MSCI Revenue Climbs 9.1% in Q2 2025

MSCI (MSCI -8.69%), a leading provider of financial indexes, analytics, and investment decision support tools, announced its Q2 FY2025 results on July 22, 2025. The company reported adjusted earnings per share of $4.17, slightly above analyst estimates, and revenue of $772.7 million, just ahead of expectations. Margins expanded, with the operating margin (GAAP) up a full percentage point year-over-year to 55.0%. However, new recurring subscription sales slowed in Q2 2025, and the company acknowledged caution in some product lines, particularly for ESG (Environmental, Social, and Governance) and climate-related products. Overall, the quarter showed stable growth in core segments and strong underlying fee-based revenue, but softer new business and higher cancellations suggest a moderating pace in parts of the business.

Source: Analyst estimates provided by FactSet. Management expectations based on management's guidance, as provided in Q1 2025 earnings report.

Business Overview and Key Focus Areas

MSCI operates at the intersection of finance, data, and technology. Its main business is delivering indexes that track various financial markets and support the growing ecosystem around exchange-traded funds (ETFs) and investment benchmarking. These indexes enable investors to build portfolios, evaluate risk, and compare performance across regions and sectors.

The company has recently focused on broadening its suite of investment tools, advancing sustainability and climate offerings, and integrating advanced technology like artificial intelligence into its analytics and data services. Key factors for success include leading in index innovation, deep client engagement, and constantly updating its product lineup to reflect regulatory developments, investment trends, and client needs. Strategic partnerships, such as those targeting private credit risk analytics and index customization, also support MSCI's competitive position.

Quarter Highlights: Segment Performance and Major Developments

The Index segment, which includes global equity and custom indexes, remained the business's core engine. Revenue in this area grew 9.5% to $434.8 million, with recurring subscriptions up 8.6% and asset-based fees rising 12.7 %, underpinned by record assets in ETFs tracking MSCI indexes. Index segment recurring revenue was supported by steady demand for both standard and customized benchmarks, and the segment’s asset-based fees accelerated thanks to strong market flows into international-focused funds.

By the end of Q2 2025, notional ETF assets under management linked to MSCI indexes reached $2.02 trillion, up 24 % from a year earlier. The segment’s run rate, which measures the forward-looking annualized revenue base, climbed 12.2%. Retention, the percentage of revenue retained from renewals in the Index segment, stood at 96.0%. However, net new recurring subscription sales in Index declined 4.5% compared to the prior year. While AUM gains helped top-line results, client spending appeared more cautious or decision cycles longer amid volatile market conditions.

The Sustainability & Climate segment, covering ESG ratings and climate risk analytics, posted GAAP revenue of $88.9 million. This was an 11.3% increase over the prior year. The segment improved its adjusted EBITDA margin to 35.6%, up from 30.0%, but new business trailed: net new recurring sales dropped 64.5%, with muted demand in the US and evolving regulatory environments cited. Management commented that the trend toward more detailed, analytics-driven sustainability products is reshaping client priorities, impacting short-term growth.

The Analytics segment delivered 7.1% revenue growth to $177.7 million, with recurring subscriptions rising 4.7%. One-time revenue increased, driven by contract-related factors and the timing of implementations. Meanwhile, the Private Assets segment recorded revenue of $71.2 million, up 9.7%. This segment, now focused on private capital solutions, is integrating data partnerships such as the recent Moody’s collaboration for private credit analytics. These partnerships had little immediate financial impact but are intended to help bolster future growth, particularly as transparency and risk analysis gain importance with private market investors.

Operationally, the operating margin (GAAP) reached 55.0%, improving by a full percentage point from last year, while the adjusted EBITDA margin moved up to 61.4%. Total operating expenses were up 6.8%, mostly from increased headcount and higher compensation. Free cash flow (non-GAAP) fell 6.3% to $301.6 million, as expense growth outpaced gains in top-line revenue. Share repurchases totaled $131.2 million, and the company declared a quarterly dividend of $1.80 per share for Q3 2025.

Financial Outlook and What to Watch

Management provided guidance for FY2025, projecting operating expenses of $1.41 billion to $1.45 billion, and free cash flow of $1.40–$1.46 billion for FY2025. These estimates assume that market conditions gradually improve through the year. CFO Andy Wiechmann stated that if market levels remain flat, expenses will likely come in at the low end of the FY2025 guidance range, reflecting a continued focus on expense control in a mixed economic environment.

Looking forward, investors should monitor trends in recurring subscription sales and asset-based fee growth, especially as net new sales in core segments have softened. The evolution of sustainability and climate products will also be central, with management expecting cyclical headwinds but remaining focused on long-term opportunity. Expansion in private asset analytics and uptake of new product partnerships like Moody’s could influence results in the coming quarters. The $1.80 per share quarterly dividend continues to offer a direct capital return to shareholders.

Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.