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    MCO
    Earnings call· Dec 2025(Q4 FY25)

    MOODYS CORP /DE/ Q4 FY25 earnings call MCO

    Feb 18, 2026 Source

    Executive summary

    Moody's Q4 FY25 — Record Year Driven by Strong Ratings and Analytics Performance

    Moody's delivered a record Q4 FY25, driven by strong performance across both Ratings and Analytics, with significant margin expansion and robust capital returns. The company is strategically scaling decision-grade contextual intelligence through AI-enabled interfaces and embedded solutions, positioning for continued growth despite portfolio adjustments and increased capital expenditure for office space.

    Highlights

    5

    • Total revenue exceeded $7.7 billion, up 9% year-over-year.

    • Adjusted operating margin expanded to 51.1%, up 300 basis points.

    • Adjusted diluted EPS reached a record $14.94, up 20% year-over-year.

    • Moody's rated $6.6 trillion of debt in 2025, an all-time high.

    • MA recurring revenue grew 11% and represented 97% of Q4 revenue.

    Concerns

    4

    • MA revenue guidance includes a 180 basis point headwind from the divestiture of the Learning Solutions business.

    • Regulatory Reporting business divestiture expected to cause a 2 percentage point headwind to MA reported revenue growth and a minor $0.05 to $0.10 adjusted EPS impact.

    • 2026 free cash flow guide impacted by a notable $100 million increase in CapEx for office build-outs.

    • Effective tax rate expected to be 23% to 25% in 2026, a normalization after a sizable M&A-related one-time benefit in 2025.

    Guidance & targets

    20
    CategoryTargetConfidence
    Total issuance growth
    low single-digit percent pace
    high materiality
    Medium
    Debt-funded M&A issuance
    40% to 45% increase
    medium materiality
    Medium
    MIS revenue growth
    high single-digit percent pace
    high materiality
    High
    MIS adjusted operating margin
    approximately 65%
    high materiality
    High
    MA reported revenue growth
    high end of mid-single-digit growth
    high materiality
    High
    MA organic constant currency recurring revenue growth
    high single-digit percent range
    high materiality
    High
    MA adjusted operating margin
    34% to 35%
    high materiality
    High
    MCO revenue growth
    high single-digit percent range
    high materiality
    High
    MCO adjusted operating margin
    52% to 53% range
    high materiality
    High
    MCO adjusted diluted EPS
    $16.40 to $17
    high materiality
    High
    Effective tax rate
    23% to 25%
    medium materiality
    High
    Free cash flow
    $2.8 billion to $3 billion
    high materiality
    High
    Share repurchases
    approximately $2 billion
    high materiality
    High
    Quarterly dividend increase
    10% increase
    medium materiality
    High
    Return of free cash flow to shareholders
    at least 90%
    high materiality
    High
    MIS issuance growth
    high single-digit range
    medium materiality
    Medium
    MIS issuance growth
    decline mid-single digit
    medium materiality
    Medium
    MIS revenue growth
    mid-teens
    medium materiality
    Medium
    MIS revenue growth
    low single-digit range
    medium materiality
    Medium
    MIS revenue growth
    mid-20s percent
    medium materiality
    Medium

    Segment performance

    9
    SegmentRevenueYoYQoQMargin
    Moody's Corporation (Total)
    Record year for Moody's, driven by strong Q4 performance across both Ratings and Analytics. Adjusted operating margin expanded by 300 basis points.
    		$7.7 billion9%—51.1%
    Moody's Investors Service (MIS) / Ratings
    Record year for debt rated. Q4 performance driven by strong investment-grade issuance, particularly in Corporate Finance, and private credit activity. Strong operating leverage due to technology investments.
    Debt rated: $6.6 trillion in 2025Private credit revenue growth: 60% in 2025Transactional revenue growth Q4: 22%Recurring revenue growth Q4: 9%
    		—9%17%63.6%
    Moody's Analytics (MA)
    Strong finish to 2025 with meaningful contributions from high-priority growth areas. Margin expansion of 190 basis points in Q4. Actively optimizing portfolio through divestitures.
    Recurring revenue growth: 11% (Q4)Recurring revenue as % of Q4 revenue: 97%ARR: $3.5 billionARR growth: 8%Organic constant currency recurring revenue growth: 8%Retention: low to mid-90s
    		—9%—33.1%
    MA - Decision Solutions (KYC, Insurance, Banking)
    Key growth engine for MA, underscoring scale and strategic importance.
    Share of total MA ARR: ~45%
    		—double-digit ARR growth——
    MA - KYC
    Fastest-growing component, driven by deeper penetration with existing banking customers and expansion to non-financial customers. Strong net growth in Q4.
    ARR growth: 15% at end of 2025
    		—mid- to high teens over past 2 years——
    MA - Banking
    Concentrated with Tier 2 and Tier 3 institutions. Actively investing in expanding end-to-end offering with AI capabilities. Deliberately reducing transactional revenue.
    ARR growth: 8% (up from 7% in Q3)
    		————
    MA - Insurance
    Demand for sophisticated high-definition models and cloud-based Intelligent Risk Platform. Successful integration of RMS business, exceeding financial target of $150 million run rate revenue by 2025.
    ARR growth: 7% (year-end '25)ARR growth (2-year view): 21%
    		————
    MA - Research & Insights
    More mature business, underscoring durability of demand, innovation, and improved customer retention. Enhancing CreditView with expanding content and agentic solutions.
    ARR growth: 8%
    		————
    MA - Data & Information
    Supported by strong pricing power and sustained customer demand. Ratings data feeds are primary growth driver. Impacted by related cancellations across several U.S. government agencies in 2025.
    ARR growth: 7%
    		————

    Operational metrics

    23
    Total revenue
    $7.7 billionup 9% year-over-year
    Full Year 2025

    Record year for Moody's.

    Adjusted operating margin
    51.1%up 300 basis points
    Full Year 2025

    Reflects operating leverage.

    Adjusted diluted EPS
    $14.94up 20% year-over-year
    Full Year 2025

    Record EPS, representing 70% earnings growth over the past 3 years.

    Earnings CAGR
    20%
    2022-2025

    Since 2022.

    Private credit revenue growth
    nearly 60%
    Full Year 2025

    Reflects market growth and expanding role in the sector.

    Adjusted operating margin
    almost 36%up 190 basis points
    Q4 2025

    Enabled by recurring revenue and execution discipline.

    Recurring revenue as % of total revenue
    97%
    Q4 2025

    Reflects durable, high-quality growth.

    CreditLens growth
    approaching 20%
    Full Year 2025

    Fastest-growing product in the banking portfolio.

    AI-enabled lending suite conversion uplift
    67%
    Full Year 2025

    New packaging is working.

    Credit memo automation savings
    35% to 40%
    Ongoing

    Achieved by a Tier 1 U.S. bank using Moody's agentic solutions.

    Decision times reduction
    up to 80%
    Ongoing

    For banks embedding AI-enabled spreading and memo generation solutions.

    Loan processing cycles reduction
    up to 15x
    Ongoing

    For banks embedding AI-enabled spreading and memo generation solutions.

    KYC growth
    mid-teens
    Ongoing

    Driven by customer trust in data quality, governance, and global coverage.

    E-commerce/technology company relationship growth
    more than twentyfold
    Past 3 years

    Data integrated across KYC, supplier risk, credit risk, transfer pricing, and sales workflows.

    Suppliers covered
    more than 15,000
    Ongoing

    Across automated entity resolution, screening, and early warning signals.

    RMS run rate revenue target
    $150 millionexceeded
    by 2025

    Achieved and slightly exceeded, shifting RMS from flattish growth in 2021 to high single-digit CAGR over 4 years.

    Learning Solutions divestiture headwind
    1 percentage point
    Full Year 2026

    Divested in December 2025.

    Learning Solutions divestiture headwind
    a little under 2 percentage point
    Full Year 2026

    Divested in December 2025.

    Regulatory Reporting divestiture headwind
    2 percentage points
    Full Year 2026

    Expected to close around midyear 2026.

    Regulatory Reporting divestiture tailwind
    100 basis points
    Full Year 2026

    Expected to close around midyear 2026.

    Regulatory Reporting divestiture margin dilution
    10 basis points
    Full Year 2026

    Expected to close around midyear 2026.

    Regulatory Reporting divestiture adjusted EPS impact
    $0.05 to $0.10
    Full Year 2026

    Depends on timing of transaction close, anticipates redeploying sales proceeds to share buybacks.

    CapEx increase
    $100 million
    Full Year 2026

    Impacts free cash flow guidance.

    Product announcements

    4
    ProductTypeDetails
    Cross-sector Stablecoin rating methodologylaunch
    High-definition severe convective storm modellaunch
    AI-enabled lending suiteexpansion
    Cat bond rating methodology and revamped cat bond modeling platformlaunch

    Deals & partnerships

    8
    Blackstonecustomer contract$1.5 billion

    Moody's was the sole rating agency on the largest private credit CLO of the year, a $1.5 billion issuance by Blackstone.

    Not nameddivestiture

    Sale of Learning Solutions business, primarily reported as transactional revenue, no longer core to strategy. Closed in December 2025.

    Not nameddivestiture

    Sale of Regulatory Reporting business, which serves customers with relatively limited cross-sell opportunities across other banking offerings. Guidance will be updated upon closing.

    one of the world's largest e-commerce and technology companiescustomer contract

    Moody's data integrated across KYC, supplier risk, credit risk, transfer pricing, and sales workflows, covering over 15,000 suppliers.

    one of the world's largest global payment platformcustomer contractmultiyear, multimillion dollar agreementmultiyear

    To embed Orbis via API into their new customer onboarding processes, creating smooth customer experience and addressing enhanced KYC due diligence requirements.

    Interpolpartnership

    Leveraging Moody's ownership in firmographic data to support operations targeting illicit finance, with a recent operation resulting in 83 arrests across 6 countries.

    large global bankcustomer contract

    Orbis win for enterprise-wide access.

    one of the world's largest asset managerspartnership

    Underscores the breadth, relevance, and durability of Moody's data estate.

    Risks & headwinds

    6
    Headwind from Learning Solutions divestiture2026

    180 basis point headwind to year-to-year growth

    Mitigation: Divestiture completed to sharpen focus on core strategy.

    Headwind from Regulatory Reporting divestiture2026

    2 percentage points of headwind to MA reported revenue growth and minor $0.05 to $0.10 adjusted EPS impact

    Mitigation: Anticipate redeploying sales proceeds to additional share buybacks.

    Increased CapEx for office build-outs2026

    $100 million increase

    Mitigation: Impacts free cash flow guidance, but part of strategic investment in infrastructure.

    Normalization of effective tax rate2026

    23% to 25% in 2026, compared to a lower rate in 2025 due to a sizable M&A-related one-time benefit

    Mitigation: Not a risk per se, but a return to a normalized rate after a one-time benefit.

    Headwinds with insurance and KYC in MA2025

    some headwinds

    Mitigation: Some KYC impact was due to DOGE (Department of Justice Enforcement). Management expects new products and cross-sell to drive future growth.

    Data & Information segment impacted by cancellations2025

    impacted by those related cancellations across several U.S. government agencies

    Mitigation: Underlying demand and customer engagement remains solid, with notable Orbis wins in Q4.

    Q&A highlights

    7

    Does MA have the right assets for highest growth, or should we expect more portfolio pruning?

    Management feels good about current assets, especially proprietary data as fuel for AI. They will continue to add uniquely valuable data. Recent trimming (Learning Solutions, Regulatory Reporting) allows focus on high-conviction areas like lending/credit decisioning, KYC/compliance, and insurance, where they have strong capabilities and customer relationships.

    “wherever we have an opportunity to add uniquely valuable data into this giant data estate, putting it into our context layer, helping to build out our network graph, I think you're going to see us do that.”

    asked by Curtis Nagle · answered by Robert Fauber

    2 min read6 chapters

    Detailed Narrative

    01

    Strategic Focus on AI and Data Integration

    Moody's is scaling decision-grade contextual intelligence by embedding it into customer workflows across various platforms and AI-enabled interfaces. The company is unifying its massive proprietary data estate, models, ratings, research, and risk assessments into a single normalized record for each entity to create a powerful knowledge graph. This foundational capability is designed to compound the value of all Moody's offerings and strengthen competitive advantages.

    02

    Moody's Analytics Portfolio Optimization and Growth Drivers

    Moody's Analytics (MA) is actively optimizing its product portfolio, divesting non-core assets like the Learning Solutions and Regulatory Reporting businesses to sharpen focus on high-conviction growth opportunities. Key growth areas include lending and credit decisioning, KYC and compliance, and insurance, where MA is upgrading customers to integrated AI-enabled platforms and expanding offerings with agentic capabilities.

    03

    AI Adoption and Customer Engagement

    AI adoption is driving greater consumption of Moody's proprietary data, expanding its share of wallet, and reinforcing long-term customer economics, particularly among large strategic accounts. Customers who have purchased or upgraded into at least one stand-alone Gen AI or agentic solution are retained at a rate of 97% and are growing at roughly twice the rate of the rest of the customer base, indicating strong customer adoption and value.

    04

    Impact of AI on Customer Workflows and Efficiency

    AI-enabled workflows, such as automated credit memos and early warning systems, are delivering material efficiency gains for banking customers, reducing cycle times and improving regulatory compliance. Examples include a Tier 1 U.S. bank saving hundreds of thousands of hours by automating 35% to 40% of credit memo creation, and banks in APAC and the Middle East reducing decision times by up to 80% and loan processing cycles by up to 15x.

    05

    Proprietary Data as a Competitive Moat

    Moody's emphasizes the unique value and difficulty of replicating its proprietary data estate, such as Orbis. This is due to data not being publicly available, complex commercial agreements, legal/regulatory compliance, semantic complexity across jurisdictions, advanced entity resolution, historical depth, and robust governance. This makes Moody's data both AI-enabling and AI-resilient, providing a strong competitive moat.

    06

    Innovation in Insurance and Catastrophe Modeling

    In the insurance sector, Moody's is responding to rising climate-related losses by investing in data-intensive, model-driven solutions. This includes the launch of a high-definition severe convective storm model calibrated on over $55 billion of granular claims data and delivered via its cloud-based Intelligent Risk Platform. The company is also expanding into casualty and financial lines and sees opportunities in catastrophe bonds.

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