figure reflected the addressable market for score shopping under rules in place at the time that limited Vantage use to loans below 80% LTV and mapped Vantage into the existing FICO pricing grid.

2/ Platform Pulls Ahead

Software revenue grew just 2% YoY to $215M, which looks soft at face value but hides what is happening underneath. Platform revenue grew 66%, while Platform ARR increased 62% to $413M and still grew in the mid-30% range excluding migrations. Platform net retention reached 148%, supported by new use cases, higher usage and migrations. For the first time, Platform now accounts for more revenue and ARR than the legacy non-platform business.

The segment’s weakness is increasingly concentrated in non-platform, where ARR declined 17% as customers migrated to Platform and older products reached end of life. In past quarters, management emphasized that it was not forcing or even encouraging migrations. That changed this quarter. With more capacity now available on Platform, FICO is actively winding down older products and moving customers over, and management expects the divergence between the two businesses to continue. Importantly, Platform remains strong beyond those migrations, with management also pointing to a growing pipeline and continued acceleration in bookings.

FICO is also widening distribution through its expanded Accenture partnership. Management expects the relationship to help deepen penetration across its roughly 500 named target accounts while reaching customers beyond FICO’s direct salesforce.

3/ Waiting On The GSEs

FICO has made progress on its response to VantageScore, but the key pieces are still not fully live. The Direct Licensing Program allows mortgage resellers to calculate and deliver FICO scores directly to lenders instead of buying them through the credit bureaus. Operationally, FICO says the program is ready to go, with signed agreements covering roughly 60% of U.S. mortgage volume and two more large resellers close to signing. The remaining holdup is certification from one of the GSEs, and despite saying it was “closing in” on bringing the program live last quarter, management still has no clear timeline for when that final sign-off will come through.

FICO Score 10T is also making progress on adoption. The adopter program now includes 70 lenders and roughly 55% of volume from the top 50 originators, while the GSEs have released historical 10T data for lenders to test. Management continues to point to analysis showing 10T is more predictive than VantageScore 4, but the score still cannot be used for GSE loan delivery. That timing has been outside FICO’s control for several quarters now, and management again said it remains in the hands of FHFA and the GSEs, with no firm timeline for when the GSEs will accept 10T for use in the agency market.

One unusual consequence of the delay is that it actually helped FY2026 guidance. FICO had assumed the performance-based DLP model would launch this year and push some revenue into FY2027. Because that has not happened yet, revenue that management expected to shift into FY2027 remained in FY2026, which contributed to the guidance raise alongside somewhat better mortgage volumes.