Analyzing FIS's Q3 2025 10-Q: Revenue Grows but Margins Shrink

Fidelity National Information Services, Inc. (FIS), a major player in the financial technology (FinTech) space, recently released its financial results for the third quarter of 2025. For anyone interested in the health of the global financial and banking technology sectors, digging into the company's latest 10-Q filing with the SEC offers a valuable snapshot. Let's break down the key numbers to understand how FIS is performing.

Solid Revenue Growth Across the Board

For the third quarter ending September 30, 2025, FIS reported total revenue of $2.72 billion, a healthy 6% increase from the $2.57 billion generated in the same period last year. This top-line growth signals continued demand for its services.

The following flow diagram illustrates how the company's revenue for the quarter is allocated across various costs and expenses, ultimately leading to its net income.

The company's performance is driven by its two primary business segments, both of which posted solid gains:

• Banking Solutions: This is the company's largest division, providing core processing, digital banking, and payment services to financial institutions. It grew its revenue by 6% to $1.89 billion.
• Capital Market Solutions: This segment, which offers technology for trading, asset management, and securities processing, saw a 7% revenue increase to $783 million.

This balanced growth across its main business lines is a positive sign, indicating strength in both the banking and capital markets technology sectors.

The Story of Shrinking Margins

While revenue growth is encouraging, a closer look reveals pressure on profitability. The company's cost of revenue rose in line with sales to $1.69 billion, keeping the gross profit margin steady at about 38%.

However, the bigger story is in the operating expenses. Selling, general, and administrative (SG&A) expenses jumped 12% to $584 million. This significant increase outpaced revenue growth and was the primary driver behind a 7% decline in operating income, which fell to $457 million for the quarter. Consequently, the company's operating margin—a key indicator of core profitability—tightened from 19% in Q3 2024 to 16.8% in Q3 2025.

How Net Income Still Climbed

Despite the lower operating income, FIS reported a net income of $265 million, up from $225 million in the prior-year quarter. This was largely due to two factors below the operating line:

1. Lower Tax Burden: The company's provision for income taxes was $87 million, down from $108 million a year ago.
2. Favorable Other Income: A swing from a $38 million expense in "Other income (expense), net" last year to an $8 million income this quarter also boosted the bottom line.

These factors helped offset the weaker operating performance, but they highlight the importance of monitoring the company's ability to manage its core operational costs.

Looking Ahead

FIS is successfully growing its business in a competitive FinTech landscape. The consistent revenue growth in its Banking and Capital Market segments demonstrates its strong market position. However, the challenge ahead is clear: controlling the growth of operating expenses to ensure that top-line gains translate more effectively into bottom-line profit. While non-operating items and a lower tax rate provided a lift this quarter, sustainable, long-term value will depend on improving operational efficiency and margins.