Moody's Corporation Q4 FY2025 earnings call

2025 was a record year driven by consistent execution. Strong top line performance with total revenue up 9%, adjusted operating margin expanded to 51.1%, adjusted diluted EPS reached a record $14.94. Ratings had busiest fourth quarter in history with $6,600,000,000,000 of debt rated, private credit revenue up 60%. Moody's Analytics had strong net growth, with largest strategic customers contributing over 30% of MA net growth. Scaling decision-grade contextual intelligence into customer workflows, with AI adoption driving greater consumption. Sold Learning Solutions and Regulatory Reporting businesses. Recognized as number one provider in Chartis RiskTech100 for fourth consecutive year. In 2026, growth expected from lending and credit decisioning, KYC and compliance, and insurance. Building AI context layer and knowledge graph. Moody's Ratings broadening methodologies and investing in global footprint. Moody's Analytics advancing strategy to position data as trusted context layer for AI

In 2025, total revenue exceeded $7,700,000,000, up 9% year over year. Ratings revenue was up 9%, with $6,600,000,000,000 of debt rated in 2025, including over $70,000,000,000 in the fourth quarter. Private credit revenue increased 60% in 2025. Moody's Analytics had net growth outpacing 2024, with recurring revenue growing 11% and representing 97% of fourth quarter revenue. MA revenue grew 9% for the full year, adjusted operating margin improved by 240 basis points to 33.1%, ARR reached $3,500,000,000, up 8%. Decision Solutions including KYC, insurance, and banking were key growth engines. KYC had mid to high teens growth, banking delivered 8% ARR growth, insurance had 7% ARR growth, Research and Insights achieved 8% ARR growth, Data and Information delivered 7% ARR growth. MIS fourth quarter revenue was up 17%, full-year adjusted operating margin was 63.6%

For 2026, MIS revenue expected to grow at high single-digit percent pace, operating margin projected at approximately 65%. Moody's Analytics reported revenue guidance at high end of mid-single-digit growth, organic constant currency recurring revenue growth in high single-digit percent range, adjusted operating margin outlook 34% to 35%. MCO revenue growth expected in high single-digit percent range, adjusted operating margin expanding by 150 bps to 50% to 53% range. Adjusted diluted EPS guidance $16.40 to $17.00, implying ~12% growth at midpoint. Effective tax rate expected 23% to 25%. Free cash flow expected $2,800,000,000 to $3,000,000,000, 13% growth at midpoint. Expect to repurchase ~$2,000,000,000 in shares and announced 10% increase to quarterly dividend

No specific risks detailed in the provided transcript beyond general reference to factors in Annual Report on Form 10-K and other SEC filings that could cause actual results to differ from forward-looking statements

Q: From a portfolio perspective, do you feel like you have the right assets and should we expect more paring this year?

A: Feel good about assets and capabilities, focus on lending, KYC, and insurance as areas with strongest right to win, may prune portfolio to focus on scalable growth opportunities.

Q: When is AI really going to contribute and if it is already contributing, are there some other issues elsewhere in the business?

A: Largest accounts growing at twice the rate of rest of portfolio, cohort of customers who bought AI solutions growing twice as fast, most sophisticated institutions have most growth and engagement around AI which will trickle through.

Q: Cadence for the year in terms of issuance trajectory on ratings side?

A: Issuance expected more heavily weighted to first half of year, mid-50s percent of total issuance in first half, revenue expected low to mid-50s percent in first half, mid-teens growth in first half of year, low single-digit in second half.

Q: How much of data is proprietary and sources?

A: Massive proprietary data estate, unifying data into knowledge graph, trusted context layer between raw data and AI reasoning engines, Orbis as example with years of entity resolution, ownership mapping, etc.

Q: AI adoption impact on MA software or vertical solution moat?

A: We will deliver content through software, AI platform, etc., not worried as delivery chassis for content.

Q: How much revenues divestitures affect MA revenue guide for 2026 and ARR?

A: Learning Solutions divestiture has ~1% headwind to MCO revenue growth, ~2% headwind to MA revenue growth, broadly neutral to MA margin, Regulatory Reporting transaction expected to close with ~2% headwind to MA reported revenue growth, 100 basis points tailwind of MCO adjusted expense growth. ARR and constant currency organic recurring revenue adjusted to eliminate divestitures and acquisitions, expected high single digit growth in 2026.

Q: MIS margin guide strengths and medium-term guide?

A: Strengths from revenue and transaction revenue growth, investments in technology and data, automated tools for analysts. Still investing in Moody's Ratings while expanding margin through technology investments.

Q: AI moats and impact on MA and pricing?

A: Moats include proprietary data not public, legal/regulatory, semantic complexity, entity resolution, historical depth, governance. Pricing models starting to trial consumption-based pricing to capture upside from labor replacement