WTW adjusted EPS jumps 18% but GAAP operating margin slips (NASDAQ: WTW)

What happened

Willis Towers Watson PLC (NASDAQ: WTW) reported third-quarter adjusted diluted earnings per share of $3.63, up 18% from $3.07 a year earlier. Revenue grew 8%.

The gain sits on adjusted measures. Operating margin under U.S. GAAP fell 90 basis points to 17.4% from 18.3%. Adjusted operating margin rose 150 basis points to 21.9% from 20.4%. Because the two margins moved in opposite directions, what WTW adds back matters this quarter.

Revenue rose $172 million to $2.46 billion from $2.29 billion in the third quarter of 2025. Organic growth was 4%. Acquisitions and divestitures account for the rest, according to the filing's revenue table. Excluding currency effects, growth was the same as reported.

Key numbers

Metric Latest Change Source
Revenue, Q3 $2.46 billion from $2.29 billion, +8% SEC 8-K, Exhibit 99.1
Adjusted diluted EPS, Q3 $3.63 from $3.07, +18% SEC 8-K, Exhibit 99.1
Adjusted operating margin, Q3 21.9% from 20.4%, +150 basis points SEC 8-K, Exhibit 99.1
Operating margin (GAAP), Q3 17.4% from 18.3%, -90 basis points SEC 8-K, Exhibit 99.1
Free cash flow, nine months $1.1 billion from $838 million, +$226 million SEC 8-K, Exhibit 99.1
Propel annualized run-rate savings achieved $18 million SEC 8-K, Exhibit 99.1

Read more: Willis Towers Watson (WTW) company research

Adjusted versus reported profit

GAAP diluted earnings per share rose 4% to $3.24 from $3.11. Net income edged up to $309 million from $306 million. Adjusted net income rose 13% to $339 million. Weighted-average diluted shares fell to 94 million from 98 million, so adjusted EPS grew faster than adjusted net income.

The reconciliation shows what separates the two sets of numbers. Transaction and program expenses were $42 million against $2 million a year earlier. The quarter also carried restructuring costs tied to Propel. Amortization was $59 million versus $47 million. Adjusted figures add those back. They also subtract a $35 million gain on disposal of operations, compared with $26 million a year earlier.

The filing says the transaction and program expenses mainly include share-based compensation and other costs tied to the Newfront and Cushon acquisitions, plus integration and Propel costs.

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Segment results

Health, Wealth Career (HWC) revenue rose 7% to $1.35 billion, with organic growth of 4%. Operating margin widened 90 basis points to 29.5%. The filing credits better operating leverage and expense discipline. Benefits Delivery Outsourcing organic revenue declined. Lower Individual Marketplace commissions more than offset growth from new clients, project work and regulatory-driven activity in Outsourcing.

Risk Broking (RB) revenue rose 8% to $1.09 billion, with organic growth of 5%. Operating margin rose 100 basis points to 19.8%. The filing says the increase was mainly driven by higher book-of-business settlement activity, alongside disciplined expense management. RB book-of-business settlements were $18 million against $6 million a year earlier.

Cash, Propel and 2026 outlook

Free cash flow for the nine months ended Sept. 30 was $1.1 billion against $838 million a year earlier. That is an increase of $226 million, which the filing says was mainly driven by operating margin expansion. The period included $29 million of proceeds from the disposal of buildings and related improvements. Operating cash flow was $1.2 billion versus $1.0 billion. WTW repurchased 687,386 shares for $220 million in the quarter.

WTW's board approved Propel, an AI Acceleration Plan, on July 28. It runs through Dec. 31, 2028. WTW expects to invest approximately $625 million of cash and incur approximately $25 million in non-cash charges to generate approximately $400 million in run-rate savings. After reinvesting approximately $50 million, it expects approximately $350 million in net run-rate savings and approximately 30% adjusted operating margin in 2028.

Through Sept. 30, Propel costs were $14 million in restructuring and $7 million in transaction and program expenses. Annualized run-rate savings achieved so far are 4.5% of the target by OptimistFi's calculation, so the plan is at an early stage.

For 2026, WTW expects mid-single-digit organic revenue growth at the enterprise level and 100 basis points of margin expansion in RB. It puts the Willis Re joint venture as a $0.30 headwind to adjusted diluted EPS. It calls Newfront $0.10 dilutive, on expected post-close revenue of approximately $250 million. It also expects a foreign currency tailwind of $0.35 for the full year. Share repurchases are expected to exceed $1.0 billion, subject to market conditions.

Why it matters

OptimistFi has argued that WTW works if its advisory franchise keeps turning complex client mandates into higher-margin, cash-generative work despite slower headline growth. On an adjusted basis, the quarter supports the margin and cash parts of that view. Free cash flow rose on margin expansion.

The caveats sit in the same filing. Reported operating margin fell. The adjusted figures exclude expenses tied to acquisitions and Propel. The RB margin gain came mainly from higher settlement activity alongside expense control, so it is not purely a recurring operating improvement. Organic growth also trails reported growth. OptimistFi reads the quarter as mixed.

What's next

WTW scheduled a conference call for 9:00 a.m. Eastern on Oct. 29 to discuss the results and strategic priorities. The next test is the fourth quarter 2026 report.

The case would strengthen if annualized Propel savings grow from the level reported through Sept. 30 and GAAP operating margin turns up. A further decline in GAAP operating margin would weaken it.

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Sources

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Originally published on OptimistFi, evidence-first equity research. More at optimistfi.com.