Moody's Misses Q3 Estimates as Weak Bond Issuance Weighs on Ratings Revenue

Moody’s Corp. posted third-quarter results that fell short of Wall Street expectations, as weaker corporate bond issuance in leveraged finance dragged on its core ratings business despite a surge in AI-related financing. Shares declined following the report.

The risk assessment and analytics firm reported adjusted diluted earnings per share of $4.14, missing the consensus estimate of $4.31 by 3.9%, according to AlphaStreet. Revenue rose 1.0% year-over-year to $2.02 billion, from $2.01 billion in the same period a year earlier. Adjusted net income reached $717 million.

The company’s Moody’s Investors Service (MIS) division, which provides credit ratings and research, generated approximately $1.1 billion in revenue, down 1% from a year earlier, as total rated issuance declined 2% to roughly $1.7 trillion. Despite the decline, Moody’s said issuance represented the second-highest third-quarter level on record, according to MarketBeat.

**AI Financing Offsets Weaker Leveraged Finance**

The ratings business showed divergent trends across asset classes. Investment-grade revenue rose 18% on 16% issuance growth, supported by financing for AI infrastructure and hyperscaler projects. President and CEO Rob Fauber said issuance tied to AI infrastructure and power investment increased approximately fourfold from the prior-year quarter. He added that AI-related issuance, broadly defined to include data centers and related infrastructure, accounted for more than half of total issuance growth year to date, and represented about 40% of revenue growth.

In contrast, high-yield revenue declined 40% and bank-loan revenue fell 27%, reflecting weaker leveraged-finance issuance and a less favorable revenue mix. Fauber said overall demand for financing remains underpinned by investments in data centers, power generation and transmission, renewable energy, defense, transportation infrastructure and other capital-intensive areas. He also highlighted refinancing needs, noting that maturities across the U.S. and Europe, the Middle East and Africa exceed $5 trillion over the next four years for the second consecutive year.

MIS adjusted operating margin was 64.4%, down about 80 basis points from a year earlier. Recurring revenue rose 8%, supported by new mandates, value-based pricing and growth in monitored credits. First-time mandates increased 40% year over year to the highest quarterly total in five years, prompting the company to raise its full-year first-time mandate outlook to 900 to 950.

Moody’s also said it is acquiring a minority stake in PhilRatings, a Philippine domestic credit rating agency, which would be its sixth domestic credit rating agency affiliate in Asia-Pacific, according to Fauber.

**Analytics ARR Rises 8%**

Moody’s Analytics (MA) reported revenue growth of 3%, or 8% on an organic constant-currency basis. Annualized recurring revenue (ARR) increased about 8% to $3.7 billion, while recurring organic constant-currency revenue grew 9%. Approximately 99% of MA revenue was recurring, and trailing 12-month retention was 95%.

MA adjusted operating margin expanded 100 basis points year over year to 35.3%, which the company attributed to portfolio simplification, technology-platform consolidation and early efficiency gains from artificial intelligence.

Decision Solutions ARR rose 10%, representing about 44% of MA ARR. Within that segment, KYC ARR increased 12%, insurance ARR grew nearly 10%, and banking ARR rose 8%. Lending-suite ARR grew 12%, while growth in more mature banking offerings was more measured. Research & Insights ARR grew about 6%, while Data & Information ARR rose 7%.

The company signed a deal with SAP to launch Moody’s Supplier Intelligence for Ariba, embedding Moody’s data into supplier onboarding, assessment and monitoring workflows. It also announced a private-markets data distribution partnership with one of the world’s largest asset managers.

**AI Adoption Expanding**

Fauber said AI capabilities are being incorporated across Moody’s Analytics products, customer workflows, APIs and Model Context Protocol (MCP) interfaces. Over the past three months, users of Moody’s research MCPs more than quadrupled and usage increased more than tenfold. The number of customers paying for MCP access more than doubled during the quarter, though Fauber noted the business remains at an early stage and starts from a small base. About half of the MCP pipeline by value was created after the end of the second quarter.

Moody’s also cited AI-related adoption in insurance, banking and compliance. Its Risk Data Refinery, used in insurance workflows, converts unstructured submissions into analytics-ready data with around 95% first-pass accuracy. Fauber said Moody’s KYC agents are growing nearly three times faster than the broader KYC business, though from a small base.

During the question-and-answer session, Fauber said customers are seeking both efficiency and improved effectiveness from compliance tools, particularly following recent high-profile fines for KYC and anti-money-laundering lapses at financial institutions. He said Moody’s is working to migrate customers from its older Orbis Catalyst product to the Maxsight platform.

**Guidance Maintained; Share Repurchases Continue**

Moody’s maintained its full-year guidance for revenue growth in the high-single-digit percentage range, adjusted operating margin of 52% to 53%, and adjusted diluted EPS of $16.50 to $17.00. The EPS outlook represents 12% growth at the midpoint, the company said. For MIS, Moody’s continues to expect high-single-digit revenue growth for the full year.

The company’s cautious outlook comes as it navigates a modest growth environment despite diversified revenue streams across ratings and analytics, according to AlphaStreet.

Analyst sentiment remains largely positive on the stock, with Wall Street consensus showing 13 buy ratings and 8 hold ratings, while no analysts recommend selling shares, AlphaStreet reported.