First American Q2 Earnings Jump 21%
Key Points
- - Adjusted earnings per share rose 20.5% to $1.53 compared to Q2 2024, surpassing the $1.35 estimate.
- - Revenue increased 14% to $1.84 billion, topping expectations and driven by strong commercial and home warranty results.
- - Operating cash flow grew 33.5% to $355 million compared to Q2 2024, supporting continued share repurchases and a steady dividend.
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First American Financial (NYSE:FAF), a leader in title insurance and settlement services, reported second quarter results on July 23, 2025, for the period ending June 30, 2025. Adjusted earnings per share were $1.53, comfortably beating the analyst estimate of $1.35 (non-GAAP). Total revenue (GAAP) reached $1.84 billion, ahead of the expected $1,754.98 million (non-GAAP) and representing a year-over-year increase. Net income grew to $146 million from $116 million a year earlier. Against a backdrop of mixed order growth in the residential market, the quarter was marked by robust outperformance in the commercial and home warranty businesses. Overall, the company delivered solid results, supported by technology investments and active capital return to shareholders.
Metric | Q2 2025 | Q2 2025 Estimate | Q2 2024 | Y/Y Change |
|---|---|---|---|---|
EPS – Diluted (Non-GAAP) | $1.53 | $1.35 | $1.27 | 20.5% |
Revenue (GAAP) | $1.84 billion | $1.75 billion | $1.61 billion | 14.2% |
Net Income (GAAP) | $146 million | $116 million | 25.9% | |
Adjusted Pretax Margin | 11.4% | 10.7% | 0.7 pp | |
Cash Flow from Operations | $355 million | $266 million | 33.5% |
Source: Analyst estimates provided by FactSet. Management expectations based on management's guidance, as provided in Q1 2025 earnings report.
Understanding First American Financial’s Business and Strategy
First American Financial is a major provider of title insurance, which protects real estate buyers and lenders against ownership disputes and other legal issues during property transactions. The company also offers settlement services, home warranty contracts, trust banking, and data and analytics products related to the real estate industry. Its core business depends on the volume of residential and commercial real estate deals, which are sensitive to interest rates and general economic conditions.
In recent years, First American Financial has focused on technology and innovation. It is investing in digital transformation and automation, with new title and escrow platforms, such as Endpoint and Sequoia, in the early stages of rollout. These platforms are designed to improve efficiency, cut costs, and provide a faster experience for buyers and sellers. Managing regulatory compliance remains a daily necessity as the industry is tightly regulated at the state and federal level. The company’s key success factors include transaction volume, cost control, technology innovation, and the ability to operate efficiently across changing real estate cycles.
Key Developments and Segment Performance in the Quarter
During the quarter, First American Financial posted several notable achievements across its business lines. Revenue climbed 14%, powered by continued strength in the Commercial Title and Home Warranty segments. Net income (GAAP) rose to $146 million, up 25.9% compared to the prior year.
The company’s Title Insurance and Services segment, its largest contributor, saw commercial revenue jump 33% to $234 million. The average revenue per U.S. commercial order increased from $11,700 to $15,300, supported by larger, higher-value deals and a mix shift toward more lucrative transaction sizes. Commercial open orders grew to 27,900 compared to 25,300 a year ago, while closed commercial orders held steady. In residential title, direct orders closed were up 5%, while the average revenue per direct order rose 8%. However, purchase closed orders per day were slightly lower compared to Q2 2024’s high season, pointing to ongoing caution in residential activity.
The Home Warranty segment, which provides protection against unexpected costs for homeowners, also delivered strong results. Total revenue increased 3% compared to Q2 2024, but more significantly, the adjusted pretax margin improved to 20.7% from 15.2% a year ago. The segment’s loss ratio, which measures claim costs as a share of premiums, improved to 41%, reflecting a decrease in warranty claims.
On the cost side, personnel expenses and other operating costs rose, driven by increased incentive compensation, salary costs, and production expenses. Notably, the company recorded a $13 million one-time expense related to executive separation, which pushed up overall corporate costs this quarter. This reflects the company managing legacy and new technologies in parallel, with the aim of retiring older systems as new digital processes roll out at scale.
There was a clear impact from international operations, especially in Canada where increased refinance activity contributed to a 10% increase in “information and other” revenue. Regulatory changes, such as the expected Texas title rate cut effective July 1, were noted, but the company believes its national scale will help it mitigate most local impacts.
First American operates homegrown technology platforms such as Endpoint, a digital closing solution, and Sequoia, a modernized title production system. Both are designed to automate more steps in title and settlement, aiming for lower costs and smoother customer experiences. Management reported that pilot implementations of these tools have already exceeded automation rate targets. These shifts are essential for maintaining competitiveness as peers innovate, and as customers demand speed and reliability in real estate transactions.
Looking Ahead: Outlook and Shareholder Focus
The release emphasized confidence in the company’s ability to capitalize on an expected upcycle in real estate, driven by unique data assets and continued deployment of new technology. Management expressed only “cautious optimism” about commercial momentum holding up in coming quarters, as discussed by management during Q1 2025.
The company’s capital management remained active. The company repurchased 1,044,058 shares for $61 million during Q2 2025, and a further 577,036 shares for $32 million in Q3 2025. It also authorized a new $300 million share repurchase program in July 2025. The quarterly dividend was maintained at $0.54 per share, unchanged from the previous quarter but an increase from $0.53 per share in Q2 2024. With operating cash flow of $355 million and cash and investment balances increasing over the period, the company appears positioned to support ongoing capital returns and fund future technology initiatives.
Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.
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