Equifax (Equifax (EFX)) stock took a hit Tuesday, even though the credit reporting giant reported second-quarter results that beat Wall Street estimates. The culprit? A narrowed full-year outlook and a third-quarter forecast that fell short of expectations, along with some sobering commentary about the state of the consumer.

Adjusted earnings came in at $2.25 per share, topping the analyst consensus of $2.20. Revenue rose 11% year over year to $1.70 billion, also ahead of the $1.696 billion consensus. On a local currency basis, revenue was up 10%. Adjusted EBITDA margin held steady at 32.5%.

Equifax also announced it was doubling its 2026-2028 AI-driven cost reduction target to $150 million and returned $366 million to shareholders through buybacks and dividends during the quarter.

But the market's focus was on the future. Equifax narrowed its full-year adjusted EPS guidance to a range of $8.39 to $8.69, from $8.34 to $8.74. The midpoint is still in line with the consensus estimate of $8.60. Revenue guidance was tightened to $6.71 billion-$6.78 billion from $6.685 billion-$6.805 billion. For the third quarter, the company forecast adjusted EPS of $2.15 to $2.25, below the analyst estimate of $2.26, and revenue of $1.68 billion to $1.71 billion, versus the consensus of $1.711 billion.

Shares were down 7.1% at $167.29 at the time of publication.

Mortgage Business Shines, but Headwinds Loom

The bright spot was Equifax's mortgage business. U.S. Mortgage revenue surged 40%, and total Mortgage revenue rose 25%. USIS revenue climbed 17%, while Workforce Solutions revenue increased 7%. International revenue grew 8% on a reported basis and 4% in local currency, led by Asia Pacific and Canada.

But the macroeconomic environment remains challenging. Elevated interest rates continue to weigh on the U.S. housing market, and CEO Mark Begor pointed to the ongoing Middle East conflict as a factor keeping inflation elevated. That inflation is disproportionately affecting lower-income and subprime consumers, he said.

On the plus side, low unemployment is still supporting overall consumer credit health, and lenders aren't tightening credit lines or increasing portfolio reviews. But Begor noted that higher mortgage rates have weakened industry origination activity recently, and the mortgage market is expected to stay soft in the second half as borrowing costs remain high.

Expanding in Mexico

Separately, Equifax announced it has agreed to acquire Círculo de Crédito, Mexico's fastest-growing credit bureau, for an enterprise value of $750 million. The deal is expected to close in the fourth quarter of 2026.

So while Equifax's core business is still growing, the headwinds from inflation and a sluggish housing market are giving investors pause. The company's ability to navigate these challenges while executing on its AI cost-cutting strategy will be key in the coming quarters.