[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]

Group 1 - Goldman Sachs reports that global investment, manufacturing employment, spending, and overall economic activity remain robust despite uncertainties and challenges [2] - Global trade remains active, indicating the persistence and importance of international trade, with significant rebounds in stock markets across the Atlantic [2] - Moody's analysis suggests that the outcome of Japan's Senate elections may hinder the government's efforts to advance fiscal consolidation in the post-pandemic era [2] Group 2 - Deutsche Bank strategists warn that if the US confirms tariff increases on August 1 alongside disappointing employment reports, it could trigger renewed recession fears [3] - Concerns over the sustainability of US debt may become a central topic of discussion in the market for the second half of the year, with long-term Treasury yields facing upward pressure [3] - Current 10-year US Treasury yield has risen by 2 basis points to 4.392% [3]

Group 1 - Fitch has confirmed Moody's Long-Term Issuer Default Rating (IDR) at "BBB+" with a stable outlook [1]

Core Viewpoint - Analysts forecast Moody's (MCO) will report quarterly earnings of $3.42 per share, reflecting a year-over-year increase of 4.3%, with anticipated revenues of $1.85 billion, up 1.8% from the previous year [1]. Earnings Estimates - Over the last 30 days, the consensus EPS estimate has been revised upward by 1.5%, indicating analysts' reassessment of their initial forecasts [2]. - Changes in earnings estimates are crucial for predicting investor reactions, as empirical studies show a strong correlation between earnings estimate revisions and short-term stock performance [3]. Revenue Projections - Analysts estimate that 'Revenue- Total external customers- Moody's investor services' will reach $977.85 million, down 3.7% year-over-year, while 'Revenue- Total external customers- Moody's Analytics' is projected at $871.28 million, up 8.6% [5]. - 'Revenue- Moody's Analytics- Decision Solutions' is expected to be $409.35 million, reflecting an 11.8% increase year-over-year. 'Revenue- Moody's Analytics- Data and Information' is estimated at $222.57 million, up 6%, and 'Revenue- Moody's Analytics- Research and Insights' at $239.93 million, up 6.2% [6]. - The consensus for 'Revenue- Moody's investor services' is $1.03 billion, indicating a 3.1% decrease from the prior year, while 'Revenue- Moody's Analytics' is projected at $875.94 million, up 8.7% [8]. - Specific revenue estimates include 'Revenue- Moody's investor services- Recurring' at $336.58 million, up 4.2%, and 'Revenue- Moody's investor services- Transaction' at $640.27 million, down 7.5% [7][8]. - 'Revenue- Moody's investor services- Public, project and infrastructure finance' is expected to reach $164.17 million, up 6.6%, and 'Revenue- Moody's investor services- Financial institutions' at $197.98 million, up 1.5% [9]. Stock Performance - Over the past month, Moody's shares have returned +6.8%, outperforming the Zacks S&P 500 composite's +5.4% change, suggesting that MCO will likely perform in line with the overall market in the upcoming period [9].

Core Viewpoint - Moody's analysis indicates that the trade agreement will have a limited impact on improving Japan's economic outlook, highlighting the severe effects of U.S. tariffs on Japanese exports [1] Economic Outlook - Japan's economic prospects are described as extremely bleak, with export data revealing the harsh impact of U.S. tariffs [1] - Even if Japan reaches an agreement to alleviate some of the stricter tariffs, a full return to pre-Trump conditions seems unlikely [1] Trade Relations - Efforts to increase imports of U.S. goods or relax restrictions on U.S. manufactured products have not resulted in tariff relief [1] - Japan, as the largest foreign investor in the U.S., has not received any special treatment in trade negotiations [1] Government Response - The Japanese government has stated it cannot afford to support the economy, further darkening the economic outlook [1] - Although the government has promised assistance to households, there is a lack of strategy to find domestic sources of growth, leading to a weakening of the export-driven growth model [1]

Core Viewpoint - The analysis compares Virtu Financial (VIRT) and Moody's (MCO) to determine which stock is more attractive to value investors, highlighting VIRT's stronger earnings outlook and favorable valuation metrics [1][3][7]. Group 1: Zacks Rank and Earnings Outlook - Virtu Financial has a Zacks Rank of 2 (Buy), indicating a positive earnings outlook, while Moody's has a Zacks Rank of 3 (Hold) [3]. - VIRT is noted to have seen a stronger improvement in its earnings outlook compared to MCO [3][7]. Group 2: Valuation Metrics - VIRT has a forward P/E ratio of 10.67, significantly lower than MCO's forward P/E of 36.41 [5]. - The PEG ratio for VIRT is 0.63, while MCO's PEG ratio is 2.84, suggesting VIRT is more favorably valued in terms of expected earnings growth [5]. - VIRT's P/B ratio stands at 4.34, compared to MCO's P/B of 23.29, further indicating VIRT's relative undervaluation [6]. - These metrics contribute to VIRT's Value grade of B and MCO's Value grade of F [6].

Industry Overview - Big Data refers to the vast amounts of information generated daily from various sources, including online shopping, sensors, social media, and videos, encompassing both structured and unstructured data [1] - The global Big Data market is projected to reach $401.2 billion by 2028, indicating significant growth potential across various industries such as healthcare, finance, retail, and manufacturing [4] Technological Advancements - Artificial intelligence (AI) and advanced machine learning algorithms now enable the processing and analysis of large data sets, enhancing financial decision-making [2] - The use of analytics allows traders to execute prompt trades based on real-time patterns and trends, improving client satisfaction through targeted marketing strategies [3] Company Developments - NVIDIA (NVDA) is at the forefront of AI and Big Data, with its new Blackwell GPU architecture designed for training advanced AI models and running complex simulations more efficiently [6] - Moody's Corporation (MCO) has shifted from traditional ratings to risk analytics, expanding its services and capabilities through acquisitions and the development of tools like the Intelligent Risk Platform (IRP) [5][7] Investment Opportunities - Dell Technologies (DELL) has evolved to focus on building infrastructure for handling large data volumes, receiving over $12 billion in AI server orders in early 2025 [9] - HubSpot Inc. (HUBS) has transformed into a comprehensive platform integrating marketing, sales, and customer service, leveraging AI tools to enhance operational efficiency [11][12] - Microsoft (MSFT) has transitioned into a Big Data and AI powerhouse, with its Azure cloud platform facilitating the storage and analysis of large data sets [13][14]

Core Viewpoint - Moody's maintains Israel's long-term local and foreign currency rating at Baa1, warning that direct military conflict with Iran will further increase fiscal pressure [1] Group 1: Rating and Fiscal Pressure - Moody's indicates that geopolitical risks have led to a weakening of Israel's fiscal situation since October 2023 [1] - The agency expects Israel's debt-to-GDP ratio to peak at around 75% in the medium term due to increased defense spending and slowing economic growth [1] - Prior to the onset of military conflict with Iran, Moody's had projected this ratio to peak at 70% [1]

穆迪：确认以色列的BAA1评级，维持负面展望。 ...