Moody’s(MCO) - 2025 Q3 - Quarterly Results

Executive Summary & Highlights Third Quarter 2025 Financial Highlights Moody's Corporation reported strong Q3 2025 results, with consolidated revenue up 11% and diluted EPS growing 23% 3Q 2025 Summary Financials | Metric | 3Q 2025 Value | YoY Change | | :---------------------- | :------------ | :--------- | | MCO Revenue | $2.0 billion | ⇑ 11% | | MA Revenue | $909 million | ⇑ 9% | | MIS Revenue | $1.1 billion | ⇑ 12% | | MCO Diluted EPS | $3.60 | ⇑ 23% | | MCO Adjusted Diluted EPS | $3.92 | ⇑ 22% | YTD 2025 Summary Financials | Metric | YTD 2025 Value | YoY Change | | :---------------------- | :------------- | :--------- | | MCO Revenue | $5.8 billion | ⇑ 8% | | MA Revenue | $2.7 billion | ⇑ 9% | | MIS Revenue | $3.2 billion | ⇑ 6% | | MCO Diluted EPS | $10.26 | ⇑ 13% | | MCO Adjusted Diluted EPS | $11.30 | ⇑ 15% | Management Commentary Management highlighted strong top-line growth, operating leverage, and raised FY2025 adjusted diluted EPS guidance to $14.50-$14.75 - CEO Rob Fauber noted strong top-line growth and significant operating leverage, attributing success to strategic investments[1] - CFO Noémie Heuland reported record MCO and MIS revenue and double-digit EPS growth, raising FY2025 adjusted diluted EPS guidance to $14.50-$14.75, representing 17% year-over-year growth at the midpoint[3] Revenue Analysis Moody's Corporation (MCO) Revenue MCO consolidated revenue increased 11% to $2.0 billion in Q3 2025 and 8% to $5.8 billion YTD, with a 1% favorable FX impact MCO Revenue Performance | Period | Revenue | YoY Growth | FX Impact | | :------- | :---------- | :--------- | :-------- | | 3Q 2025 | $2.0 billion | 11% | +1% | | YTD 2025 | $5.8 billion | 8% | +1% | Moody's Analytics (MA) Revenue MA revenue grew 9% in Q3 and YTD 2025, driven by 11% recurring revenue growth, with ARR increasing 8% to $3.4 billion MA Third Quarter 2025 Revenue MA revenue increased 9% in Q3 2025, with recurring revenue up 11% and transaction revenue declining 19% due to strategic shifts MA Q3 2025 Revenue Growth | Metric | Growth Rate | Organic Constant Currency Growth | | :---------------- | :---------- | :------------------------------- | | Total Revenue | 9% | 6% | | Recurring Revenue | 11% | 8% | - MA's transaction revenue declined by 19% in Q3 2025, reflecting a strategic shift towards subscription-based solutions[19] MA Year-to-Date 2025 Revenue & ARR YTD 2025 MA revenue grew 9%, with recurring revenue up 11%, and ARR reached $3.4 billion, an 8% increase MA YTD 2025 Revenue Growth | Metric | Growth Rate | Organic Constant Currency Growth | | :---------------- | :---------- | :------------------------------- | | Total Revenue | 9% | 7% | | Recurring Revenue | 11% | 8% | MA Annualized Recurring Revenue (ARR) | Metric | Value (Sept 30, 2025) | Growth vs. Sept 30, 2024 | | :------------------------ | :-------------------- | :----------------------- | | Total MA ARR | $3.4 billion | 8% | | Decision Solutions ARR | - | 10% | | Banking ARR | $466 million | 7% | | Insurance ARR | $628 million | 8% | | KYC ARR | $407 million | 16% | | Research and Insights ARR | $970 million | 8% | | Data and Information ARR | $890 million | 7% | Moody's Investors Service (MIS) Revenue MIS revenue grew 12% in Q3 2025, achieving a record quarter, and 6% YTD, with broad-based growth across segments MIS Third Quarter 2025 Revenue MIS revenue increased 12% in Q3 2025, a record quarter exceeding $1 billion for the third consecutive time, driven by Leveraged Finance and infrequent issuer issuance - MIS revenue grew 12% in Q3 2025, reaching a record quarter and exceeding $1 billion for the third successive quarter[31] - Corporate Finance revenue growth was driven by Leveraged Finance issuers, primarily from ongoing refinancing[31] - Financial Institutions revenue growth was attributed to the strongest quarter in over a decade for infrequent issuer issuance in Banking[31] MIS Year-to-Date 2025 Revenue YTD 2025 MIS revenue grew 6%, supported by constructive market conditions and strong investor demand across segments - MIS revenue grew 6% YTD 2025, with market conditions remaining constructive despite tariff and trade volatility[31] - Corporate Finance revenue growth was driven by Investment Grade issuers and improved High Yield issuance[31] - Structured Finance increased primarily from continued momentum in CMBS and CLOs[31] Operating Performance MCO Operating Expenses MCO operating expenses were flat YoY in Q3 2025 due to offsets, and grew 5% YTD, including restructuring and M&A impacts - Q3 2025 operating expenses were generally in line YoY, with investments and salary increases offset by lower incentive compensation and cost efficiency initiatives[37] - YTD 2025 operating expenses grew 5%, including 2% from restructuring charges and 2% from inorganic expense growth from M&A, but were largely offset by savings from restructuring and lower incentive compensation[37] Operating Margin and Adjusted Operating Margin MCO's adjusted operating margin expanded significantly in Q3 2025 by 510 basis points to 52.9%, and reached 51.8% YTD Operating Margin Performance | Metric | 3Q 2025 | YoY Change (bps) | YTD 2025 | YoY Change (bps) | | :-------------------------- | :------ | :--------------- | :------- | :--------------- | | MCO Operating Margin | 45.7% | +500 (approx) | 44.3% | +160 (approx) | | MCO Adjusted Operating Margin | 52.9% | +510 | 51.8% | +240 (approx) | | MA Adjusted Operating Margin | 34.3% | +400 | 32.2% | +270 | | MIS Adjusted Operating Margin | 65.2% | +560 | 65.1% | +260 | Earnings Per Share & Tax Rate Diluted EPS and Adjusted Diluted EPS Diluted EPS and Adjusted Diluted EPS grew 23% and 22% respectively in Q3 2025, driven by improved operating performance EPS Growth | Metric | 3Q 2025 Growth | YTD 2025 Growth | | :------------------- | :------------- | :-------------- | | Diluted EPS | 23% | 13% | | Adjusted Diluted EPS | 22% | 15% | Effective Tax Rate (ETR) Q3 2025 ETR was 24.2%, broadly in line, while YTD 2025 ETR was 25.4%, higher due to prior year tax benefits and state income taxes Effective Tax Rate (ETR) | Period | ETR | Prior Year ETR | Change | | :------- | :---- | :------------- | :----- | | 3Q 2025 | 24.2% | - | Broadly in line | | YTD 2025 | 25.4% | 24.0% | Higher | - The higher YTD 2025 ETR reflects tax benefits recognized in Q3 2024 from uncertain tax position resolutions and an increase in current year state income taxes[45] Capital Allocation & Liquidity Cash Flow and Dividends YTD 2025 operating cash flow was $2,043 million and free cash flow was $1,798 million, both decreasing due to higher tax and incentive payments Cash Flow (YTD 2025) | Metric | Amount | | :------------------------ | :------------- | | Cash flow from operations | $2,043 million | | Free cash flow | $1,798 million | - The decrease in operating and free cash flow was primarily driven by higher tax and incentive compensation payments compared to the prior-year period[49] - A regular quarterly dividend of $0.94 per share of MCO Common Stock was declared, payable on December 12, 2025[49] Share Repurchases Moody's repurchased 1.0 million shares in Q3 2025, and authorized an additional $4 billion in share repurchase authority - Moody's repurchased 1.0 million shares at an average cost of $503.66 per share in Q3 2025[49] - An additional $4 billion in share repurchase authority was authorized on October 21, 2025, supplementing the $398 million remaining as of September 30, 2025[49] Debt and Liquidity As of September 30, 2025, Moody's had $7.0 billion of outstanding debt and an undrawn $1.25 billion revolving credit facility - As of September 30, 2025, Moody's had $7.0 billion of outstanding debt and an undrawn $1.25 billion revolving credit facility[49] Outlook and Macroeconomic Assumptions Full Year 2025 Outlook Overview Moody's updated its full year 2025 outlook, reflecting assumptions on economic conditions, interest rates, inflation, and capital markets - The updated full year 2025 outlook reflects assumptions on economic conditions, interest rates, inflation, foreign currency, and capital markets liquidity[51] - The outlook does not include unclosed acquisitions or dispositions and acknowledges uncertainties from global GDP growth and geopolitical events[51] Key Macroeconomic Assumptions Key macroeconomic assumptions for 2025 include increased U.S. and Global GDP growth forecasts and two federal funds rate cuts in Q4 Updated Macroeconomic Assumptions (Selected) | Forecasted Item | Last Publicly Disclosed Assumption | Current Assumption | | :------------------------ | :------------------------------- | :----------------- | | U.S. GDP growth | 0.5% - 1.5% | 1.5% - 2.5% | | Global GDP growth | 1.5% - 2.5% | 2.0% - 3.0% | | Global policy rates | Expecting two cuts from the U.S. Fed in 2H25. Other Central Banks to maintain easing bias | Two federal funds rate cuts in Q4. Differing inflation outlooks are driving varied monetary policy approaches across other central banks | | U.S. high yield spreads | To widen to around 430 bps over the next 12 months, close to historical average of around 500 bps | To widen to around 480 bps over the next 12 months, close to historical average of around 500 bps | | Global MIS rated issuance | Decrease in the low-single-digit to mid-single-digit percent range | Increase in the mid-single-digit percent range | Teleconference Details Teleconference Details Details for the Q3 2025 earnings teleconference held on October 22, 2025, including webcast and replay information - The teleconference was held on October 22, 2025, at 9:00 a.m. ET, with webcast and replay available via Moody's Investor Relations website[54] About Moody's Corporation About Moody's Corporation Moody's Corporation provides data, insights, and technologies to help customers understand risks and unlock opportunities globally - Moody's provides data, insights, and innovative technologies to help customers develop a holistic view of risks and unlock opportunities[56] - The company has approximately 16,000 employees across more than 40 countries[56] Forward-Looking Statements and Risk Factors Forward-Looking Statements and Risk Factors This section contains forward-looking statements subject to risks and uncertainties, including economic conditions, geopolitical events, and regulatory changes - Statements in this document are forward-looking and involve risks and uncertainties that could cause actual results to differ materially[57] - Key risk factors include uncertain effects of government actions, general economic conditions, geopolitical events, regulatory changes, competition, and operational failures[57] Financial Statements and Reconciliations Consolidated Statements of Operations The unaudited consolidated statements of operations detail Moody's financial performance for Q3 and YTD 2025 and 2024, including revenue, expenses, and EPS Consolidated Statements of Operations (Selected Data) | Metric | 3 Months Ended Sep 30, 2025 | 3 Months Ended Sep 30, 2024 | 9 Months Ended Sep 30, 2025 | 9 Months Ended Sep 30, 2024 | | :------------------------------ | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Revenue | $2,007 million | $1,813 million | $5,829 million | $5,416 million | | Operating income | $917 million | $738 million | $2,581 million | $2,314 million | | Net income attributable to Moody's | $646 million | $534 million | $1,849 million | $1,663 million | | Diluted EPS | $3.60 | $2.93 | $10.26 | $9.09 | Condensed Consolidated Balance Sheet Data The condensed consolidated balance sheet data provides Moody's financial position as of September 30, 2025, and December 31, 2024, detailing assets, liabilities, and equity Condensed Consolidated Balance Sheet (Selected Data) | Metric | Sep 30, 2025 | Dec 31, 2024 | | :------------------------ | :----------- | :----------- | | Total assets | $15,415 million | $15,505 million | | Total liabilities | $11,303 million | $11,778 million | | Total shareholders' equity | $4,112 million | $3,727 million | Condensed Consolidated Statements of Cash Flows The condensed consolidated statements of cash flows present cash flows from operating, investing, and financing activities for YTD 2025 and 2024 Condensed Consolidated Statements of Cash Flows (Selected Data) | Metric (9 Months Ended Sep 30) | 2025 | 2024 | | :----------------------------- | :--- | :--- | | Net cash provided by operating activities | $2,043 million | $2,164 million | | Net cash provided by (used in) investing activities | $44 million | $(875) million | | Net cash used in financing activities | $(2,454) million | $(812) million | | Cash and cash equivalents, end of period | $2,181 million | $2,642 million | Non-Operating (Expense) Income, Net This table details non-operating expense and income components, including interest, FX, and investment gains, for Q3 and YTD 2025 and 2024 Non-Operating (Expense) Income, Net (Selected Data) | Metric | 3 Months Ended Sep 30, 2025 | 3 Months Ended Sep 30, 2024 | 9 Months Ended Sep 30, 2025 | 9 Months Ended Sep 30, 2024 | | :------------------------------------ | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Interest expense, net | $(58) million | $(60) million | $(180) million | $(185) million | | Other non-operating income, net | $8 million | $25 million | $42 million | $45 million | | Total non-operating (expense) income, net | $(50) million | $(35) million | $(138) million | $(140) million | Financial Information by Segment This table provides revenue and Adjusted Operating Income by segment (MA and MIS) for Q3 and YTD 2025 and 2024, highlighting profitability Segment Revenue and Adjusted Operating Income (3 Months Ended Sep 30) | Segment | Total External Revenue (2025) | Adjusted Operating Income (2025) | Adjusted Operating Margin (2025) | Total External Revenue (2024) | Adjusted Operating Income (2024) | Adjusted Operating Margin (2024) | | :------ | :---------------------------- | :------------------------------- | :------------------------------- | :---------------------------- | :------------------------------- | :------------------------------- | | MA | $909 million | $313 million | 34.3% | $831 million | $253 million | 30.3% | | MIS | $1,098 million | $749 million | 65.2% | $982 million | $614 million | 59.6% | | Consolidated | $2,007 million | $1,062 million | 52.9% | $1,813 million | $867 million | 47.8% | Segment Revenue and Adjusted Operating Income (9 Months Ended Sep 30) | Segment | Total External Revenue (2025) | Adjusted Operating Income (2025) | Adjusted Operating Margin (2025) | Total External Revenue (2024) | Adjusted Operating Income (2024) | Adjusted Operating Margin (2024) | | :------ | :---------------------------- | :------------------------------- | :------------------------------- | :---------------------------- | :------------------------------- | :------------------------------- | | MA | $2,656 million | $858 million | 32.2% | $2,432 million | $721 million | 29.5% | | MIS | $3,173 million | $2,164 million | 65.1% | $2,984 million | $1,954 million | 62.5% | | Consolidated | $5,829 million | $3,022 million | 51.8% | $5,416 million | $2,675 million | 49.4% | Transaction and Recurring Revenue This table breaks down revenue into transaction and recurring components for MA and MIS segments for Q3 and YTD 2025 and 2024 Total Moody's Corporation Revenue Mix (3 Months Ended Sep 30) | Revenue Type | 2025 Amount | 2025 % of Total | 2024 Amount | 2024 % of Total | | :----------- | :---------- | :-------------- | :---------- | :-------------- | | Transaction | $787 million | 39% | $705 million | 39% | | Recurring | $1,220 million | 61% | $1,108 million | 61% | | Total | $2,007 million | 100% | $1,813 million | 100% | Total Moody's Corporation Revenue Mix (9 Months Ended Sep 30) | Revenue Type | 2025 Amount | 2025 % of Total | 2024 Amount | 2024 % of Total | | :----------- | :---------- | :-------------- | :---------- | :-------------- | | Transaction | $2,255 million | 39% | $2,159 million | 40% | | Recurring | $3,574 million | 61% | $3,257 million | 60% | | Total | $5,829 million | 100% | $5,416 million | 100% | Adjusted Operating Income and Adjusted Operating Margin Reconciliation This table reconciles U.S. GAAP operating income to adjusted operating income, excluding specific charges, to assess core operating performance Adjusted Operating Income Reconciliation (3 Months Ended Sep 30) | Metric | 2025 | 2024 | | :------------------------------ | :--- | :--- | | Operating income | $917 million | $738 million | | Depreciation and amortization | $123 million | $108 million | | Restructuring | $21 million | $6 million | | Charges related to asset abandonment | $1 million | $15 million | | Adjusted Operating Income | $1,062 million | $867 million | | Operating margin | 45.7% | 40.7% | | Adjusted Operating Margin | 52.9% | 47.8% | Free Cash Flow Reconciliation This table reconciles net cash from operating activities to Free Cash Flow for YTD 2025 and 2024, a key metric for cash available Free Cash Flow Reconciliation (9 Months Ended Sep 30) | Metric | 2025 | 2024 | | :-------------------------------- | :--- | :--- | | Net cash provided by operating activities | $2,043 million | $2,164 million | | Capital additions | $(245) million | $(243) million | | Free Cash Flow | $1,798 million | $1,921 million | Organic Constant Currency Revenue Growth Reconciliation This table reconciles reported revenue growth to organic constant currency growth, excluding FX and acquisitions, for MCO and MA segments MCO Organic Constant Currency Revenue Growth (3 Months Ended Sep 30) | Metric | 2025 Revenue | 2024 Revenue | Change | Growth | | :------------------------------ | :----------- | :----------- | :----- | :----- | | MCO reported revenue | $2,007 million | $1,813 million | $194 million | 11% | | Organic constant currency MCO revenue | $1,970 million | $1,813 million | $157 million | 9% | MA Organic Constant Currency Revenue Growth (3 Months Ended Sep 30) | Metric | 2025 Revenue | 2024 Revenue | Change | Growth | | :----------------------------- | :----------- | :----------- | :----- | :----- | | MA reported revenue | $909 million | $831 million | $78 million | 9% | | Organic constant currency MA revenue | $882 million | $831 million | $51 million | 6% | Annualized Recurring Revenue (ARR) Metrics This table presents MA's Annualized Recurring Revenue (ARR) on an organic constant currency basis as of September 30, 2025 and 2024 MA Annualized Recurring Revenue (ARR) (September 30) | Segment | 2025 ARR | 2024 ARR | Change | Growth | | :------------------------ | :------- | :------- | :----- | :----- | | Decision Solutions | $1,501 million | $1,370 million | $131 million | 10% | | Research and Insights | $970 million | $899 million | $71 million | 8% | | Data and Information | $890 million | $832 million | $58 million | 7% | | Total MA ARR | $3,361 million | $3,101 million | $260 million | 8% | Adjusted Net Income and Adjusted Diluted EPS Reconciliation This table reconciles U.S. GAAP net income and diluted EPS to adjusted measures, excluding specific items, for a clearer view of core earnings Adjusted Net Income Reconciliation (3 Months Ended Sep 30) | Metric | 2025 | 2024 | | :------------------------------------------ | :--- | :--- | | Net Income attributable to Moody's common shareholders | $646 million | $534 million | | Net Acquisition-Related Intangible Amortization Expenses | $41 million | $39 million | | Net restructuring | $16 million | $5 million | | Net charges related to asset abandonment | $1 million | $12 million | | Net gain on previously held equity method investments | $0 million | $(5) million | | Adjusted Net Income | $704 million | $585 million | Adjusted Diluted EPS Reconciliation (3 Months Ended Sep 30) | Metric | 2025 | 2024 | | :------------------------------------------ | :--- | :--- | | Diluted EPS attributable to Moody's common shareholders | $3.60 | $2.93 | | Net Acquisition-Related Intangible Amortization Expenses | $0.22 | $0.21 | | Net restructuring | $0.09 | $0.03 | | Net charges related to asset abandonment | $0.01 | $0.07 | | Net gain on previously held equity method investments | $0.00 | $(0.03) | | Adjusted Diluted EPS | $3.92 | $3.21 | Full Year 2025 Guidance This table provides Moody's updated full year 2025 guidance for key financial metrics and segment performance, including adjusted measures Full Year 2025 Moody's Corporation Guidance (as of Oct 22, 2025) | Metric | Last Publicly Disclosed Guidance | Current Guidance | | :------------------------ | :------------------------------- | :--------------- | | MCO Revenue | Increase in the mid-single-digit percent range | Increase in the high-single-digit percent range | | Operating Margin | 42% to 43% | 43% to 44% | | Adjusted Operating Margin | 49% to 50% | Approximately 51% | | Diluted EPS | $12.25 to $12.75 | $13.15 to $13.40 | | Adjusted Diluted EPS | $13.50 to $14.00 | $14.50 to $14.75 | | Operating Cash Flow | $2.65 to $2.85 billion | Approximately $2.85 billion | | Free Cash Flow | $2.30 to $2.50 billion | Approximately $2.5 billion | | Share Repurchases | At least $1.3 billion | At least $1.5 billion | Full Year 2025 Segment Guidance (as of Oct 22, 2025) | Segment Metric | Last Publicly Disclosed Guidance | Current Guidance | | :------------- | :------------------------------- | :--------------- | | MA Revenue | Increase in the high-single-digit percent range | NC | | MA Adjusted Operating Margin | 32% to 33% | Approximately 33% | | MIS Revenue | Increase in the low-single-digit to mid-single digit percent range | Increase in the high-single-digit percent range | | MIS Adjusted Operating Margin | 61% to 62% | 63% to 64% |