MSCI Q1 FY26 earnings call MSCI

MSCI is deeply integrating agentic AI across its operations, from data capture and model building to product launch and marketing. This has led to significant early efficiencies in data development for private assets and sustainability, allowing for increased data gathering without additional headcount. AI is also accelerating software development and the creation of models and methodologies, particularly in custom indices and ESG rating systems. The company noted that the use of AI by its employees has dramatically increased over the past year.

The company completed three small, strategic bolt-on acquisitions: Compass Financial Technologies (index calculation services for commodities, digital assets, equity derivatives), Vantage (AI platform for private market due diligence), and PM Insights (secondary market pricing, liquidity, and reference data for private markets). These acquisitions extend capabilities and accelerate client solutions in key growth areas, contributing modestly to run rate and ongoing expenses.

MSCI experienced broad-based momentum across geographic regions, product lines, and client segments. APAC was a standout, posting its strongest ever Q1 for recurring sales at $15 million, up 46% year-over-year. Hedge funds and banks/broker-dealers also showed strong subscription run rate growth and net new sales, with hedge fund subscription run rate growth at 17% and banks/broker-dealers at almost 11%.

The ecosystem around MSCI indices continues to scale, with over $21 trillion in AUM benchmarked to them, including $7.4 trillion in indexed equity AUM. The company saw its best Q1 since 2023 for traded volumes and run rate from listed futures and options, reinforced by a new licensing agreement for options on MSCI indices listed on the NYSE. Equity ETFs linked to MSCI indexes captured a record $103 billion of inflows in Q1.

While sustainability and climate faced some headwinds with higher cancels and client focus on critical priorities, MSCI is differentiating between sustainability and climate. The company secured an important competitive win with the Central Bank of Germany for climate risk tools, indicating potential for reacceleration, especially in physical risk. Management believes the 'run war' (Russia-Ukraine war) will underscore the need for energy transition, benefiting their climate tools.

MSCI is very bullish on the active ETF market, viewing it as a significant expansion area for active asset managers. The company believes its data sets, indices, and quantitative tools are highly relevant, especially since 70-80% of active ETFs incorporate systematic or index investing elements. This presents opportunities for additional content licensing and potential asset-based fee revenue, with MSCI actively used as a benchmark on active ETFs.