Moody's Q2 Earnings Call Highlights
Key Points
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- Moody’s posted a strong second quarter, with enterprise revenue up 15%, adjusted operating income up 25%, and adjusted diluted EPS up 31% to $4.68. The company also raised its full-year EPS midpoint and increased share repurchase guidance to as much as $3 billion.
- The ratings business benefited from heavy issuance, as Moody’s Investors Service revenue rose 25% and transaction revenue jumped 34%. Management said AI-related financing, refinancing, private credit and infrastructure activity were major drivers, and rated issuance was up 33% year over year in the quarter.
- Moody’s Analytics continued to expand, with ARR reaching about $3.7 billion, up nearly 9%, and recurring revenue making up 99% of segment revenue. The company highlighted growing demand for AI-enabled workflow tools across banking, insurance and compliance, while maintaining its full-year growth and margin outlook.
Moody's (NYSE:MCO) reported what President and CEO Rob Fauber called a “standout second quarter,” with broad-based growth across its ratings and analytics businesses and higher select full-year guidance metrics.
On the company’s second-quarter 2026 earnings call, Fauber said enterprise revenue rose 15%, adjusted operating income increased 25%, adjusted operating margin expanded 440 basis points to 55.3%, and adjusted diluted earnings per share grew 31% to $4.68.
“I think what's most encouraging is not just the strength of the quarter, but how broad-based it was,” Fauber said.
Moody’s raised its expectations for rated issuance growth to the mid-single-digit percent range for the full year and narrowed its adjusted diluted EPS guidance to $16.50 to $17.00, increasing the midpoint to $16.75. The company also raised full-year share repurchase guidance to up to $3 billion.
Ratings Business Benefits From Strong Issuance
Moody’s Investors Service delivered 25% revenue growth in the quarter, supported by what executives described as broad-based strength across asset classes. Transaction revenue rose 34%, and Moody’s rated more than $2 trillion of debt for the second consecutive quarter. Adjusted operating margin in MIS expanded 410 basis points from a year earlier to 68.3%.
Fauber said issuance growth was supported by several “funding deep currents,” including refinancing, AI-related investment, private credit, digital finance, energy transition and emerging markets. He highlighted a roughly $4 billion financing for Beacon Point DC, a 350 megawatt hyperscale data center campus developed by Hut 8, as an example of AI-related capital formation.
“AI is becoming one of the largest capital formation stories in the global economy,” Fauber said, adding that financing needs extend beyond data centers into power, infrastructure and other sectors.
Fauber said hyperscalers have already exceeded Moody’s 2026 issuance forecast and have issued more debt this year than in the prior three years combined. He also said that even excluding AI data center and hyperscaler activity, issuance grew double digits year to date.
CFO Noémie Heuland said rated issuance was up 33% year over year in the quarter and 20% year to date. She said results were not driven by a single market dynamic and that revenue growth outpaced issuance growth in several areas because of favorable transaction mix and larger, more complex mandates.
Recurring revenue in MIS increased 6% to $369 million, supported by pricing initiatives, new mandates and growth in monitored credit. Heuland said first-time mandates increased by about 45% and are on pace for the company’s full-year expectation of 750 to 850.
Analytics ARR Grows as Moody’s Emphasizes Workflow Integration
Moody’s Analytics continued to grow recurring revenue, with annualized recurring revenue reaching approximately $3.7 billion, up nearly 9% from the prior year. Trailing 12-month retention remained at 95%. Adjusted operating margin in the segment expanded 150 basis points to 33.6%.
Heuland said Moody’s Analytics revenue increased 4% as reported, or 8% on an organic constant currency basis, following recent divestitures that closed in the second quarter. Recurring revenue grew 7% as reported, or 9% on an organic constant currency basis, and represented 99% of Moody’s Analytics revenue. Transactional revenue declined 72% year over year to about $10 million, which she said was consistent with deliberate portfolio repositioning.
Decision Solutions remained the primary growth engine in Moody’s Analytics, accounting for 44% of total ARR and growing 10%. Within that business, KYC ARR grew 13%, banking ARR grew 10%, insurance ARR grew 9%, Research and Insights ARR grew 6%, and Data and Information ARR grew 8%.
Fauber said the analytics business is focused on embedding “trusted decision-grade intelligence” into lending, underwriting, compliance and other workflows. He pointed to integrations with Amazon and Microsoft, including bringing Moody’s Connected Intelligence into Amazon Quick and launching an AI skill on Microsoft 365 Copilot Cowork.
Moody’s also said it now has more than 100 MCP and Smart API connections being used or trialed by customers. In response to an analyst question, Fauber said early demand is being driven by AI-ready research, entity data, news, economic data and credit models.
Company Highlights AI, Insurance and Banking Use Cases
Fauber emphasized the role of artificial intelligence both as a driver of capital markets activity and as a component of Moody’s product strategy. He said Moody’s has more than 630 million entities in its company data estate and that proprietary ownership linkages remain one of its most heavily used data sets in KYC and across the company.
In compliance, Fauber said Moody’s AI-powered screening solutions are helping customers reduce false positive alerts by approximately 50%. He also cited a competitive win in EMEA with a Global Fortune 500 home appliance maker, where Moody’s displaced an incumbent by combining company data, credit models and intelligence screening for third-party risk management.
In insurance, Moody’s is migrating customers from on-premise modeling products to its cloud-based Intelligent Risk Platform. Fauber said a top-three U.S. auto and property insurer expanded ARR with Moody’s by nearly 60%, reflecting demand for geospatial AI integration into property underwriting and broader adoption across personal and business lines.
In banking, Fauber said Moody’s moved from proof of concept to production with a top-three Southeast Asian bank on an AI-enabled early warning solution across 19 countries, producing 20% ARR growth with that customer. He also described an expansion with a major regional bank in the Northwestern U.S. that lifted ARR by 8%.
Guidance Holds Despite Strong First Half
Heuland said Moody’s is maintaining high-single-digit revenue guidance for MIS and high-single-digit ARR growth guidance for Moody’s Analytics, even after raising the issuance outlook. She said the higher issuance expectation is concentrated in project and infrastructure finance and banking, including more data center activity and frequent banking issuers, which can carry lower average revenue yields.
“The increase in volume doesn't translate one-on-one into incremental revenue,” Heuland said during the question-and-answer session.
For MIS, the company expects low-single-digit revenue growth in the third quarter as market activity slows through the summer, with fourth-quarter revenue roughly flat versus the prior year. For Moody’s Analytics, Heuland said margin expansion remains on track, with full-year adjusted operating margin guidance of 34% to 35%.
Moody’s also expanded its restructuring program envelope by $100 million and extended the program through year-end 2027. Heuland said the full program is expected to result in annualized savings of $300 million to $350 million when completed.
Free cash flow was $688 million in the quarter, up 47% year over year. Moody’s adjusted full-year free cash flow guidance to $2.7 billion to $2.9 billion, reflecting working capital expectations and restructuring costs. Heuland said the company is on track to return more than 130% of free cash flow to shareholders this year, supported by proceeds from recent portfolio actions.
Executives Cite Constructive Markets but Note Risks
Asked about potential upside and downside for issuance in the second half, Fauber said stronger M activity, continued hyperscaler and data center issuance, controlled inflation and possible rate cuts could support further financing activity. He also noted that high-yield spreads remain tight by historical averages and that Moody’s speculative-grade default rate outlook continues to decline.
At the same time, Fauber said headline risks remain, including possible “risk-off” windows, energy flow disruptions, inflation pressure and deferred M He also noted that the second half of 2025 created a difficult comparison because it was “very robust.”
“Net-net, I think we have a very constructive environment heading into the second half of the year,” Fauber said.
About Moody's (NYSE:MCO)
Moody's Corporation is a global provider of credit ratings, research, data and analytics that support financial decision-making and transparency in capital markets. The company traces its origins to the early 20th century when financial analyst John Moody began publishing credit information; today Moody's is headquartered in New York and serves a broad set of market participants including investors, issuers, financial institutions, corporations, governments and regulators.
Moody's operates primarily through two complementary businesses.
This instant news alert was generated by narrative science technology and financial data from MarketBeat in order to provide readers with the fastest reporting and unbiased coverage. Please send any questions or comments about this story to [email protected].
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