Morningstar (MORN 1.99%), best known for its investment research, data, and analytics offerings, reported quarterly earnings that comfortably beat expectations, driven by margin expansion and continued growth in analytics platforms like PitchBook and the Morningstar Direct Platform. On July 30, 2025, it announced results, reporting adjusted (non-GAAP) EPS of $2.40, ahead of the $2.11 estimate. GAAP revenue was $605.1 million, just topping the $604.57 million consensus. Profitability improved year over year, as operating margin rose despite some soft spots, most notably in free cash flow, which fell sharply mainly due to higher tax payments. Overall, the period featured solid performance in core products, some segment-level headwinds, and early signs of strategic transition in underperforming business lines.
| Metric | Q2 2025 | Q2 2025 Estimate | Q2 2024 | Y/Y Change |
|---|---|---|---|---|
| EPS (Non-GAAP) | $2.40 | $2.11 | $2.01 | 19.4 % |
| EPS (GAAP) | $2.09 | $1.60 | 30.6 % | |
| Revenue (GAAP) | $605.1 million | $604.57 million | $571.9 million | 5.8 % |
| Operating Income (GAAP) | $125.1 million | $108.5 million | 15.3 % | |
| Operating Margin (GAAP) | 20.7 % | 19.0 % | 1.7 pp | |
| Free Cash Flow (Non-GAAP) | $62.4 million | $120.8 million | (48.3 %) |
Source: Analyst estimates for the quarter provided by FactSet.
Inside Morningstar’s Business and Success Factors
Morningstar is a leading provider of independent investment research, data, ratings, and analytics for individual investors, financial advisors, asset managers, and retirement plan providers. It operates a portfolio of technology platforms and data services that help users make informed financial decisions. Products include its Direct Platform for portfolio analysis, the PitchBook platform for private markets, credit ratings services, and ESG (environmental, social, governance) solutions.
The company’s recent strategic focus centers on expanding its core data and analytics offerings, scaling investment management services, and enhancing credit ratings coverage. Success in these areas depends on high-quality, timely data, platform innovation, expanding client segments, and leveraging technology for workflow efficiency. Maintaining strong renewal rates, responding to regulatory changes, and keeping pace with evolving markets are also key.
Quarter Highlights: Revenue Drivers and Segment Trends
The Direct Platform, Morningstar’s flagship analytics and data product, posted revenue of $209.2 million, up 6.2%, with license growth of 0.6%. Recent upgrades to the Direct Platform added new private funds data and improved analytical tools. The PitchBook platform, which delivers private equity and venture capital data, grew sales 9.8% to $166.5 million, driven by demand from institutional investors and advisors. The Morningstar Credit segment, focused on publishing independent credit ratings for various securities, delivered $85.0 million in GAAP revenue, up 9.5%, helped by robust demand in the US and Europe for ratings on structured finance instruments.
The investment management services business showed a mixed picture. The Morningstar Wealth segment, encompassing managed portfolios and advisory tools, saw revenue climb 2.7%. Assets under management or advisement (AUMA) grew 13.0% to $66.8 billion as of June 30, 2025, reflecting inflows and a positive market environment. Operating income improved within Wealth, swinging from a loss to a $3.0 million adjusted operating profit. The Morningstar Retirement line, which provides retirement planning tools and managed account solutions, reported declines in both revenue and profits, as higher marketing costs and compensation pressured margins. Assets in retirement offerings grew to $285.4 billion.
The company’s ESG segment, known as Morningstar Sustainalytics, faced a year-over-year revenue drop to $27.3 million due to streamlining of its ratings offering and lower demand, partly from vendor consolidation among clients. Management highlighted a “targeted reorganization” in this unit, which included $4.9 million in compensation expenses. The Indexes business, which delivers investment benchmarks, was also slightly down.
Operating expenses increased by 3.8%, chiefly on the back of rising salaries inclusive of charges linked to the ESG reorganization. Still, operating margin (GAAP) improved to 20.7%. Share repurchases and dividends continued, with $112.0 million spent on buybacks and $19.3 million paid in dividends. Despite improved profitability, free cash flow fell nearly in half, attributed mainly to timing of higher tax payments. The balance sheet saw an uptick in debt, rising to $838.8 million as of June 30, 2025.
Looking Forward: Outlook and Strategic Watchpoints
Management did not provide explicit financial guidance for the next quarter or the full fiscal year. The company reiterated its strategy of investing in platform enhancements, new data capabilities, and workflow tools for investors and advisors. The release referenced the importance of progressing in key areas like technology innovation, client-centric product design, and further expanding its analytics coverage.
Notable risks cited by Morningstar include the competitive landscape in both credit ratings and ESG data, regulatory changes affecting client demand, and the need to ramp up innovation in artificial intelligence.
Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.
