Group 1 - The company aims to invest in firms with ideal qualitative attributes, purchasing them at attractive prices based on fundamentals and holding them indefinitely [1] - The investment strategy involves managing a concentrated portfolio to avoid underperformers while maximizing exposure to high-potential winners [1] - The company plans to publish articles on such investments approximately three times a week, including extensive quarterly follow-ups and constant updates [1] Group 2 - The company often rates high-quality firms as 'Hold' due to insufficient growth opportunities or excessive downside risks [1]

Investors might want to bet on Moody's (MCO) , as it has been recently upgraded to a Zacks Rank #2 (Buy). This upgrade is essentially a reflection of an upward trend in earnings estimates -- one of the most powerful forces impacting stock prices.The Zacks rating relies solely on a company's changing earnings picture. It tracks EPS estimates for the current and following years from the sell-side analysts covering the stock through a consensus measure -- the Zacks Consensus Estimate.Since a changing earnings ...

PART I. FINANCIAL INFORMATION [Financial Statements](index=10&type=section&id=Item%201.%20Financial%20Statements) The company reported increased revenue and net income for Q2 and H1 2025, with stable assets and decreased liabilities Consolidated Statements of Operations Highlights (Unaudited) | Financial Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | % Change | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | % Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | **Revenue ($M)** | $1,898 | $1,817 | 4.5% | $3,822 | $3,603 | 6.1% | | **Operating Income ($M)** | $818 | $775 | 5.5% | $1,664 | $1,576 | 5.6% | | **Net Income Attributable to Moody's ($M)** | $578 | $552 | 4.7% | $1,203 | $1,129 | 6.6% | | **Diluted EPS ($)** | $3.21 | $3.02 | 6.3% | $6.66 | $6.16 | 8.1% | Consolidated Balance Sheets Highlights (Unaudited) | Balance Sheet Item | June 30, 2025 ($M) | December 31, 2024 ($M) | | :--- | :--- | :--- | | Cash and cash equivalents | $2,174 | $2,408 | | Goodwill | $6,481 | $5,994 | | **Total Assets ($M)** | **$15,487** | **$15,505** | | Long-term debt | $6,967 | $6,731 | | **Total Liabilities ($M)** | **$11,379** | **$11,778** | | **Total Moody's Shareholders' Equity ($M)** | **$3,949** | **$3,565** | Consolidated Statements of Cash Flows Highlights (Unaudited) | Cash Flow Activity | Six Months Ended June 30, 2025 ($M) | Six Months Ended June 30, 2024 ($M) | | :--- | :--- | :--- | | **Net cash provided by operating activities** | $1,300 | $1,461 | | **Net cash provided by (used in) investing activities** | $98 | ($191) | | **Net cash used in financing activities** | ($1,780) | ($731) | | **(Decrease) increase in cash and cash equivalents** | ($234) | $505 | [Notes to the Consolidated Financial Statements (Unaudited)](index=18&type=section&id=Notes%20to%20the%20Consolidated%20Financial%20Statements%20%28Unaudited%29) Notes detail accounting policies, revenue disaggregation, restructuring, and segment performance, including MA's reorganization - In Q1 2025, Moody's Analytics (MA) reorganized its management and reporting structure, resulting in its goodwill being evaluated as a single reporting unit instead of the previous two. This change did not affect the company's reportable segments[47](index=47&type=chunk) Revenue by Reportable Segment (Six Months Ended June 30) | Segment | 2025 Revenue ($M) | 2024 Revenue ($M) | % Change | | :--- | :--- | :--- | :--- | | **Moody's Analytics (MA)** | $1,747 | $1,601 | 9.1% | | **Moody's Investors Service (MIS)** | $2,075 | $2,002 | 3.6% | | **Total MCO** | **$3,822** | **$3,603** | **6.1%** | - The company initiated the 'Strategic and Operational Efficiency Restructuring Program' on December 19, 2024, to realign operations and improve efficiency. The program is expected to result in annualized savings of **$250 million** to **$300 million** and total pre-tax charges of **$200 million** to **$250 million**. As of June 30, 2025, cumulative expenses incurred were **$105 million**[93](index=93&type=chunk)[94](index=94&type=chunk) - In Q1 2025, the company fully repaid its **$700 million** 3.75% 2020 Senior Notes upon maturity. As of June 30, 2025, total long-term debt carrying value was **$6,967 million**[108](index=108&type=chunk)[109](index=109&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=48&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses H1 2025 revenue growth in MA and MIS segments, improved adjusted operating margin, and strong liquidity [Results of Operations](index=49&type=section&id=Results%20of%20Operations) H1 2025 total revenue grew 6% to **$3.82 billion**, driven by MA and MIS, with adjusted operating margin expanding 110 bps Q2 2025 vs Q2 2024 Performance Summary | Financial Measure | Q2 2025 ($M) | Q2 2024 ($M) | % Change | | :--- | :--- | :--- | :--- | | **Total Revenue** | $1,898 | $1,817 | 4% | | MA External Revenue | $888 | $802 | 11% | | MIS External Revenue | $1,010 | $1,015 | 0% | | **Operating Margin** | 43.1% | 42.7% | +40 BPS | | **Adjusted Operating Margin** | 50.9% | 49.6% | +130 BPS | | **Diluted EPS ($)** | $3.21 | $3.02 | 6% | | **Adjusted Diluted EPS ($)** | $3.56 | $3.28 | 9% | H1 2025 vs H1 2024 Performance Summary | Financial Measure | H1 2025 ($M) | H1 2024 ($M) | % Change | | :--- | :--- | :--- | :--- | | **Total Revenue** | $3,822 | $3,603 | 6% | | MA External Revenue | $1,747 | $1,601 | 9% | | MIS External Revenue | $2,075 | $2,002 | 4% | | **Operating Margin** | 43.5% | 43.7% | -20 BPS | | **Adjusted Operating Margin** | 51.3% | 50.2% | +110 BPS | | **Diluted EPS ($)** | $6.66 | $6.16 | 8% | | **Adjusted Diluted EPS ($)** | $7.38 | $6.65 | 11% | - MA's revenue growth was driven by sustained demand for KYC and insurance offerings, SaaS-based banking solutions, and credit research products. ARR increased by **8%**[141](index=141&type=chunk)[159](index=159&type=chunk) - MIS revenue growth was supported by strong investor demand and tight credit spreads in investment-grade, U.S. public and project finance, and CMBS, partially offset by declines in bank loans due to market volatility and subdued M&A activity[211](index=211&type=chunk) [Liquidity and Capital Resources](index=77&type=section&id=Liquidity%20and%20Capital%20Resources) The company maintains strong liquidity with **$2.3 billion** in cash, despite decreased operating cash flow, and has **$0.9 billion** for share repurchases Cash Flow Summary (Six Months Ended June 30) | Cash Flow Activity | 2025 ($M) | 2024 ($M) | | :--- | :--- | :--- | | Net cash provided by operating activities | $1,300 | $1,461 | | Net cash provided by (used in) investing activities | $98 | ($191) | | Net cash used in financing activities | ($1,780) | ($731) | | **Free Cash Flow (Non-GAAP) ($M)** | **$1,140** | **$1,290** | - The decrease in operating cash flow was driven by **$198 million** in higher income tax payments and approximately **$100 million** in higher incentive compensation payments[277](index=277&type=chunk)[283](index=283&type=chunk) - The increase in cash used in financing activities was primarily due to a **$700 million** repayment of notes and **$273 million** more in treasury share repurchases compared to the prior year[280](index=280&type=chunk)[284](index=284&type=chunk) - As of June 30, 2025, the company had approximately **$0.9 billion** of remaining authority under its **$1.5 billion** share repurchase program authorized in October 2024[291](index=291&type=chunk) [Non-GAAP Financial Measures](index=79&type=section&id=Non-GAAP%20Financial%20Measures) The company utilizes non-GAAP measures like Adjusted Operating Income, Adjusted Diluted EPS, and Free Cash Flow for performance analysis Reconciliation of Operating Income to Adjusted Operating Income (Six Months Ended June 30) | Metric | 2025 ($M) | 2024 ($M) | | :--- | :--- | :--- | | Operating income | $1,664 | $1,576 | | Depreciation and amortization | $233 | $210 | | Restructuring | $60 | $7 | | Charges related to asset abandonment | $3 | $15 | | **Adjusted Operating Income ($M)** | **$1,960** | **$1,808** | Reconciliation of Diluted EPS to Adjusted Diluted EPS (Six Months Ended June 30) | Metric | 2025 ($) | 2024 ($) | | :--- | :--- | :--- | | Diluted EPS | $6.66 | $6.16 | | Net Acquisition-Related Intangible Amortization Expenses | $0.46 | $0.40 | | Net restructuring | $0.25 | $0.03 | | Net charges related to asset abandonment | $0.01 | $0.06 | | **Adjusted Diluted EPS ($)** | **$7.38** | **$6.65** | - For the six months ended June 30, 2025, the company's organic constant currency revenue growth was **5%** for the total company, **7%** for MA, and **3%** for MIS[306](index=306&type=chunk)[307](index=307&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=86&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's market risk primarily involves FX and interest rate fluctuations, mitigated by derivatives - The company is exposed to market risk from changes in FX rates, particularly the euro, Hong Kong dollar, and Singapore dollar, relative to the U.S. dollar[317](index=317&type=chunk)[318](index=318&type=chunk) - A hypothetical 10% strengthening of the euro versus the USD would cause a combined unfavorable impact of approximately **$580 million** to OCI from cross-currency swaps (**$433 million**) and designated euro-denominated debt (**$147 million**). This impact would be offset by gains on the hedged net investments[322](index=322&type=chunk)[323](index=323&type=chunk) [Controls and Procedures](index=87&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective as of June 30, 2025, with no material changes - The CEO and CFO concluded that as of June 30, 2025, the company's disclosure controls and procedures were effective at a reasonable assurance level[324](index=324&type=chunk) - No material changes in the company's internal control over financial reporting occurred during the three-month period ended June 30, 2025[325](index=325&type=chunk) PART II. OTHER INFORMATION [Legal Proceedings](index=88&type=section&id=Item%201.%20Legal%20Proceedings) Details on legal proceedings are provided in Note 16, 'Contingencies,' within the financial statements - For details on legal proceedings, the report refers to Note 16 "Contingencies" in Part I, Item 1[329](index=329&type=chunk) [Risk Factors](index=88&type=section&id=Item%201A.%20Risk%20Factors) No material changes to risk factors have occurred since the company's 2024 Annual Report on Form 10-K - The company states there have been no material changes from the risk factors disclosed in its 2024 Form 10-K[330](index=330&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=88&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) In Q2 2025, Moody's repurchased **623,206 shares** at an average of **$460.76**, with **$0.9 billion** repurchase authority remaining Share Repurchases for Q2 2025 | Period | Total Shares Purchased | Average Price Paid per Share ($) | | :--- | :--- | :--- | | April 2025 | 246,913 | $430.63 | | May 2025 | 64,373 | $477.84 | | June 2025 | 311,920 | $480.87 | | **Total Q2** | **623,206** | **$460.76** | - At the end of Q2 2025, approximately **$0.9 billion** remained available for future repurchases under the Board's authorization from October 15, 2024[332](index=332&type=chunk) [Other Information](index=88&type=section&id=Item%205.%20Other%20Information) No information is reported under this item - Not applicable[333](index=333&type=chunk) [Exhibits](index=89&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with the Form 10-Q, including corporate documents and CEO/CFO certifications - The exhibits filed with this report include CEO/CFO certifications (Exhibits 31.1, 31.2, 32.1, 32.2) and XBRL data files (Exhibits 101 and 104)[335](index=335&type=chunk)

Market Overview - The market capitalization of major US stocks shows varied performance, with Oracle at 762.30 billion, Mastercard at 321.36 billion, and Visa at 770.15 billion, reflecting increases of +0.66%, +0.86%, and +0.68% respectively [3] - Exxon Mobil's market cap is 679.53 billion, with a slight decrease of -0.98%, while Johnson & Johnson and Netflix show minor changes of -0.08% and -0.05% respectively [3] - Companies like Wells Fargo and Cisco have market caps of 270.15 billion and 279.59 billion, with respective increases of +0.98% and -0.58% [3] Notable Stock Movements - T-Mobile US Inc experienced a significant increase of +6.20%, reaching a market cap of 272.19 billion [3] - General Electric and Coca-Cola saw market caps of 285.05 billion and 298.76 billion, with increases of +0.37% and +0.91% respectively [3] - Companies like Disney and Goldman Sachs have market caps of 229.06 billion and 221.80 billion, with slight changes of +0.01% and -0.60% [3] Sector Performance - The technology sector shows mixed results, with Intel at 991.05 billion, down -3.28%, while AMD increased by +2.46% to 254.92 billion [5] - The consumer goods sector is represented by companies like Procter & Gamble and Coca-Cola, with market caps of 371.68 billion and 298.76 billion, showing slight increases [3][4] - The energy sector, represented by Exxon Mobil and Chevron, shows varied performance, with Exxon down -0.98% and Chevron up +0.66% [3] Summary of Key Companies - Oracle's market cap stands at 762.30 billion, reflecting a positive trend [3] - Mastercard and Visa show strong performance with market caps of 321.36 billion and 770.15 billion, both increasing [3] - Companies like Pfizer and Comcast have market caps of 1579.81 billion and 1332.00 billion, with Pfizer showing minimal change and Comcast down -3.16% [4][5]

Key Takeaways Moody's reported Q2 adjusted EPS of $3.56, beating estimates and rising 8.5% y/y. Revenues grew 4.5% to $1.90B, led by 10.5% growth in MA on strong demand for data and insights. Expenses rose 3.6% y/y and MCO repurchased 0.6M shares at an average price of $460.76.Moody's (MCO) has reported second-quarter 2025 adjusted earnings of $3.56 per share, which outpaced the Zacks Consensus Estimate of $3.44. The bottom line grew 8.5% from the year-ago quarter figure.The results were primarily aided b ...

Moody’s (MCO) Q2 2025 Earnings Call July 23, 2025 09:00 AM ET Company ParticipantsShivani Kak - Head - IRRobert Fauber - President, Director & CEONoémie Heuland - CFOScott Wurtzel - SVP - Equity ResearchRussell Quelch - Managing DirectorShlomo Rosenbaum - Managing DirectorFaiza Alwy - MD - US Company ResearchOwen Lau - Executive DirectorConference Call ParticipantsAshish Sabadra - Analyst - Information and Business ServicesJeffrey Silber - Business, Industrial Services & Education AnalystGeorge Tong - Senio ...

Financial Data and Key Metrics Changes - Moody's reported second quarter revenue of $1.9 billion, growing 4% year over year, despite a tough comparison to the previous year's 22% growth [5][6] - Adjusted operating margin reached 50.9%, up 130 basis points from a year ago, translating to adjusted diluted EPS of $3.56, a 9% increase [6][7] - The company narrowed its guidance ranges for rated issuance, MIS revenue, and EPS based on second quarter performance [6][7] Business Line Data and Key Metrics Changes - MIS revenue was flat year over year at $1 billion, with a 1% decline when adjusted for positive FX effects [25] - Corporate Finance transaction revenue declined 6% year on year, while Investment Grade transaction revenue grew 18% on 16% issuance growth [26] - Moody's Analytics revenue grew 11%, with recurring revenue increasing by 12% and Decision Solutions showing double-digit growth [30][31] Market Data and Key Metrics Changes - Private credit transactions accounted for nearly 25% of first-time mandates, with a 75% revenue growth in private credit across multiple lines of business [10][11] - The U.S. Public Finance group rated the highest quarterly issuance volume since 2007, with nearly 200 first-time mandates in the second quarter [28] - EMEA first-time mandates increased year over year, driven by private credit mandates [29] Company Strategy and Development Direction - Moody's is focused on strengthening its position in private credit markets and enhancing transparency and insights for investors [9][10] - The company is investing in partnerships, such as with MSCI, to leverage data and models for emerging investor needs [12][17] - Moody's aims to capitalize on digital transformation, AI adoption, and the expansion of private markets to drive long-term sustainable value [41] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism for the second half of the year, citing key credit themes that could influence performance [9] - The company is monitoring macroeconomic and geopolitical uncertainties that may affect issuance volumes [38] - Management highlighted the importance of maintaining a strong pipeline and executing on growth strategies despite market challenges [52] Other Important Information - Moody's Analytics achieved a 32.1% adjusted operating margin, a 360 basis point improvement year over year [13] - The company completed the acquisition of ICR Chile, enhancing its presence in the Latin American bond market [17] - Moody's is integrating GenAI capabilities across its product portfolio, with 40% of products now including some form of GenAI enablement [20] Q&A Session Summary Question: Insights on Decision Solutions and KYC - Management acknowledged attrition from a strategic termination of a distribution partnership in KYC and ongoing ESG-related attrition, but emphasized strong growth in banking and insurance segments [45][46] Question: Potential Pull Forward of Issuance - Management indicated that there was no meaningful pull forward of issuance, noting healthy performance in both public and private credit markets [55][56] Question: Operating Margin Expansion - Management clarified that the operating margin expansion was due to disciplined expense management and not due to expense shifts from Q2 to later quarters [63][64] Question: Banking Sector Performance - Management noted that while there has been a decline in banking ARR, growth in lending products, particularly Credit Lens, is expected to drive future growth [70][71] Question: AI and GenAI Adoption - Management highlighted that while standalone AI revenue is not yet material, early adopters of GenAI are showing double the growth compared to other customers, indicating strong engagement [78][79] Question: Contribution of Private Credit to MIS Revenues - Management confirmed that private credit is contributing to several lines in the rating agency, with significant growth in asset-backed finance and first-time mandates [84][85]

Financial Performance Highlights - Moody's achieved its second-highest Q2 revenue on record[9] - Moody's Analytics (MA) Annualized Recurring Revenue (ARR) reached $33 billion, an increase of 8% year-over-year[9] - Adjusted Operating Margin increased by 130 basis points to 509%[12] - Adjusted Diluted EPS increased by 9% to $356[12] Moody's Investors Service (MIS) Performance - MIS revenue outpaced issuance by approximately 12%[13] - MIS achieved an Adjusted Operating Margin of 642%, up 100 basis points[12, 16] - Total MIS rated issuance guidance was updated to reflect a decrease in the low-single-digit to mid-single-digit percent range[27, 36] Moody's Analytics (MA) Performance - MA experienced strong recurring revenue growth, with recurring revenue accounting for 96% of total revenue[19] - MA's Adjusted Operating Margin increased by 360 basis points to 321%[12, 19] - Decision Solutions led with 10% ARR growth[12] - MA revenue grew by 11% year-over-year[19] Updated Full Year 2025 Guidance - MCO revenue growth is projected to be in the mid-single-digit percent range[10] - Adjusted Diluted EPS is now expected to be in the range of $1350 to $1400[12] - The company plans to repurchase at least $13 billion in shares[39]

[Second Quarter 2025 Financial Highlights](index=1&type=section&id=Second%20Quarter%202025%20Financial%20Highlights) [Summary Financials and Management Commentary](index=1&type=section&id=SECOND%20QUARTER%20SUMMARY%20FINANCIALS) Moody's Corporation reported a 4% increase in revenue to $1.9 billion for the second quarter of 2025, driven by an 11% growth in Moody's Analytics (MA), while Moody's Investors Service (MIS) revenue remained flat. Adjusted Diluted EPS grew 9% to $3.56. Citing these results, the company narrowed its full-year 2025 Adjusted Diluted EPS guidance to a range of $13.50 to $14.00 Q2 2025 Key Financial Metrics | Metric | Q2 2025 | Change (YoY) | | :--- | :--- | :--- | | **MCO Revenue** | $1.9 billion | ⇑ 4% | | **MA Revenue** | $888 million | ⇑ 11% | | **MIS Revenue** | $1.0 billion | 0% | | **MCO Diluted EPS** | $3.21 | ⇑ 6% | | **MCO Adjusted Diluted EPS** | $3.56 | ⇑ 9% | - The company is updating its expectations for MIS issuance and revenue growth and has narrowed its full-year adjusted diluted EPS guidance by **$0.25** to a new range of **$13.50 to $14.00**[3](index=3&type=chunk) - Management highlighted strong recurring revenue growth and cost discipline as key drivers of performance, enabling innovation and investment in the business[1](index=1&type=chunk) [Detailed Financial Performance](index=3&type=section&id=Detailed%20Financial%20Performance) [Revenue Analysis](index=3&type=section&id=REVENUE) Overall revenue for Moody's Corporation (MCO) grew 4% in Q2 and 6% YTD, with a favorable 2% impact from foreign currency in the quarter. Growth was led by Moody's Analytics (MA), which saw an 11% revenue increase, while Moody's Investors Service (MIS) revenue was flat due to a favorable mix offsetting lower issuance volumes [Moody's Corporation (MCO) Revenue](index=3&type=section&id=Moody's%20Corporation%20(MCO)%20Revenue) MCO's total revenue reached $1.9 billion in Q2 2025, a 4% increase year-over-year, aided by a 2% favorable impact from foreign currency translation. Year-to-date revenue increased by 6% to $3.8 billion MCO Revenue Performance | Period | Revenue | Change (YoY) | Foreign Currency Impact | | :--- | :--- | :--- | :--- | | **Q2 2025** | $1.9 billion | ⇑ 4% | Favorable 2% | | **YTD 2025** | $3.8 billion | ⇑ 6% | Immaterial | [Moody's Analytics (MA) Revenue](index=4&type=section&id=Moody's%20Analytics%20(MA)%20Revenue) MA revenue grew 11% to $888 million in Q2 2025, driven by strong performance across all lines of business, particularly Decision Solutions which grew 13%. Recurring revenue, which constitutes 96% of MA's total, increased by 12%. Annualized Recurring Revenue (ARR) grew 8% year-over-year to $3.3 billion - Q2 revenue growth was led by Decision Solutions (up **13%**), Research and Insights (up **10%**), and Data & Information (up **8%**). Within Decision Solutions, KYC revenue was a standout performer, increasing **22%**[20](index=20&type=chunk) - Recurring revenue grew **12%** on a reported basis and **8%** on an organic constant currency basis, representing **96%** of total MA revenue[20](index=20&type=chunk) MA Annualized Recurring Revenue (ARR) Growth (as of June 30, 2025) | Segment | YoY Growth | | :--- | :--- | | **Total MA ARR** | **8%** | | Decision Solutions | 10% | | - Banking | 7% | | - Insurance | 9% | | - KYC | 15% | | Research & Insights | 7% | | Data & Information | 6% | [Moody's Investors Service (MIS) Revenue](index=5&type=section&id=Moody's%20Investors%20Service%20(MIS)%20Revenue) MIS revenue was flat year-over-year at just over $1.0 billion for Q2 2025, as a favorable revenue mix offset a 12% decline in market issuance. Growth in Structured Finance and Public, Project and Infrastructure Finance was offset by declines in Corporate Finance (due to lower bank loan activity) and Financial Institutions (due to high prior-year comparatives) - Corporate Finance revenue declined due to subdued M&A and lower bank loan activity, partially offset by growth in Investment Grade bonds[32](index=32&type=chunk) - Financial Institutions revenue fell due to lower infrequent Insurance issuance compared to a record prior-year period[32](index=32&type=chunk) - Structured Finance revenue grew across most asset classes, while Public, Project and Infrastructure Finance growth was driven by U.S. Public Finance[32](index=32&type=chunk) [Operating Expenses and Margin](index=7&type=section&id=OPERATING%20EXPENSES%20AND%20MARGIN) MCO's operating expenses increased by 4% in Q2, primarily due to restructuring charges and acquisitions. Despite this, disciplined cost management led to margin expansion, with the consolidated adjusted operating margin rising to 51.3% for the first half of 2025. Both MA and MIS segments saw significant improvements in their adjusted operating margins [MCO Operating Expenses](index=7&type=section&id=MCO%20Operating%20Expenses) In Q2 2025, operating expenses grew 4% year-over-year, a figure that includes a 2% impact from restructuring charges and another 2% from recent acquisitions. Excluding these items, operating growth was 2%, as efficiency gains partially offset investments in the business Drivers of Operating Expense Growth | Period | Total Growth | Restructuring Impact | Acquisition Impact | Operating Growth | | :--- | :--- | :--- | :--- | :--- | | **Q2 2025** | 4% | 2% | 2% | 2% | | **YTD 2025** | 6% | 3% | 2% | 3% | [Operating Margin and Adjusted Operating Margin](index=8&type=section&id=Operating%20Margin%20and%20Adjusted%20Operating%20Margin) MCO's adjusted operating margin expanded by 130 basis points to 50.9% in YTD 2025. MA's adjusted operating margin saw a significant increase of 360 basis points to 32.1% in Q2, while MIS's margin rose 100 basis points to 64.2%, reflecting strong revenue performance and cost discipline Operating Margin Performance (YTD 2025 vs YTD 2024) | Metric | YTD 2025 | YTD 2024 | Change | | :--- | :--- | :--- | :--- | | **MCO Adjusted Op. Margin** | 50.9% | 49.6% | ⇑ 130 bps | | **MA Adjusted Op. Margin** | 31.1% | 29.1% | ⇑ 200 bps | | **MIS Adjusted Op. Margin** | 65.1% | 63.9% | ⇑ 120 bps | [Earnings Per Share (EPS)](index=9&type=section&id=EARNINGS%20PER%20SHARE%20(EPS)) Healthy revenue growth and margin expansion drove a 6% increase in Diluted EPS to $3.21 and a 9% increase in Adjusted Diluted EPS to $3.56 for Q2 2025. The effective tax rate for the quarter was 25.0%, up from 23.1% in the prior-year period EPS Performance | Metric | Q2 2025 | Q2 2024 | Change (YoY) | | :--- | :--- | :--- | :--- | | **Diluted EPS** | $3.21 | $3.02 | ⇑ 6% | | **Adjusted Diluted EPS** | $3.56 | $3.28 | ⇑ 9% | - The Q2 Effective Tax Rate (ETR) was **25.0%**, higher than the **23.1%** in Q2 2024, primarily due to higher non-U.S. and state income taxes and a decrease in excess tax benefits from stock-based compensation[43](index=43&type=chunk) [Capital Allocation and Liquidity](index=10&type=section&id=CAPITAL%20ALLOCATION%20AND%20LIQUIDITY) [Capital Returned to Shareholders & Free Cash Flow](index=10&type=section&id=Capital%20Returned%20to%20Shareholders%20%26%20Free%20Cash%20Flow) For the first six months of 2025, Moody's generated $1.14 billion in free cash flow. The company increased its quarterly dividend by 11% to $0.94 per share and repurchased 0.6 million shares during the second quarter. As of June 30, 2025, Moody's had $7.0 billion in outstanding debt and $0.9 billion remaining in its share repurchase authorization - YTD free cash flow was **$1,140 million**, a decrease from **$1,290 million** in the prior-year period, primarily due to higher tax and incentive compensation payments[49](index=49&type=chunk)[83](index=83&type=chunk) - The Board declared a quarterly dividend of **$0.94 per share**, an **11%** increase from the prior year[49](index=49&type=chunk) - During Q2, Moody's repurchased **0.6 million shares** and had approximately **$0.9 billion** of share repurchase authority remaining as of June 30, 2025[49](index=49&type=chunk) [2025 Outlook and Assumptions](index=11&type=section&id=ASSUMPTIONS%20AND%20OUTLOOK) [Full Year 2025 Outlook](index=11&type=section&id=Moody's%202025%20Outlook) Moody's updated its full-year 2025 outlook, narrowing the Adjusted Diluted EPS guidance range to $13.50 - $14.00. The company also revised its forecast for MIS revenue growth to the low-single-digit to mid-single-digit percent range. Macroeconomic assumptions were updated, including an increased forecast for U.S. and Euro area GDP growth and a lower expected U.S. inflation rate Updated Full Year 2025 Guidance (as of July 23, 2025) | Metric | Current Guidance | Previous Guidance | | :--- | :--- | :--- | | **Adjusted Diluted EPS** | $13.50 to $14.00 | $13.25 to $14.00 | | **Diluted EPS** | $12.25 to $12.75 | $12.00 to $12.75 | | **MIS Revenue Growth** | Low-single to mid-single-digit % | Flat to mid-single-digit % | Updated Macroeconomic Assumptions | Forecasted Item | Current Assumption | Previous Assumption | | :--- | :--- | :--- | | **U.S. GDP Growth** | 0.5% - 1.5% | 0.0% - 1.0% | | **Euro area GDP Growth** | 0.5% - 1.5% | 0.0% - 1.0% | | **U.S. Inflation Rate** | 2.5% - 3.5% | 3.5% - 4.5% | | **Global MIS Rated Issuance** | Decrease in low-to-mid-single-digit % | Decrease in low-to-high-single-digit % | [Appendix: Financial Tables](index=13&type=section&id=Appendix%3A%20Financial%20Tables) [Table 1: Consolidated Statements of Operations](index=13&type=section&id=Table%201%20-%20Consolidated%20Statements%20of%20Operations%20(Unaudited)) This table presents the company's revenues, expenses, operating income, net income, and earnings per share for the three and six months ended June 30, 2025, compared to the same periods in 2024 Consolidated Statements of Operations (Six Months Ended June 30) | Amounts in millions, except per share | 2025 | 2024 | | :--- | :--- | :--- | | **Revenue** | $3,822 | $3,603 | | **Operating income** | $1,664 | $1,576 | | **Net income attributable to Moody's** | $1,203 | $1,129 | | **Diluted EPS** | $6.66 | $6.16 | [Table 2: Condensed Consolidated Balance Sheet Data](index=14&type=section&id=Table%202%20-%20Condensed%20Consolidated%20Balance%20Sheet%20Data%20(Unaudited)) This table provides a snapshot of the company's financial position, detailing assets, liabilities, and shareholders' equity as of June 30, 2025, compared to December 31, 2024 Balance Sheet Highlights (in millions) | Account | June 30, 2025 | Dec 31, 2024 | | :--- | :--- | :--- | | **Total Assets** | $15,487 | $15,505 | | Cash and cash equivalents | $2,174 | $2,408 | | **Total Liabilities** | $11,379 | $11,778 | | Long-term debt | $6,967 | $6,731 | | **Total Shareholders' Equity** | $4,108 | $3,727 | [Table 3: Condensed Consolidated Statements of Cash Flows](index=15&type=section&id=Table%203%20-%20Condensed%20Consolidated%20Statements%20of%20Cash%20Flows%20(Unaudited)) This table details the cash inflows and outflows from operating, investing, and financing activities for the six months ended June 30, 2025, and 2024 Cash Flow Summary (Six Months Ended June 30, in millions) | Activity | 2025 | 2024 | | :--- | :--- | :--- | | **Net cash provided by operating activities** | $1,300 | $1,461 | | **Net cash provided by (used in) investing activities** | $98 | $(191) | | **Net cash used in financing activities** | $(1,780) | $(731) | | **(Decrease) increase in cash** | $(234) | $505 | [Table 5: Financial Information by Segment](index=17&type=section&id=Table%205%20-%20Financial%20Information%20by%20Segment%20(Unaudited)) This table breaks down revenue, adjusted operating income, and adjusted operating margin for the two main business segments, Moody's Analytics (MA) and Moody's Investors Service (MIS), for the three and six-month periods Segment Performance (Six Months Ended June 30, 2025, in millions) | Segment | Total Revenue | Adjusted Operating Income | Adjusted Operating Margin | | :--- | :--- | :--- | :--- | | **Moody's Analytics (MA)** | $1,753 | $545 | 31.1% | | **Moody's Investors Service (MIS)** | $2,174 | $1,415 | 65.1% | [Table 6: Transaction and Recurring Revenue](index=19&type=section&id=Table%206%20-%20Transaction%20and%20Recurring%20Revenue%20(Unaudited)) This table provides a detailed breakdown of revenue into transaction-based and recurring sources for each business line within the MA and MIS segments Revenue Mix (Six Months Ended June 30, 2025) | Segment | Transaction Revenue % | Recurring Revenue % | | :--- | :--- | :--- | | **Moody's Corporation** | 38% | 62% | | **Moody's Analytics (MA)** | 4% | 96% | | **Moody's Investors Service (MIS)** | 67% | 33% | [Non-GAAP Reconciliations](index=21&type=section&id=Non-GAAP%20Reconciliations) This section includes several tables (7, 8, 9, 11, and 12) that reconcile non-GAAP financial measures such as Adjusted Operating Income, Free Cash Flow, Organic Constant Currency Revenue, and Adjusted Diluted EPS to their most directly comparable U.S. GAAP measures. It also defines and details the calculation for the Key Performance Metric of Annualized Recurring Revenue (ARR) in Table 10 - Table 7 reconciles Operating Income to Adjusted Operating Income by excluding depreciation & amortization, restructuring, and asset abandonment charges[78](index=78&type=chunk)[80](index=80&type=chunk) - Table 8 reconciles Net Cash from Operating Activities to Free Cash Flow by subtracting capital additions[81](index=81&type=chunk)[82](index=82&type=chunk)[83](index=83&type=chunk) - Table 11 reconciles Net Income and Diluted EPS to Adjusted Net Income and Adjusted Diluted EPS by excluding amortization of acquired intangibles, restructuring, and asset abandonment charges[92](index=92&type=chunk)[93](index=93&type=chunk)[94](index=94&type=chunk)

Core Insights - Moody's (MCO) is set to announce its second-quarter 2025 results on July 23, with expectations of limited revenue growth in its Corporate Finance line, which is the largest revenue contributor within the Moody's Investors Service (MIS) division [1][10] - Global bond issuance activity showed some health, but there was a significant slowdown in leveraged loan issuance compared to the previous year [1][2] Corporate Finance - The consensus estimate for Corporate Finance revenues is $492 million, indicating a 6.3% decline year-over-year [2][10] - Weaker leveraged loan issuance, attributed to lower repricing activity and increased corporate debt spreads, has notably impacted revenue [2][10] Financial Institutions and Other Segments - The Financial Institutions business line is expected to generate revenues of $198 million, reflecting a year-over-year increase of 1.5% [3] - Public, Project, and Infrastructure Finance revenues are estimated at $164 million, suggesting a 6.5% increase [3] Structured Finance - Quarterly issuance volumes for collateral debt obligations were strong, but commercial mortgage-backed securities (CMBS) and asset-backed securities (ABS) saw a decline, leading to a projected 6.1% drop in Structured Finance revenues to $123 million [4][10] Overall MIS Division Performance - The consensus estimate for total MIS division revenues is $1.03 billion, indicating a 3.1% year-over-year decline [5] Moody's Analytics Division - Revenues from the Moody's Analytics (MA) division are projected to rise to $876 million, reflecting an 8.7% increase year-over-year due to rising demand and inorganic growth strategies [6][7] Key Developments - Moody's fully acquired ICR Chile in June, enhancing its presence in Latin America's credit markets, although the deal is not expected to materially impact 2025 financial results [8][9] Earnings Expectations - The Zacks Consensus Estimate for earnings is $3.42, representing a 4.3% increase from the previous year, while sales are expected to reach $1.85 billion, a 1.8% rise year-over-year [13]