Moody's (MCO 1.32%), a leading provider of credit ratings, research, and risk analytics, released its results for the second quarter of fiscal 2025 on July 23, 2025. The company reported GAAP revenue of $1.90 billion, topping analyst expectations of $1.85 billion (GAAP). Adjusted earnings per share (Non-GAAP) came in at $3.56, ahead of the $3.39 consensus forecast (non-GAAP). Moody's also expanded its operating margin and saw strong recurring revenue growth from its analytics business. Overall, the quarter showed positive surprises on both revenue and profits, with clear momentum in analytics and technology-driven products, but also flagged slower growth in core ratings activity.
| Metric | Q2 2025 | Q2 2025 Estimate | Q2 2024 | Y/Y Change |
|---|---|---|---|---|
| EPS (Non-GAAP) | $3.56 | $3.39 | $3.28 | 8.5% |
| Revenue (GAAP) | $1.90 billion | $1.85 billion | $1.82 billion | 4.4% |
| Operating Margin | 43.1% | 42.7% | 0.4 pp | |
| Adjusted Operating Margin | 50.9% | 49.6% | 1.3 pp | |
| Free Cash Flow (Non-GAAP) | $1.14 billion* | $1.29 billion | (11.6%) |
Source: Analyst estimates provided by FactSet. Management expectations based on management's guidance, as provided in Q1 2025 earnings report.
Business Overview and Key Success Factors
Moody's is a global risk assessment and data analytics firm, best known for its credit rating services. It delivers financial intelligence through two main business segments: Moody's Investors Service, which provides credit ratings and research, and Moody's Analytics, which offers risk management software, data, and financial modeling tools.
The company's recent focus centers on three areas: expanding recurring revenue from analytics, innovating with artificial intelligence (AI) and automation, and maintaining regulatory compliance amid new digital regulations. These areas are central to sustaining growth, building client trust, and managing operational risks as financial regulations and technologies evolve.
Quarter Highlights: Financial and Strategic Developments
The quarter reflected solid growth, particularly in Moody's Analytics, which posted 11% revenue growth, outpacing the group as a whole. This segment benefited from strong demand for recurring risk management products. Notably, recurring revenue made up 96% of Moody's Analytics revenue, and grew by 12% versus the prior-year period
Key product families in analytics include Decision Solutions (risk and compliance software for banking, insurance, and Know Your Customer or KYC verification), Research & Insights (credit research and market analysis), and Data & Information (financial and market data services). Decision Solutions revenue grew 13%, led by KYC at 22% in the second quarter and insurance solutions at 14% in the second quarter. The company also highlighted advances in AI-powered tools, such as the Research Assistant for automating data review and new generative AI agents for KYC screening. These innovations drove a 360 basis point increase in the adjusted operating margin for analytics, reaching 32.1%.
Moody's Investors Service, the credit ratings business, saw stable GAAP revenue compared to the prior year. This decline was offset by a favorable revenue mix. Adjusted operating margin for the MIS segment rose to 64.2%. However, overall ratings revenue growth slowed, with the segment now more reliant on recurring monitoring and non-issuance income streams.
For the company overall, consolidated adjusted operating margin expanded to 50.9%, reflecting ongoing efficiency programs and sharper focus on cost management. Operating expenses rose 4%, driven in part by restructuring charges and recent acquisitions. Free cash flow was $1.14 billion for the first six months of 2025, mostly due to higher tax and compensation expenses.
Moody's continued its track record of returning value to shareholders, repurchasing 0.6 million shares during the quarter. The board approved an 11% increase in the quarterly dividend, raising it to $0.94 per share, as declared on July 22, 2025.
Looking Ahead: Guidance and Key Trends
Moody's provided updated guidance for the full year. It affirmed expectations for consolidated revenue growth in the mid-single-digit percent range, and kept its adjusted operating margin target at 49–50%. The company raised and narrowed its adjusted (non-GAAP) earnings per share estimate to $13.50–$14.00, up from $13.25–$14.00 previously. For the Analytics segment, revenue and annualized recurring revenue (ARR) targets remain in the high-single-digit percent range; for the Investors Service segment, revenue growth expectations were shifted up slightly to low- to mid-single digits, reflecting recent revenue mix improvements despite soft market issuance.
Management's outlook assumes modest economic growth in the U.S. and Europe, persistent but manageable inflation, and a decline in global MIS rated bond issuance volumes in the low- to mid-single-digit percent range for the full year. The company also cited enhanced adoption and customer interest in new AI-driven product features. Investors should watch for further changes in debt issuance activity (a key factor for the ratings business), the rate of recurring revenue gains in analytics, and how structural cost programs affect free cash flow in the quarters ahead. The quarterly dividend was raised 11% to $0.94 per share, as declared on July 22, 2025.
Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.
