Verisk (VRSK) Q3 2025: Subscription Revenue Climbs 8.7% as AI-Driven Solutions Expand
Verisk’s Q3 underscored the resilience of its subscription-heavy model, with 8.7% OCC subscription revenue growth offsetting weather-driven transactional declines. AI product adoption, deep client integration, and a robust data moat are driving both near-term margin expansion and long-term strategic visibility. Management’s confidence in multi-year growth targets remains intact despite temporary headwinds and regulatory delays on M&A, keeping the focus on AI-powered value creation and client partnership momentum.
Summary
- Subscription Momentum: Core subscription businesses delivered broad-based growth, validating the company’s recurring revenue strategy.
- AI Solutions Traction: Rapid adoption of AI-enhanced offerings is deepening client integration and expanding Verisk’s data advantage.
- Strategic Confidence Endures: Management reaffirmed long-term growth targets and margin discipline, even as weather and regulatory factors weighed on short-term results.
Performance Analysis
Verisk’s Q3 results highlighted the strength of its subscription-centric model, with 84% of total revenue now coming from recurring agreements. Organic constant currency (OCC) revenue grew 5.5%, with underwriting and claims both posting mid-single-digit gains. The standout metric was subscription revenue growth at 8.7% OCC, compounding on last year’s 9.1%—demonstrating both high retention and pricing power, even as transactional revenue fell due to historically light weather activity.
Transactional revenue, comprising 16% of the mix, declined 8.8% OCC, pressured by the lowest U.S. storm activity since 2017 and a reduction in a government contract. Despite these headwinds, OCC adjusted EBITDA grew 8.8% and margins expanded to 55.8%, reflecting operating leverage, disciplined cost management, and self-funded investment in innovation. Free cash flow surged 40% on improved collections and lower cash taxes, fueling continued capital returns and organic investment.
- Weather-Driven Volatility: Q3 marked the lowest U.S. storm frequency in eight years, highlighting the benefit of Verisk’s shift toward subscription volume in property estimating.
- Auto Segment Pressure: Competitive dynamics and improved rate adequacy continued to weigh on personal lines auto, with management focused on differentiating through deeper analytics and data assets.
- Capital Allocation Discipline: $100 million in share repurchases and a 15% dividend increase signaled ongoing commitment to shareholder returns.
Despite temporary transactional softness, the underlying business demonstrated resilience and ongoing margin expansion, with management reiterating confidence in the 6%–8% long-term organic growth model.
Executive Commentary
"Our elevated strategic engagement is leading to more pipeline opportunities, and in fact, 2025 is on track to be our strongest sales year yet, with sales teams across Verisk exceeding an ambitious quota for the second straight year."
Lee Schabel, President and Chief Executive Officer
"Subscription revenues, which comprised 84% of our total revenue in the quarter, grew 8.7% on an OCC basis, compounding on the 9.1% OCC growth we delivered in the prior year quarter and consistent with growth levels in the first half of the year."
Elizabeth Mann, Chief Financial Officer and Interim Head of Claims
Strategic Positioning
1. AI as a Competitive Moat
Verisk’s proprietary data sets, curated over decades, are powering a new generation of AI-driven solutions such as ExactExpert and ExactAI, now adopted by six of the top ten carriers. These tools deliver immediate productivity gains for clients and enable Verisk to realize upsell revenue, reinforcing the company’s position as an essential data utility for the insurance sector.
2. Subscription Model Resilience
By converting more offerings to subscription, Verisk is reducing exposure to weather-driven volatility and transactional swings. This model provides high visibility and enables the company to sustain investment in product innovation, even in quarters with muted event-driven demand.
3. Deepening Client Integration
Strategic C-suite engagement is unlocking new data contributions and use cases, especially in emerging areas like excess and surplus lines and digital media forensics. The willingness of clients to contribute proprietary data and expand integrations demonstrates Verisk’s critical role in client workflows and future planning.
4. Ecosystem Expansion and M&A Discipline
Verisk’s focus remains on strengthening its ecosystem through both organic innovation and targeted acquisitions, such as the pending AccuLynx deal. While regulatory delays have paused near-term integration, management continues to prioritize deals that enhance data connectivity and operational efficiency for clients.
5. Self-Funding Innovation
Margin expansion has been delivered alongside major technology upgrades, including cloud migration, ERP, and AI investments. The company’s ability to self-fund innovation while growing margins signals robust operational discipline and long-term scalability.
Key Considerations
Q3’s results reinforced Verisk’s ability to navigate cyclical and exogenous headwinds, while deepening its strategic partnership with the insurance industry. Investors should focus on the following:
- AI-Driven Upsell Opportunities: Rapid adoption of ExactExpert and related AI tools is expanding Verisk’s wallet share and recurring revenue base.
- Data Contribution Flywheel: More clients are contributing proprietary data, enhancing Verisk’s analytics and reinforcing its data moat.
- Weather Normalization Impact: The shift toward subscription mitigates volatility, but Q4 faces another tough weather comp following last year’s hurricane-driven uplift.
- Capital Allocation Flexibility: Strong free cash flow supports continued investment, buybacks, and dividend growth, even as AccuLynx M&A remains delayed.
- Auto Segment Softness: Competitive pressures persist, but management is focused on leveraging unique data assets to differentiate and stabilize this line.
Risks
Regulatory delays on M&A (AccuLynx) and persistent competitive pressure in auto solutions pose near-term uncertainties. Weather-driven transactional swings, while structurally reduced, can still impact quarterly results. Additionally, the insurance industry’s premium growth is normalizing to mid-single digits, which could temper upside for certain contract-linked revenues. Management’s guidance assumes no material benefit from AccuLynx in 2025 and continued resilience in core subscription growth.
Forward Outlook
For Q4 2025, Verisk expects:
- Weather-related headwinds to persist, with another difficult comp due to last year’s hurricane uplift.
- Continued strong subscription revenue growth and margin discipline.
For full-year 2025, management maintained guidance:
- Revenue: $3.05–$3.08 billion
- Adjusted EBITDA: $1.69–$1.72 billion
- Adjusted EBITDA margin: 55–55.8%
- Tax rate: 23–25%
- Diluted adjusted EPS: $6.80–$7.00
Management emphasized ongoing sales momentum, robust subscription renewals, and a pipeline of AI-driven product launches as drivers of confidence in achieving long-term targets.
- Salesforce performance remains above quota for a second year, supporting 2026 growth.
- Investments in AI and data integrations are expected to further expand addressable market and pricing power.
Takeaways
Verisk’s Q3 results validated its recurring revenue model and strategic pivot toward AI-powered data solutions. Despite temporary headwinds from weather and regulatory delays, the company remains well positioned for multi-year growth, margin expansion, and deepening client integration.
- AI and Data Moat: Proprietary datasets and rapid AI adoption are driving both upsell and retention, reinforcing Verisk’s essential role in insurance analytics.
- Margin and Cash Flow Strength: Self-funded innovation and cost discipline are enabling margin expansion and robust free cash flow, supporting both organic investment and capital returns.
- Forward Focus: Investors should watch for further subscription penetration, AI product launches, and resolution of AccuLynx regulatory review as key catalysts for 2026.
Conclusion
Verisk’s Q3 demonstrated the durability of its subscription model and the accelerating impact of AI-driven product innovation. While transactional and M&A headwinds remain, the company’s strategic positioning, robust client engagement, and operational discipline provide a strong foundation for continued value creation.
Industry Read-Through
Verisk’s results spotlight the growing importance of proprietary data and AI enablement in insurance analytics. The shift toward subscription models and integrated client workflows is likely to become standard across the sector, reducing cyclical volatility and increasing pricing power. Competitors lacking deep, curated datasets or robust AI capabilities will face increasing barriers to scale. Additionally, the regulatory scrutiny on data-driven M&A signals that industry consolidation may proceed more slowly, favoring incumbents with established data ecosystems and client relationships.