MOODYS (MCO) Q4 FY25 earnings call: guidance and Q&A

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

Why isn't AI translating into higher MA ARR/revenue growth, given impressive stats? Are there other issues offsetting AI's contribution?

Q4 ARR was in line with Q3. While there are puts and takes across segments, the largest accounts (growing twice as fast as the rest) are driving AI-oriented engagement. Customers buying AI solutions are retained at 97% and growing twice as fast. These are leading indicators, and AI's impact will trickle down to the broader customer base.

“those largest accounts for us are growing at about twice as fast as the rest of the portfolio. That's really important because that's where we have the deepest engagement with the most sophisticated institutions on the planet”

asked by Alex Kramm · answered by Robert Fauber

What is the assumed issuance trajectory and revenue cadence for the Ratings segment in 2026?

Issuance activity is expected to be front-loaded in H1 2026 (mid-50s% of total), with high single-digit growth in H1 and mid-single-digit decline in H2. Q1 2026 issuance is projected at high 20s% of the full year. Revenue will be less front-loaded (low to mid-50s% in H1), with mid-teens growth in H1, low single-digit growth in H2, and mid-20s% growth in Q1.

“we're expecting issuance to grow in the first half of '26 in the kind of high single-digit range versus the first half of last year and to decline mid-single digit in the second half.”

asked by Manav Patnaik · answered by Robert Fauber

How much of Moody's data is proprietary, what are its sources, and how can this be dimensionalized for investors?

Moody's has a massive proprietary data estate, unifying data, models, ratings, and research into a single normalized record for each entity, forming a powerful knowledge graph. This "trusted context layer" sits between raw data and AI engines, providing structured, governed, and contextualized data. The data is hard to replicate due to commercial agreements, legal/regulatory issues, semantic complexity, entity resolution, historical depth, and governance, making it "decision-grade."

“It's a structured, governed representation of what the data means, how it relates across entities and time and scenarios, when and why the data should be applied and much, much more, right, is a deep contextual understanding of the data.”

asked by Toni Kaplan · answered by Robert Fauber

How strong is the moat around MA's software/vertical solutions given concerns about verticalized LLMs (e.g., Claude for Financial Services) potentially impacting workflow solutions?

Moody's views its software as a delivery chassis for content, not just business logic. They will deliver content wherever customers need it – through software platforms (for Tier 3 banks), smart APIs/specialized agents (for Tier 1 banks building their own AI workflows), or enterprise software systems. The focus is on providing "decision-grade" content, which is the core value, regardless of the consumption method.

“the software that we have built is simply a delivery chassis for the content. It's not just some business logic that we've sold to a customer. It's a delivery channel for the content.”

asked by Ashish Sabadra · answered by Robert Fauber

How do the Learning Solutions and Regulatory Reporting divestitures affect MA's 2026 revenue guide and ARR figures? Are divestitures included/excluded from ARR?

Learning Solutions divestiture (closed Dec 2025) creates a 1% headwind to MCO revenue growth and ~2% headwind to MA revenue growth in 2026. Regulatory Reporting divestiture (expected mid-2026) will cause ~2% headwind to MA reported revenue growth, 100 bps tailwind to MCO expense growth, and ~10 bps dilution on MCO margin, with a minor $0.05-$0.10 adjusted EPS impact. ARR and organic constant currency recurring revenue are adjusted to eliminate effects of divestitures and acquisitions.

“ARR is adjusted to eliminate the effects of divestitures and acquisitions, and we expect both of those to grow high single digit in 2026.”

asked by Andrew Steinerman · answered by Noemie Heuland

Further detail on MA's AI moats, potential vulnerabilities to third-party AI, and how pricing will adapt if white-collar headcount reduces significantly due to AI.

Moats include non-public data, complex commercial agreements, legal/regulatory compliance, semantic complexity, entity resolution, historical depth, and governance. These make data uniquely valuable and hard to replicate. Pricing is evolving from value-based to consumption-based models to capture upside from efficiency gains enabled by Moody's data and models, acknowledging potential labor replacement.

“we are starting to trial in parts of the business, different pricing models, right? And thinking about elements, bringing in elements of consumption-based pricing that I think will be more closely aligned to outcomes”

asked by Craig Huber · answered by Robert Fauber