Title insurance provider First American Financial NYSE:FAF beat Wall Street’s revenue expectations in Q2 CY2026, with sales up 15% year on year to $2.12 billion. Its non-GAAP profit of $2.08 per share was 13.1% above analysts’ consensus estimates.
First American Financial (FAF) Q2 CY2026 Highlights:
- Revenue: $2.12 billion vs analyst estimates of $2.05 billion (15% year-on-year growth, 3.4% beat)
- Pre-tax Profit: $283.9 million (13.4% margin)
- Adjusted EPS: $2.08 vs analyst estimates of $1.84 (13.1% beat)
- Market Capitalization: $7.30 billion
Company Overview
Tracing its roots back to 1889 when California was experiencing its first major real estate boom, First American Financial NYSE:FAF provides title insurance, settlement services, and risk solutions for residential and commercial real estate transactions across the United States and internationally.
Revenue Growth
Insurance companies generate revenue three ways. The first is the core insurance business itself, represented in the income statement as premiums earned. The second source is investment income from investing the “float” (premiums collected but not yet paid out as claims) in assets such as fixed-income assets and equities. The third is fees from policy administration, annuities, and other value-added services. Unfortunately, First American Financial struggled to consistently increase demand as its $7.98 billion of revenue for the trailing 12 months was close to its revenue five years ago. This wasn’t a great result and is a sign of lacking business quality.
Long-term growth is the most important, but within financials, a half-decade historical view may miss recent interest rate changes and market returns. First American Financial’s annualized revenue growth of 15.9% over the last two years is above its five-year trend, suggesting its demand recently accelerated.
Note: Quarters not shown were determined to be outliers because they were impacted by outsized investment gains/losses that are not indicative of the recurring fundamentals of the business.
This quarter, First American Financial reported year-on-year revenue growth of 15%, and its $2.12 billion of revenue exceeded Wall Street’s estimates by 3.4%.
Net premiums earned made up 80.6% of the company’s total revenue during the last five years, meaning First American Financial barely relies on non-insurance activities to drive its overall growth.
Net premiums earned command greater market attention due to their reliability and consistency, whereas investment and fee income are often seen as more volatile revenue streams that fluctuate with market conditions.
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Net Premiums Earned
Net premiums earned are net of what’s paid to reinsurers (insurance for insurance companies), which are used by insurers to protect themselves from large losses.
First American Financial’s net premiums earned has declined by 1.7% annually over the last five years, much worse than the broader insurance industry and in line with its total revenue.
When analyzing First American Financial’s net premiums earned over the last two years, we can see that growth accelerated to 14.5% annually. Since two-year net premiums earned grew slower than total revenue over this period, it’s implied that other line items such as investment income grew at a faster rate. These extra revenue streams are important to the bottom line, yet their performance can be inconsistent. Some firms have been more successful and consistent in managing their float, but sharp fluctuations in the fixed income and equity markets can dramatically affect short-term results.
Key Takeaways from First American Financial’s Q2 Results
We enjoyed seeing First American Financial beat analysts’ revenue expectations this quarter. We were also glad its EPS outperformed Wall Street’s estimates. Zooming out, we think this was a solid print. The stock traded up 3.3% to $72.79 immediately following the results.
First American Financial put up rock-solid earnings, but one quarter doesn’t necessarily make the stock a buy. Let’s see if this is a good investment. The latest quarter does matter, but not nearly as much as longer-term fundamentals and valuation, when deciding if the stock is a buy. .