Moody's Corporation
MCO · NYSE
Next quarter
Reports Oct 28, 2026.
Consensus is $4.26 EPS for Sep 2026 across 8 estimates, ranging $4.15 to $4.35.
MCO Jun 2026
- 10.38%
- -3.57%
- $4.24
- $4.68
- —
- $2.19B
Reported results
- $2.19B
- 76.29%
- $1.05B
- 47.87%
- $878.00M
- $5.03
Highlights
- Earnings beat: Adjusted diluted EPS was $4.68 versus consensus of $4.24, a 10.38% surprise; GAAP diluted EPS was $5.03, up 57% year over year.
- Revenue acceleration: Second-quarter revenue was $2.185 billion, up 15% year over year and 16% on an organic constant-currency basis, versus $2.08 billion in Q1 2026 and $1.898 billion a year ago.
- Ratings strength: Moody’s Investors Service revenue rose 25% to $1.260 billion, with transaction revenue up 34% to $891 million and rated issuance volume up 33%.
- Operating leverage: Adjusted operating margin expanded 440 basis points year over year to 55.3%; GAAP operating margin rose 480 basis points to 47.9% on operating income of $1.046 billion.
- Analytics recurring base: Moody’s Analytics revenue increased 4% to $925 million, or 8% organically in constant currency; recurring revenue rose 7% to $915 million and ARR increased 9% to $3.661 billion.
- Cash generation: Six-month operating cash flow increased 32% to $1.718 billion and free cash flow rose 34% to $1.532 billion.
- Capital return: Moody’s repurchased approximately $2.2 billion of shares and paid $365 million in dividends during the first half, returning about $2.5 billion to shareholders.
- 2026 outlook: Full-year revenue growth guidance remained in the high-single-digit range, while adjusted EPS guidance was narrowed to $16.50-$17.00 from $16.40-$17.00; buyback guidance increased to up to $3.0 billion.
Analysis
Moody’s delivered a strong second quarter, beating the $4.24 consensus adjusted EPS estimate with $4.68, while revenue reached $2.185 billion, up 15% year over year and 5% sequentially from $2.08 billion in Q1. Operating income rose to $1.046 billion from $818 million a year ago and $922 million in the prior quarter, while net income attributable to Moody’s increased to $878 million from $578 million year over year and $661 million sequentially. GAAP EPS benefited from a $181 million pre-tax gain on business divestitures, but adjusted EPS still increased 31% year over year.
The print was defined first by an unusually strong ratings market, with MIS revenue up 25% and issuance volume up 33% across corporate, structured, financial institution and infrastructure finance. Second, Analytics continued to build its recurring base: ARR rose 9% to $3.661 billion and recurring revenue represented 99% of MA revenue, despite reported growth being reduced by divestitures. Finally, cost growth lagged revenue growth, driving a 440-basis-point adjusted margin expansion. Management maintained its high-single-digit revenue outlook, raised the repurchase target, and modestly tightened adjusted EPS guidance, although operating cash flow and free cash flow guidance were reduced.
Ratings issuance surge
- MIS growth: Moody’s Investors Service revenue increased 25% to $1.260 billion, with ratings revenue up 25% to $1.248 billion. Transaction revenue rose 34% to $891 million, while recurring revenue increased 6% to $369 million.
- Broad-based activity: Corporate Finance revenue grew 27% to $651 million, Structured Finance rose 12% to $151 million, Financial Institutions increased 16% to $222 million, and Public, Project and Infrastructure Finance climbed 38% to $224 million.
- Issuance backdrop: Total rated issuance volume increased 33%, including 31% growth in Corporate Finance, 43% in Structured Finance, 29% in Financial Institutions and 44% in Public, Project and Infrastructure Finance. Management cited investment-grade and leveraged-finance activity, ABS and RMBS issuance, banking and private-credit activity, and data-center infrastructure financing.
Analytics recurring base
- Organic performance: Moody’s Analytics revenue rose 4% to $925 million, or 8% on an organic constant-currency basis. Decision Solutions organic constant-currency revenue increased 12% to $421 million, led by Banking at 17%, Insurance at 9% and KYC at 11%.
- Recurring revenue: MA recurring revenue increased 7% to $915 million and represented 99% of segment revenue. Organic constant-currency recurring revenue rose 9%, supported by 14% growth in Decision Solutions recurring revenue.
- ARR growth: MA ARR increased 9% year over year to $3.661 billion. Decision Solutions ARR rose 10% to $1.621 billion, including 13% growth in KYC, while Research and Insights ARR increased 6% and Data and Information ARR rose 8%.
- Reported headwind: MA transactional revenue declined 72% year over year, primarily because of the Learning Solutions divestiture. This explains why reported MA growth of 4% lagged its 8% organic constant-currency growth.
Margin expansion
Revenue growth translated into substantial operating leverage. Consolidated operating expenses increased 5%, below the 15% revenue increase, despite higher incentive compensation and costs supporting growth. Adjusted operating income rose to $1.208 billion from $966 million, lifting adjusted operating margin to 55.3% from 50.9%. MIS produced the largest expansion, with adjusted margin rising 410 basis points to 68.3%; MA margin increased 150 basis points to 33.6%. GAAP operating margin improved to 47.9% from 43.1%, while operating income increased 28% to $1.046 billion.
Cash return and outlook
- Cash generation: Six-month operating cash flow was $1.718 billion, up from $1.300 billion, and free cash flow was $1.532 billion versus $1.140 billion a year earlier. Capital additions were $186 million in the first half.
- Shareholder returns: Moody’s used $2.165 billion for treasury-share purchases and paid $365 million in dividends during the first half. The board declared a quarterly dividend of $1.03 per share, and full-year repurchase guidance increased to up to $3.0 billion from approximately $2.5 billion.
- Guidance changes: Full-year revenue growth remained in the high-single-digit range and adjusted operating margin stayed at 52%-53%. Adjusted EPS guidance moved to $16.50-$17.00 from $16.40-$17.00, while GAAP EPS guidance narrowed to $16.00-$16.50. Operating cash flow guidance was reduced to $3.15-$3.35 billion and free cash flow to $2.7-$2.9 billion.
Divestiture gain
GAAP results included a $181 million pre-tax gain on business divestitures, principally the Moody’s Analytics Regulatory Solutions divestiture, which contributed to the year-over-year increase in net income and GAAP EPS. Moody’s excluded the gain from adjusted results; the reconciliation reduced adjusted diluted EPS by $0.72 in the quarter. The distinction matters because adjusted EPS of $4.68, rather than GAAP EPS of $5.03, better captures the quarter’s recurring operating performance.
