Moody’s Earnings Call: Record Year, Confident Outlook

Moody’s ((MCO)) has held its Q4 earnings call. Read on for the main highlights of the call.

Moody’s earnings call painted a strongly upbeat picture, with management highlighting record revenue, widening margins, and record adjusted EPS alongside powerful momentum in private credit and recurring analytics revenue. While they acknowledged divestiture-related growth drag, segment pockets of weakness, and AI monetization timing questions, they framed these as manageable against durable demand and strong cash generation.

Record Revenue and Broad-Based Top-Line Growth

Moody’s reported more than $7.7 billion in 2025 revenue, up 9% year over year and powered by roughly equal contributions from Ratings and Analytics. Management stressed that growth was not dependent on a single pocket of issuance or product, but reflected widespread client demand across corporate, structured, and data-driven solutions.

Margin Expansion and Profitability Upside

Profitability was a major bright spot as adjusted operating margin for Moody’s Corp. expanded to 51.1%, an impressive 300 basis points improvement from last year. Moody’s Analytics also delivered, with its adjusted margin near 36% in Q4 and 190 basis points of expansion in the quarter, underscoring operating leverage despite investment in product and technology.

Record Adjusted EPS and Earnings Momentum

Adjusted diluted EPS reached a record $14.94, up 20% from last year and translating into roughly 70% earnings growth over the past three years, or about a 20% compound annual rate since 2022. Management framed this as evidence that Moody’s can compound earnings faster than revenue by combining scale benefits, mix shift toward higher-margin areas, and disciplined cost control.

Historic Ratings Volume and Market Leadership

Moody’s rated $6.6 trillion of debt in 2025, an all-time high, with Q4 the busiest fourth quarter in company history and more than $70 billion of issuance from marquee issuers like Alphabet, Amazon, and Meta alone. The firm again reinforced its franchise strength by being named Best Credit Rating Agency in the U.S. by Xcel for the 14th consecutive year, underscoring entrenched market leadership.

Private Credit Emerging as a Growth Engine

Private credit remains a breakout area, with related revenue rising 60% in 2025 and activity up 40% in Q4 as more deals seek rating validation and data insight. Management highlighted wins such as being the sole rater on a $1.5 billion Blackstone private credit CLO, arguing that Moody’s is increasingly embedded in the infrastructure of this fast-growing asset class.

Strength in Recurring Revenue and ARR

Recurring revenue represented 97% of Q4 Moody’s Analytics sales and grew 11% in the quarter, providing a stable base that tempers issuance cyclicality. Annualized recurring revenue climbed to $3.5 billion, up 8%, with organic constant currency recurring growth also at 8%, reinforcing the shift toward subscription and platform-like economics.

AI Adoption Driving Stickier and Higher-Value Relationships

AI-enabled products showed striking engagement, as customers using at least one GenAI or AgenTix solution retained at a 97% rate and grew at roughly twice the pace of the broader customer base. CreditLens, the firm’s lending platform, grew about 20% in 2025 and saw an average 67% uplift on eligible renewals, with nearly two-thirds of clients upgrading into the AI-enabled suite.

Ratings Segment Delivers Powerful Quarterly and Annual Results

The Moody’s Investors Service ratings business capped the year with Q4 revenue up 17% year over year, powered by strong issuance across sectors. For the full year, MIS delivered a robust 63.6% adjusted operating margin, expanding 350 basis points, while MIS recurring revenue rose 9% in Q4, giving the ratings arm both cyclical and recurring earnings power.

Strategic Wins and Innovation Underpin Long-Term Edge

Management spotlighted several commercial and product wins, including large banks embedding GenAI-ready data and APIs and integrating Orbis into payments platforms. Interpol is using Moody’s ownership and firmographic data, which management says has already supported significant operational outcomes, and the firm launched a high-definition severe convective storm model calibrated on more than $55 billion of claims data for insurers.

Capital Returns and Shareholder-Friendly Allocation

The company laid out a capital plan for 2026 that includes around $2 billion in share repurchases and a 10% increase in its quarterly dividend. Moody’s also expects free cash flow of $2.8 billion to $3.0 billion, about 13% growth at the midpoint, and committed to returning at least 90% of that cash to shareholders despite higher investment spending.

Early-2025 Tariff Shock and Subsequent Recovery

Management acknowledged a tariff-driven “air pocket” early in 2025 that briefly disrupted market activity and issuance, illustrating the ratings business’ sensitivity to macro news and policy shocks. However, they emphasized that volumes rebounded later in the year, allowing the company to still post record ratings throughput and strong revenue growth.

Divestitures Weigh on Near-Term Reported Growth

The sale of the Learning Solutions business and the planned divestiture of Regulatory Reporting are creating noticeable headwinds to reported growth metrics even as underlying demand remains solid. The Learning Solutions sale alone reduced Moody’s Analytics reported revenue growth by about 180 basis points and is expected to shave roughly one percentage point from total company revenue growth and about two points from MA growth, with additional drag expected from the Regulatory Reporting sale once closed.

Government Cancellations Affect Data & Information Segment

Within Moody’s Analytics, Data & Information revenue was hit by cancellations from multiple U.S. government agencies linked to DOS issues during 2025, creating noise in growth trends. Management stressed that excluding these items, underlying demand for data and information solutions remained healthy, suggesting the impact is more situational than structural.

Mixed Trends Across KYC and Insurance Subsegments

Not all analytics subsegments moved in lockstep, with Know-Your-Customer and insurance solutions seeing weaker ARR trends at points in 2025 despite respectable full-year growth. KYC posted mid-to-high teens growth and insurance about 7%, but the intra-year variability contributed to volatility in Moody’s Analytics performance, reminding investors that portfolio mix still matters.

AI Monetization Pace and Investor Skepticism

Investors pressed management on how quickly AI capabilities will translate into broader ARR acceleration across the customer base, beyond flagship deployments. Moody’s said AI traction is currently concentrated among its largest strategic accounts, driving strong growth and retention there, but acknowledged AI has yet to fully inflect revenue growth across the entire customer population.

FX, M&A, and Timing Create Short-Term Noise

The company reiterated that foreign exchange, acquisition impacts, and revenue recognition timing for upfront or on-premise licenses can make quarterly growth choppy. Management suggested investors focus on underlying constant currency and ARR trends instead of quarter-to-quarter fluctuations, arguing that the long-term trajectory remains firmly upward.

Higher CapEx for Real Estate Projects

Guidance for 2026 bakes in a roughly $100 million increase in capital expenditures tied to building out the New York headquarters and a London office. While this additional real estate spending partially offsets free cash flow growth in the near term, management positioned it as a strategic investment in modern workspaces supporting collaboration and talent retention.

Ongoing Exposure to Market and Execution Risks

Moody’s reminded investors that issuance-driven revenue inherently depends on market conditions, risk appetite, and timing, with its forecasts assuming more activity in the first half of the year. Any downside surprise to issuance or investor demand, or missteps in execution, could pressure ratings revenue versus current assumptions, although management believes diversified analytics revenue and strong balance sheet help buffer these risks.

Forward Guidance Signals Continued Growth and Shareholder Focus

For 2026, Moody’s expects companywide revenue to grow at a high single-digit rate, with adjusted operating margin expanding about 150 basis points to roughly 50%–53% and adjusted diluted EPS between $16.40 and $17.00, or around 12% growth at the midpoint, alongside a 23%–25% effective tax rate. The firm projects free cash flow of $2.8 billion to $3.0 billion despite the extra CapEx, plans roughly $2 billion of share buybacks and a 10% dividend increase, and sees high single-digit revenue growth and around a 65% margin for MIS plus improved mid-to-high single-digit growth and 34%–35% margins for Moody’s Analytics, even after divestiture headwinds.

Overall, Moody’s earnings call underscored a company firing on multiple cylinders with record revenue, earnings, and ratings activity supported by rising recurring analytics revenue and early AI-led product momentum. While divestitures, government cancellations, subsegment variability, and market-dependent issuance introduce some short-term noise, management’s guidance and capital return plans suggest confidence that Moody’s can keep compounding growth and shareholder value in the years ahead.