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    MCO
    Earnings call· Sep 2025(Q3 FY25)

    MOODYS CORP /DE/ MCO

    Oct 22, 2025 Source

    Executive summary

    Moody's Q3 FY25 — Record Revenue and Strong Margin Expansion

    Moody's delivered a record-setting quarter, exceeding $2 billion in revenue, driven by robust issuance in its Ratings business and strong recurring revenue in Analytics. The company demonstrated significant operating leverage, expanding adjusted operating margins by over 500 basis points, and is on track to meet medium-term margin commitments. Strategic investments in AI and emerging markets, alongside portfolio simplification, position Moody's for continued durable growth despite some transactional revenue mix shifts.

    Highlights

    5

    • Achieved record quarterly revenue of over $2 billion, up 11% year-over-year.

    • Adjusted operating margin expanded by over 500 basis points to almost 53%.

    • Adjusted diluted EPS grew 22% year-over-year to $3.92.

    • MIS revenue increased 12% year-over-year, surpassing $1 billion for the third consecutive quarter.

    • Moody's Analytics (MA) revenue grew 9% year-over-year, with Decision Solutions up 11%.

    Concerns

    4

    • MIS transaction revenue growth of 14% slightly trailed 15% issuance growth due to higher repricing activity yielding lower revenue.

    • Investment-grade revenue declined 17% year-over-year, reflecting a 6% drop in issuance, primarily due to a challenging prior-year comparable.

    • MA transactional revenue declined 19% year-over-year as the company actively reshaped its revenue mix by downsizing low-margin services.

    • Data & Information ARR growth of 7% continues to be affected by cancellations from earlier in the year.

    Guidance & targets

    14
    CategoryTargetConfidence
    Moody's Analytics (MA) Adjusted Operating Margin
    approximately 33%
    medium materiality
    High
    MIS Adjusted Operating Margin
    63% to 64%
    medium materiality
    High
    Issuance Growth
    mid-single digit
    high materiality
    High
    M&A Issuance
    15% to 20%
    medium materiality
    High
    MIS Revenue Growth
    high single-digit range
    high materiality
    High
    MCO Revenue Growth
    high single-digit percent range
    high materiality
    High
    MCO Adjusted Operating Margin
    about 51%
    high materiality
    High
    MCO Operating Expenses (Q4 FY25)
    increase by $10 million to $20 million quarter-over-quarter
    medium materiality
    High
    MCO Incentive Compensation (Q4 FY25)
    approximately $100 million
    medium materiality
    High
    MCO Adjusted Diluted EPS
    $14.50 to $14.75
    high materiality
    High
    MCO Free Cash Flow
    approximately $2.5 billion
    high materiality
    High
    MCO Share Repurchase
    at least $1.5 billion
    high materiality
    High
    MCO Free Cash Flow returned to shareholders
    over 85%
    medium materiality
    High
    Moody's Analytics (MA) Adjusted Operating Margin
    mid- to high 30s
    high materiality
    High

    Segment performance

    2
    SegmentRevenueYoYQoQMargin
    Moody's Investors Service (MIS)
    Achieved record quarterly revenue, surpassing $1 billion for the third consecutive quarter, driven by a constructive issuance environment. Strong growth in leveraged finance, financial institutions, and private credit. Transaction revenue slightly trailed issuance growth due to repricing activity. Investment-grade revenue declined due to a tough prior-year comparable.
    Transaction revenue growth: 14%Recurring revenue growth: 8% year-over-yearIssuance (Q3): nearly $1.8 billionCorporate Finance transaction revenue growth: 13%Corporate Finance bank loan revenue growth: 29%Spec-grade revenue growth: 43%Investment-grade revenue decline: 17% year-over-yearFinancial Institutions transactional revenue growth: 34%Public, Project and Infrastructure Finance transactional revenue: relatively flatStructured Finance transaction revenue growth: 10%Private credit-related deals growth: almost 70%Private credit revenue growth: over 60%First-time mandates (Q3): 200First-time mandates (Q3) growth: 5% year-over-yearRating Assessment Service (RAS) revenue: record quarterly revenue
    		$1 billion12%—65.2%
    Moody's Analytics (MA)
    Delivered strong revenue growth and significant margin improvement, ahead of plans. Recurring revenue remains a strong component. Actively reshaping revenue mix by downsizing low-margin services. KYC continues to be the fastest-growing part of Decision Solutions. Insurance growth is strong in life business, with tough comps in P&C due to prior year migrations. Banking line of business shows strength in lending solutions like CreditLens.
    Recurring revenue growth: 11%Organic constant currency recurring revenue growth: 8%Transactional revenue decline: 19%ARR: nearly $3.4 billionARR growth: 8% versus last yearRetention rate: 93%Decision Solutions ARR growth: 10%KYC ARR growth: 16%Insurance ARR growth: 8%Banking line of business ARR growth: 7%Banking line of business reported revenue: flatCreditLens ARR growth: low to mid-teens paceResearch & Insights ARR growth: 8%Data & Information ARR growth: 7%
    		—9%—34.3%

    Operational metrics

    19
    Adjusted Operating Margin
    53%up over 500 basis points from a year ago
    Q3 FY25

    Company-wide adjusted operating margin.

    Adjusted Diluted EPS
    $3.92up 22% from last year
    Q3 FY25

    Company-wide adjusted diluted EPS.

    Adjusted Diluted EPS (3-year comparison)
    more than doubled
    Q3 FY25 vs Q3 FY22

    Comparison of current adjusted diluted EPS to the same quarter three years prior.

    Operating Expenses (MCO)
    $10 million to $20 millionincrease quarter-over-quarter
    Q4 FY25

    Anticipated increase in operating expenses at the MCO level, excluding restructuring charges.

    Incentive Compensation (MCO)
    $100 millionin line with Q3
    Q4 FY25

    Expected incentive compensation at the MCO level.

    Annualized Savings (Efficiency Program)
    over $100 million
    Annualized

    Savings executed through efficiency programs, helping offset salary increases and variable costs.

    Share Repurchase
    at least $1.5 billion
    Full Year 2025

    Increased guidance for share repurchases for the full year.

    Effective Tax Rate (Favorable Impact)
    200 basis pointfavorable impact
    Full Year 2025

    One-time favorable impact on full year effective tax rate due to expiration of statute of limitations on pre-acquisition tax exposures. No impact to net income or EPS due to offset by indemnification asset release.

    Refunding Needs (Next 4 Years)
    surpass $5 trillioncompound annual growth rate of 10% from 2018 to 2025
    Next 4 years

    Projected refunding needs, approximately double the dollar volume seen in 2018.

    Nonfinancial Corporate Refinancing Walls (US & EMEA)
    6%grew
    Upcoming 4-year maturity horizon

    Growth in nonfinancial corporate refinancing walls.

    Investment-Grade Maturities
    5%up
    Upcoming 4-year maturity horizon

    Increase in overall investment-grade maturities.

    Spec-Grade Maturities
    7%up
    Upcoming 4-year maturity horizon

    Increase in overall spec-grade maturities.

    Spec-Grade U.S. Bond Maturities
    more than 20%increased by
    Upcoming 4-year maturity horizon

    Increase specifically within U.S. spec-grade bond maturities.

    EMEA Spec-Grade Bonds and Loans
    approximately 20%rose by
    Upcoming 4-year maturity horizon

    Increase in spec-grade bonds and loans in EMEA.

    Private Credit Deals (Number)
    almost 70%grew
    Q3 FY25

    Growth in the number of private credit-related deals.

    Private Deals Refinancing Savings
    200 basis points
    Current

    Average savings realized by issuers when refinancing private market rates into the rated BSL market.

    ARR (Moody's Analytics)
    $3.4 billionup 8% versus last year
    Q3 FY25

    Annual Recurring Revenue for Moody's Analytics.

    Global GDP (Emerging Markets Contribution)
    more than 60%
    by 2029

    Expected contribution of emerging markets, including China, to global GDP.

    Debt Outstanding in Emerging Markets (Cross-Border)
    10%
    Current

    Percentage of total debt outstanding in emerging markets that is cross-border, implying 90% is issued and rated locally.

    Deals & partnerships

    3
    FitchSale of Learning Solutions business

    Entered into a definitive agreement to sell the Learning Solutions business, as it no longer fit the profile of scalable recurring revenue businesses.

    SalesforceIntegrated suite of connectors for third-party risk management and compliance monitoring; expansion to Agentforce 360 and AgentExchange.

    Partnership continues to see strong growth from integrated connectors providing company firmographic data, news, and content. Expanding to make proprietary GenAI-ready data and analytics available within Salesforce's Agentforce 360 and Moody's new Agentic AI sales tool, AgentExchange.

    MERISAcquisition of a majority interest in MERIS, the leading ratings agency in Egypt.

    Signed a definitive agreement to acquire a majority interest in MERIS, aiming to grow Ratings footprint in emerging markets.

    Risks & headwinds

    8
    MIS transaction revenue trailing issuance growthQ3 FY25

    14% transaction revenue growth vs 15% issuance growth

    Mitigation: Due to high volume of repricing activity, which typically yields lower revenue from a mix perspective.

    Investment-grade revenue declineQ3 FY25

    declined 17% year-over-year

    Mitigation: Reflecting a 6% drop in issuance and a tough comparable base from Q3 FY22, which had significant deal volume in energy, oil, and gas.

    MA transactional revenue declineQ3 FY25

    down 19% this quarter

    Mitigation: Result of actively reshaping the revenue mix by downsizing low-margin services and leveraging implementation partners.

    Data & Information ARR affected by prior cancellationsQ3 FY25

    7% ARR growth

    Mitigation: Despite cancellations, strong pricing power, sustained demand for Ratings data feeds, and strong Orbis new business volume are positive offsets.

    Potential for significant market disruptionNear-term

    not factored into guidance

    Mitigation: Risks remain with ongoing tariff and trade negotiations, and the full impact of a prolonged government shutdown on market conditions is difficult to predict. Guidance accounts for a broad spectrum of plausible scenarios.

    Economic growth decelerationInto 2026

    unquantified

    Mitigation: Monitoring job growth, consumer confidence, and spending to assess potential further slowdowns. Current thinking suggests sustainable growth into next year.

    Global trade dynamics and geopolitical conflictsInto 2026

    unquantified

    Mitigation: Headline risks around global trade (e.g., U.S. and China) can create market volatility, negatively impacting issuance, creating risk-off environments, and widening spreads. Potential for further resolution in conflicts could provide market confidence.

    Private credit health concernsOngoing

    unquantified

    Mitigation: Any credit stress in the private market drives increased demand for independent credit insight and research. Also, private deals are refinancing into public markets for material savings, creating opportunities for Moody's.

    What to watch in Q4 FY25

    5

    MA Margin Expansion

    next 2 years
    Current34.3% (Q3 FY25 adjusted operating margin)
    Targetmid- to high 30s

    Why it matters

    Sustained margin expansion in Moody's Analytics is key to strengthening earnings durability and achieving medium-term financial commitments.

    We remain focused on expanding margins towards our medium-term commitment of mid- to high 30s over the next 2 years.

    Q&A highlights

    8

    How is Moody's thinking about the pros and cons of AI in its Analytics business, particularly regarding seat-based exposure and customer feedback?

    Rob Fauber clarified that Moody's has never used seat-based contracts and AI will be no different. He explained that Moody's is embedding AI into its own workflow solutions, launching 'Agentic Solutions' (smart APIs and MCP servers built on Moody's data), and developing domain-specific agents. The strategy is to meet customers where they are, whether through Moody's own AI-supported workflows, partner platforms, or embedding into internal AI orchestration, leveraging its massive proprietary data estate.

    “First of all, we've really never had kind of seat-based exposure. That's generally not the way the contracts have been structured. So AI is not going to be any different.”

    asked by Brendan Popson · answered by Robert Fauber

    2 min read5 chapters

    Detailed Narrative

    01

    Record Performance and Operating Leverage

    Moody's achieved record quarterly revenue exceeding $2 billion, an 11% increase year-over-year, driven by strong market activity. The company demonstrated significant operating leverage, with adjusted operating margin expanding over 500 basis points to nearly 53%, and adjusted diluted EPS growing 22% to $3.92. This performance reflects consistent earnings power and strategic investments, with the firm more than doubling adjusted diluted EPS from three years ago.

    02

    MIS Issuance Trends and Refunding Walls

    The Ratings business (MIS) saw 12% revenue growth, surpassing $1 billion for the third consecutive quarter, fueled by a healthy issuance environment and tight spreads. Refunding needs are projected to exceed $5 trillion over the next four years, representing a 10% compound annual growth rate from 2018 to 2025. Spec-grade maturities, which are more accretive to revenue, showed notable increases (up 20% in US bonds, 20% in EMEA bonds/loans), pointing to a favorable backdrop for future issuance. Private credit also remains a significant growth driver, with related revenue up over 60%.

    03

    Moody's Analytics Strategic Focus and AI Momentum

    Moody's Analytics (MA) delivered 9% revenue growth and expanded its adjusted operating margin by 400 basis points to 34.3%, ahead of plans. The company is simplifying its product suite, divesting non-core assets like Learning Solutions, and focusing on high-growth areas such as physical climate risk solutions and AI integration. Tangible momentum in AI-enabled workflows is emerging, with new business wins leveraging proprietary data and advanced analytics to automate credit memo creation and deploy early warning systems for customers.

    04

    KYC and Data Differentiation

    The KYC business, part of Decision Solutions, continues to be a fast-growing segment with 16% ARR growth, driven by demand beyond financial services. Moody's differentiates through proprietary data sets like Orbis (a massive company database of derived data), politically exposed persons data, and AI-curated news. These are linked to provide unique beneficial ownership and hierarchy insights, crucial for regulatory compliance and fraud detection, offering a competitive moat against web-scraping or generic AI solutions.

    05

    Emerging Markets Expansion

    Moody's is strategically expanding its Ratings footprint in emerging markets, exemplified by the definitive agreement to acquire a majority interest in MERIS, Egypt's leading ratings agency. This move deepens its presence in the Middle East and Africa, giving a first-mover advantage across the region's domestic debt markets. This investment aligns with the expectation that emerging markets, including China, will account for over 60% of global GDP by 2029, with 90% of their debt issued and rated locally.

    AI-generated summary of the company’s earnings call. Not investment advice.