MSCI Q2 2025: 10% ABF Rev Target Backed by $6T AUM
- Secular Growth in Asset Based Fees: MSCI's dominant role in the global index ecosystem is underscored by having $6,000,000,000,000 of client assets indexed to its benchmarks—with strong inflows and a positive fee mix from international products—which supports a robust, long‐term ABF revenue expansion.
- Active ETF and Product Innovation Momentum: The firm is capitalizing on growing demand for active ETF solutions, with strong client dialogue and an expanding suite that spans from enhanced indexation to unconstrained stock picking. This diversified active ETF product strategy provides a compelling growth opportunity.
- Acceleration in Non‐Active Subscription Segments: Even though active asset management faces industry headwinds, MSCI is aggressively targeting non‐active segments—such as wealth management, asset owners, and private capital—where initiatives and new product launches are poised to drive subscription growth beyond the current 11.5% rate.
- Slower Active Asset Management Growth: The company acknowledged that rapid acceleration in the active asset management subscription segment is unlikely in the near term due to industry challenges like cost pressures, fund outflows, and consolidation, which could dampen overall subscription revenue growth [Speaker 2][Speaker 6].
- Volatile Retention in Key Segments: There were concerns about lumpy retention, especially in analytics and sustainability and climate segments, driven by client events and budget pressures, potentially impacting recurring revenue stability [Speaker 4][Speaker 8].
- Execution Risks on New Growth Initiatives: The successful integration and accelerated adoption of emerging products—such as private capital solutions and active ETF offerings—remain uncertain. Delays or underperformance in these initiatives could further weigh on overall growth [Speaker 2][Speaker 10].
| Metric | YoY Change | Reason |
|---|---|---|
Total Revenue | +9% ( ) | The total revenue increased from $707.949 million in Q2 2024 to $772.7 million in Q2 2025, driven by modest gains across all revenue streams. This reflects consistent organic growth seen in prior periods (e.g., solid Q1 subscription and fee growth) and market expansion, supporting a sustained upward trend. ( ) |
Recurring Subscriptions | +267% ( ) | Recurring subscriptions surged from $64.309 million in Q2 2024 to $235.6 million in Q2 2025. This dramatic jump builds on previous strong performance in Q1 2024 and Q1 2025, indicating that company-specific initiatives to boost recurring revenue—such as enhancing index and analytics products—are starting to yield significant results. ( ) |
Asset-Based Fees | +12.7% ( ) | Asset-based fees rose from $163.281 million to $184.1 million year-over-year, reflecting increased average assets under management, particularly in ETFs linked to MSCI equity indexes. This trend follows similar gains noted in earlier quarters where improvements in AUM and market exposures played a key role in fee growth. ( ) |
Non-Recurring Revenues | +2400%+ ( ) | Non-recurring revenues exploded from $0.598 million in Q2 2024 to $15.1 million in Q2 2025, largely due to a very low base in the previous period. This increase is likely driven by new, sizable catch-up revenue items and one-off client implementations, analogous to similar trends observed in prior quarters where non-recurring items contributed significantly when active. ( ) |
Analytics Revenue | +7% ( ) | Analytics revenue increased modestly from $165.995 million to $177.7 million, reflecting improved recurring subscription performance that partially offset declines in non-recurring revenues. This balanced outcome continues the trend seen in Q1 2024 and Q1 2025, where organic growth and market conditions led to measured gains in the segment. ( ) |
All Other – Private Assets | +9.8% ( ) | Revenue in All Other – Private Assets climbed from $64.907 million to $71.2 million, largely fueled by growth in private capital solutions and recurring subscriptions. This increase builds on previous quarter performance where organic growth and regional/client expansion in private assets drove steady improvement. ( ) |
| Metric | Period | Previous Guidance | Current Guidance | Change |
|---|---|---|---|---|
Expense Guidance | Second half of 2025 | no prior guidance [N/A] | MSCI's expense guidance ranges remain unchanged. They expect to come in towards the middle of their expense guidance ranges if AUM levels remain around their current levels. | no prior guidance |
Retention Rate | Second half of 2025 | no prior guidance [N/A] | The retention rate for private assets remained stable from last year's level, slightly over 91%. | no prior guidance |
Expense Guidance | FY 2025 | MSCI's guidance assumes that market levels will gradually increase throughout the year. If markets remain at their current levels, expenses are expected to be at the low end of the current guidance ranges. | no recent guidance [N/A] | no recent guidance |
Tax Rate Guidance | FY 2025 | Beyond Q1, the quarterly effective tax rate, excluding potential discrete items, is expected to be in the range of 19% to 21% each quarter for the rest of 2025. | no recent guidance [N/A] | no recent guidance |
Market Assumptions | FY 2025 | Guidance is based on the assumption that market levels will gradually increase throughout the year. | no recent guidance [N/A] | no recent guidance |
| Topic | Previous Mentions | Current Period | Trend |
|---|---|---|---|
Secular Growth in Asset Based Fees | Q1 2025 earnings emphasized strong growth metrics and revenue expansion with robust ETF and non-market cap product performance | Q2 2025 earnings highlighted systemic trends in systematic investing, stable fees, and the long‐term secular potential of the ABF business | Bullish and reinforced long‑term growth outlook with renewed focus on non-market cap and global benchmark opportunities |
Active ETF and Product Innovation | Q1 2025 focused on active ETF development and customized product solutions, while Q4 2024 stressed the “indexification” of active strategies and breakthroughs in custom index innovations | Q2 2025 continued robust discussions on active ETFs and introduced new product areas and use cases for innovation | Consistent focus with strengthened emphasis on active ETF opportunities and broader product innovation capabilities |
Expansion into Diversified Growth Segments | Q1 2025 and Q4 2024 detailed wins in Wealth Management, Private Capital, Fixed Income, and highlighted both strong subscription growth and challenges in Real Assets | Q2 2025 reported further traction in Wealth Management and Private Capital, notable fixed income wins, but ongoing challenges in Real Assets | Recurring focus with nuanced performance across segments; overall growth is maintained though Real Assets face headwinds |
Active Asset Management Growth Challenges | Q4 2024 noted cyclical pressures and slow growth (5%) in the active management segment | Q2 2025 reiterated slow growth (just over 6%) and ongoing industry challenges such as fund outflows and cost pressures | Persistent challenge with modest growth, indicating a continued cautious sentiment in this segment |
Deferred Deal Closures and Sales Pipeline Dynamics | Q1 2025 described deferred deals expected to close in Q2 and healthy pipeline engagement; Q4 2024 provided context on nuanced sales cycles | Q2 2025 did not offer specific commentary on deferred deal closures but referenced a generally stable sales environment | Reduced emphasis on deferred deals in Q2, with a shift toward a stable overall sales pipeline |
Client Retention Variability and Recurring Revenue Stability | Q1 2025 reported very high retention rates (>95%) with strong recurring revenue, while Q4 2024 mentioned lower rates (93%) in certain segments due to client events | Q2 2025 noted variability—lower retention in some areas like sustainability—but overall recurring revenue remains stable through diversified solutions | Mixed signals: overall recurring revenue stability is maintained, though certain segments show variability in client retention |
ESG, Sustainability & Climate Regulatory and Sales Challenges | Q1 2025 detailed evolving client demand, heightened regulatory burdens, and regional variations, and Q4 2024 emphasized strong European commitment, Moody’s partnership, and robust product development | Q2 2025 observed a cyclical slowdown with lower retention and muted demand, noting the absence of prior partnerships like Moody’s ESG contribution | Consistent presence with evolving challenges: sentiment has shifted toward cautious adaptation amid regulatory pressures and slowing sales |
International Market Trends and Global Asset Flows | Q1 2025 described an accelerating shift toward international assets driven by global flows and Q4 2024 reported strong ETF inflows and distinct regional dynamics | Q2 2025 emphasized a significant rotation to international markets with record ETF inflows and favorable fee dynamics for non-U.S. exposures | Strong and consistently bullish trend: international asset flows are increasingly favorable and are a major growth catalyst |
Execution and Integration Risks for New Growth Initiatives | Not specifically mentioned in Q1 2025 and Q4 2024 discussions [N/A] | Not mentioned in Q2 2025 earnings calls [N/A] | Topic not mentioned across periods, suggesting it is not a current focus [N/A] |
Macroeconomic and Market Volatility Impact on Subscription Revenue | Q1 2025 highlighted resilient subscription revenue through mission-critical tools and robust retention, while Q4 2024 discussed consistent organic run rate growth despite FX headwinds | Q2 2025 noted that despite volatility and market swings, client purchasing behavior remains steady, supporting subscription revenue stability | Consistent resilience: subscription revenue continues to perform strongly despite market volatility and macroeconomic headwinds |
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Global Flows
Q: How will international flows impact business?
A: Management explained that non‑U.S. asset rotation is boosting both ABF and eventually subscriptions, noting that client assets indexed to MSCI exceed $6,000,000,000,000 and record ETF inflows drive this momentum. -
Asset Manager Growth
Q: How can non‑active subscriptions accelerate growth?
A: They emphasized shifting focus to non‑active segments to lift growth above the current 11.5% pace while active managers remain around 6%, using new products and dedicated sales efforts. -
ABF Revenue Target
Q: Is the 10% ABF revenue growth target achievable?
A: Despite challenges in the active management space, strong secular trends—including 29% market share in ETF inflows—support the robust ABF growth target. -
Consolidation Impact
Q: How does consolidation affect future results?
A: Management noted consolidation is cyclical, with periods of significant deals balanced by quieter spells, so its overall impact remains modest on forecasts. -
Retention Trends
Q: Why were retention rates soft this quarter?
A: Lower retention in analytics and sustainability was driven by lumpy client events and financial pressures, while asset manager retention held strong at 96%. -
Sales Environment
Q: How is the current sales environment?
A: Sales have normalized after one-off contributions like Moody’s ESG, and despite market volatility, client engagement remains steady overall. -
Custom Index Demand
Q: Why the slowdown in custom index sales?
A: Management explained that quarterly variances occur in custom index deals, but the strategic direction remains unchanged and outlook positive. -
Active ETFs
Q: What is the outlook for active ETFs?
A: Active ETFs are viewed as a major growth opportunity, offering tailored solutions from enhanced indexation to pure stock picking, with 50 global clients engaging actively. -
Cost Guidance
Q: What factors are shaping expense guidance?
A: A mix of stable AUM levels, FX shifts, and other cost factors suggests that if current AUM holds, expenses will hit the guidance mid‑range. -
Growth Sustainability
Q: Can fixed income and wealth growth sustain high rates?
A: Strong momentum in wealth mandates and a solid mix in non‑market cap products support ongoing robust growth even as fixed income faces minor challenges. -
Subscription Acceleration
Q: When will non‑active subscriptions pick up?
A: While the timing is uncertain over the next few quarters, strong demand from fast money segments and wealth managers signals significant acceleration ahead. -
Private Capital
Q: How is private capital adoption trending?
A: Since the Burgess acquisition integration, efforts to enhance data and transparency are underway, with growing client interest to boost liquidity and pricing clarity gradually. -
Pricing Environment
Q: How are pricing conversations evolving?
A: The pricing approach remains steady with modest increases, especially in analytics and sustainability, reflecting inflation and cost pressures without altering long‑term strategy. -
Data Rights
Q: What progress is there on GP data rights?
A: They are working to liberalize GP data restrictions using anonymized, aggregated LP data, which will eventually broaden access and enhance product offerings. -
ETF Pricing
Q: Are ETF licensing fees stable?
A: Yes, fee levels have been stable on both ETF and non‑ETF platforms, supported by favorable mix shifts, even though long‑term pressures may gradually lower fees. -
Global Benchmarks
Q: How will MSCI World evolve as a global ecosystem?
A: Management envisions a deepening global benchmark ecosystem, where MSCI World underpins client strategies worldwide—a trend already evident in significant client engagements.