FIS Cuts 2026 Outlook on Banking Conversion Delays

FIS reduced its full-year 2026 outlook after third-quarter results showed weaker-than-anticipated recurring revenue performance in Banking Solutions. Client-led conversion delays, bank consolidation and lower assumptions for non-recurring revenue weighed on the updated forecast, even as margins expanded and year-to-date free cash flow rose sharply.

Third-quarter revenue totaled $3.45 billion, up 29.1% on an adjusted basis and 3.7% on a pro forma combined, constant-currency basis. Adjusted EBITDA increased 30.5% to $1.48 billion, or 5.2% pro forma, while adjusted EBITDA margin reached 42.9%, expanding 94 basis points on a pro forma basis. FIS attributed the margin improvement to favorable revenue mix and cost savings.

Adjusted earnings per share rose 6.6% to $1.61. On a GAAP basis, net earnings attributable to FIS from continuing operations were $356 million, compared with $264 million a year earlier, while diluted earnings per share were $0.69 versus $0.50.

Banking recurring growth falls short

Banking Solutions generated $2.55 billion in third-quarter revenue, representing pro forma growth of 3.9%. The segment’s adjusted EBITDA rose 8.8% pro forma to $1.21 billion, and its adjusted EBITDA margin expanded 212 basis points to 47.4%.

Recurring revenue, which accounted for 84% of the segment total, grew 2.4% pro forma. FIS said that performance was slower than anticipated because of customer-led conversion delays and the effects of selected bank consolidations. Non-recurring revenue increased 22.8%, reflecting the activation of strategic partners, while professional-services revenue grew 1.7%.

Within the segment, Banking revenue rose 5.2% to $1.07 billion, while Payments revenue increased 3% pro forma to $1.48 billion.

Capital Markets revenue increased 3% to $823 million. Adjusted EBITDA rose 6.5% to $444 million, lifting the segment’s margin by 180 basis points to 54%. Recurring revenue, representing 75% of segment revenue, grew 3% against a 9% increase in the prior-year quarter. Non-recurring revenue advanced 24.6% as strategic partnerships were activated, while professional-services revenue declined 20.3%.

Across Banking Solutions and Capital Markets, recurring revenue grew 2.5% in the quarter. FIS reported organic growth of 6% in core banking accounts and about 5% in accounts on file, while card transactions increased approximately 7% organically during the first nine months of the year.

Cash flow remains a relative strength

Free cash flow excluding cash transaction taxes on business dispositions, primarily the Worldpay sale, increased 8% to $862 million in the third quarter. For the first nine months, the measure rose 57% to $1.86 billion, compared with $1.19 billion a year earlier. The corresponding GAAP-based free cash flow measure, before adding back Worldpay-related transaction taxes, was $695 million for the quarter and $1.38 billion year to date.

FIS ended the quarter with $20.8 billion of total debt and a leverage ratio of 3.5 times adjusted EBITDA excluding stock compensation. Capital returns totaled $248 million.

For the first nine months of 2026, revenue was $10.13 billion, representing pro forma growth of 5.1%. Adjusted EBITDA increased 7.2% pro forma to $4.20 billion, and adjusted EPS rose 8.8% to $4.44.

2026 forecast reduced; 2027 revenue expected to be roughly flat

FIS now expects full-year 2026 revenue of $13.45 billion to $13.51 billion, corresponding to pro forma growth of 3.1% to 3.6%. Banking Solutions is expected to grow 3.5% to 4%, while Capital Markets growth is projected at 2% to 2.5%.

Adjusted EBITDA is forecast at $5.57 billion to $5.61 billion, with an adjusted EBITDA margin of 41.4% to 41.5%. Adjusted EPS is expected to range from $5.82 to $5.89. The company maintained its free cash flow outlook of $2.15 billion to $2.25 billion, citing trailing-12-month free cash flow of about $2.3 billion.

Management said the reduced outlook reflects delayed Banking conversions, consolidation among bank customers, lower non-recurring revenue assumptions and less license activity in Capital Markets. The lower non-recurring revenue forecast is also expected to affect margins.

FIS’s preliminary 2027 framework calls for pro forma revenue growth between a 0.5% decline and a 1% increase. Banking Solutions revenue is expected to range from flat to 1.5% growth, with recurring revenue growing about 3%. Capital Markets revenue is projected to decline 1.5% or rise as much as 0.5%, while recurring revenue is expected to grow at a mid-single-digit rate.

The company expects declines in non-recurring and professional-services revenue to offset organic growth in 2027 as it laps strategic deals and termination fees, exits an equipment-reselling business and shifts Capital Markets activity toward recurring revenue. Adjusted EPS is expected to decline by a high-single-digit to low-double-digit percentage, while free cash flow is projected to remain flat. FIS anticipates the non-recurring revenue headwinds will largely dissipate in 2028.

Operational priorities include additional cybersecurity investment, channel-based sales, development of agentic banking products and continued evaluation of strategic alternatives. FIS also completed the divestiture of a non-core prepaid asset in October as part of its portfolio simplification efforts.

The outlook remains subject to execution risks around customer conversion schedules, bank consolidation and non-recurring license activity. FIS also identified acquisition integration, cost-savings execution, cybersecurity, artificial intelligence, regulation, competition and broader economic and financial-market conditions among the factors that could cause actual results to differ from its projections.