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MOODYS CORP /DE/ (MCO)·Q2 2025 Earnings Summary

Executive Summary

  • Revenue grew 4% year over year to $1.90B and adjusted diluted EPS rose 9% to $3.56; adjusted operating margin expanded 130 bps to 50.9%, reflecting disciplined cost management and mix tailwinds .
  • Results beat Wall Street consensus: revenue $1.90B vs $1.85B*, EPS $3.56 vs $3.39*, and EBITDA $968M vs $913M*, driven by favorable issuance mix and strong MA margin expansion; April’s issuance “air pocket” was later offset by May–June pickup .
  • Guidance was narrowed/raised: MIS revenue growth to low–mid single digits (from flat to mid-single), adjusted EPS to $13.50–$14.00 (from $13.25–$14.00), and diluted EPS to $12.25–$12.75 (from $12.00–$12.75) .
  • Catalysts: accelerating private credit momentum (75% revenue growth; ~25% of Q2 first-time mandates), MA adjusted margin inflection (+360 bps YoY), and an 11% dividend increase to $0.94/share declared July 22 .

Values retrieved from S&P Global for estimates (*).

What Went Well and What Went Wrong

What Went Well

  • MA adjusted operating margin reached 32.1% (+360 bps YoY) on strong recurring revenue and cost discipline; consolidated adjusted margin rose to 50.9% (+130 bps YoY) .
  • Private credit growth was a significant tailwind: “revenue related to private credit grew 75%… and… accounted for nearly 25% of first-time mandates” (CEO) .
  • Strong recurring revenue engine: MA recurring revenue was 96% of segment revenue (+12% YoY), and MA ARR reached $3.30B (+8% YoY), demonstrating durability of the Analytics franchise .

Management quotes:

  • “We continue to innovate… strengthening the earnings engine… delivering strong recurring revenue growth combined with real cost discipline.” — Rob Fauber (CEO) .
  • “We… highlight[] the success of our strategy and efficiency initiatives… narrowing… adjusted diluted EPS guidance to $13.50 to $14.00.” — Noémie Heuland (CFO) .

What Went Wrong

  • Issuance softness: overall MIS-rated issuance declined 12% YoY; corporate bank loans and M&A subdued; FI issuance pressured by lower infrequent insurance activity .
  • April “air pocket” of no issuance days created near-term headwinds before conditions improved into May/June (CEO) .
  • Specific attrition and mix challenges at MA: strategic termination of a longstanding KYC redistribution partnership and an insurance account loss following a merger dampened ARR growth cadence (CFO) .

Financial Results

Consolidated and Margin Profile

MetricQ4 2024Q1 2025Q2 2025
Revenue ($USD Millions)$1,672 $1,924 $1,898
Diluted EPS ($)$2.17 $3.46 $3.21
Adjusted Diluted EPS ($)$2.62 $3.83 $3.56
Operating Margin (%)33.6% 44.0% 43.1%
Adjusted Operating Margin (%)43.8% 51.7% 50.9%

Segment Revenue Breakdown

Segment Revenue ($USD Millions)Q2 2024Q1 2025Q2 2025
Moody’s Analytics (MA)$802 $859 $888
Moody’s Investors Service (MIS)$1,015 $1,065 $1,010
Total$1,817 $1,924 $1,898

MIS Asset-Class Composition (Q2)

MIS ($USD Millions)Q2 2024Q2 2025
Corporate Finance$525 $512
Structured Finance$135 $135
Financial Institutions$195 $191
Public, Project & Infrastructure Finance$154 $162
MIS Other$10 $10
Total MIS$1,015 $1,010

Transaction vs. Recurring Mix (Q2)

Revenue ($USD Millions)Q2 2024Q2 2025
Transaction$730 $699
Recurring$1,087 $1,199
Total$1,817 $1,898

KPIs (MA)

KPIQ2 2024Q1 2025Q2 2025
MA ARR ($USD Millions)$3,051 (Jun 30, 2024) $3,266 (Mar 31, 2025) $3,297 (Jun 30, 2025)
MA Recurring Revenue (%)95% (Q4 reference) 96% (Q1) 96% (Q2)

Versus Consensus (Q2 2025)

MetricConsensusActual
Revenue ($USD Millions)$1,847.54*$1,898
Primary EPS ($)$3.39*$3.56
EBITDA ($USD Millions)$912.72*$968

Values retrieved from S&P Global for estimates (*).

Guidance Changes

MetricPeriodPrevious Guidance (Apr 22, 2025)Current Guidance (Jul 23, 2025)Change
MIS Revenue GrowthFY 2025Flat to mid-single-digit increase Low- to mid-single-digit increase Raised
Adjusted Diluted EPSFY 2025$13.25–$14.00 $13.50–$14.00 Raised (low end)
Diluted EPSFY 2025$12.00–$12.75 $12.25–$12.75 Raised (low end)
Adjusted Operating MarginFY 202549%–50% 49%–50% Maintained
Operating MarginFY 202542%–43% 42%–43% Maintained
MA Revenue GrowthFY 2025High single-digit % High single-digit % Maintained
MA ARR GrowthFY 2025High single-digit % High single-digit % Maintained
MA Adjusted Operating MarginFY 202532%–33% 32%–33% Maintained
Operating Cash FlowFY 2025$2.65–$2.85B $2.65–$2.85B Maintained
Free Cash FlowFY 2025$2.30–$2.50B $2.30–$2.50B Maintained
Share RepurchasesFY 2025≥$1.3B ≥$1.3B Maintained
DividendQ3 declaration$0.94/share (11% YoY increase) $0.94/share Maintained

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4 2024 and Q1 2025)Current Period (Q2 2025)Trend
Private creditQ1: 143 private-credit deals; 20% of SF revenue growth tied to private credit 75% revenue growth; ~25% of first-time mandates; multi-line contribution (SF, FIG, PPIF) Accelerating tailwind
AI/GenAI initiativesQ1: Research Assistant and agentic tools; ARR uplift; internal efficiency (customer service, engineering, sales) ~40% of products by ARR include GenAI; ~$200M ARR cohort of GenAI adopters growing ~2x MA; Microsoft partnership for operational data Scaling enablement and monetization
Tariffs/macroQ1: Tariffs created uncertainty; April issuance soft; widened guidance ranges April air pocket; conditions improved in May–June; cautious H2 outlook Volatility but improving issuance
MIS mix/issuanceQ1: Expect rated issuance down low-to-high single digits in 2025; mix positive via repricing decline and recurring growth Mix tailwinds (CMBS strength, less repricing, more infrequent issuers); MIS adj margin 64.2% Favorable mix vs softer volumes
MA portfolio/ARRQ1: ARR +9% with Decision Solutions +12% ARR +8%; KYC redistribution termination and insurance M&A loss; MA margins ramping Durable growth with selective headwinds
Regional/expansionQ4: Medium-term targets; resilient global footprint Fully acquired ICR Chile; strengthen Moody’s Local LatAm presence Strategic footprint deepening
Regulatory/legalQ1: noted macro/regulatory risk factors in guidance Ongoing disclosure of risk factors; ETR rose to 25.0% in Q2 Monitored, tax rate uptick

Management Commentary

  • CEO: “We… capitalize on the deep currents… strengthening the earnings engine… delivering strong recurring revenue growth combined with real cost discipline.”
  • CFO: “We are pleased to report a 4% increase in MCO’s second quarter revenues… significant expansion in our segments’ adjusted operating margins… narrowing… adjusted diluted EPS guidance… which at the midpoint implies 10% growth versus last year.”
  • CEO on private credit: “Private credit-related transactions accounted for nearly 25% of first-time mandates… revenue related to private credit grew 75%… contributing to flat revenue amidst an issuance environment down 12%.”
  • CFO on MA margins: “MA delivered an adjusted operating margin of 32.1%, a 360 basis point improvement year over year… on track to deliver full-year margin guidance.”

Q&A Highlights

  • KYC/Insurance ARR headwinds and pipeline: Strategic termination of a redistribution partnership and an insurance account loss moderated ARR; pipeline building, high-teens KYC ARR ex-attrition expected (CFO/CEO) .
  • MIS issuance and mix: No meaningful pull-forward; expect favorable mix (CMBS, CLO, infrequent issuers) to persist; M&A pickup would be mix-positive (CEO) .
  • Margin expansion drivers: No expense pushouts; prioritization of investments, vendor optimization, productivity tools; high GenAI adoption internally (CFO/IR) .
  • Private credit substitution risk: Some substitution occurs, but opportunity to convert investor demand via MSCI model-implied ratings; potential future issuer adoption (CEO) .
  • MA environment: Slight lengthening of sales cycles offset by larger deal sizes; no material deterioration in end markets (CEO) .

Estimates Context

  • Q2 2025 beat across all tracked metrics: revenue $1.90B vs $1.85B*, EPS $3.56 vs $3.39*, EBITDA $968M vs $913M* .
  • Drivers: favorable MIS mix (less repricing, stronger CMBS/PPIF), recurring revenue strength, MA cost discipline and margin expansion .
  • Forward implications: MIS guide implies low single-digit YoY decline in Q3, mid-single-digit YoY growth in Q4 at midpoint; adjusted EPS midpoint +10% YoY for FY25 (CFO), suggesting upward pressure on H2 profitability assumptions .

Values retrieved from S&P Global for estimates (*).

Key Takeaways for Investors

  • Mix matters: Despite a 12% issuance decline, favorable MIS mix and recurring revenue drove flat-to-up revenue and robust margins; this supports earnings resilience in choppy issuance environments .
  • Private credit is becoming a multi-line growth engine (SF, FIG, PPIF) with rising first-time mandates; watch MSCI partnership and investor-side adoption to broaden monetization .
  • MA margin inflection appears durable (32.1% in Q2), underpinned by recurring revenue (96%) and efficiency program; expect sequential margin ramp in H2 .
  • Guidance risk skew improves: MIS revenue raised to low–mid single digits and EPS ranges narrowed/raised; constructive for estimate revisions and sentiment into H2 .
  • Near-term trading: Q3 MIS revenue modeled low single-digit decline with H2 margin discipline; any M&A acceleration or CMBS/CLO strength could be upside catalysts (mix-positive) .
  • Medium-term thesis: Deep currents (digital transformation, AI enablement, private markets expansion, climate risk) support recurring revenue growth and operating leverage across both segments .
  • Capital returns and balance sheet: $0.94 dividend (+11% YoY) and ≥$1.3B buybacks maintained; $7.0B debt, $1.25B undrawn revolver offer flexibility .

Additional Relevant Q2 Press Releases and Prior Quarter Context

  • Q2 strategic move: Moody’s fully acquired ICR Chile, strengthening presence in Latin America’s domestic ratings via Moody’s Local .
  • Prior quarter benchmarks: Q1 2025 record MIS revenue $1.1B (+8% YoY), MCO adjusted margin 51.7%, adjusted EPS $3.83; guide widened due to macro/tariffs uncertainty .
  • FY24 baseline: Strong year with MIS transactional revenue +54% and FY24 adj margin 48.1%, setting a high-quality earnings base into 2025 .