Moody's Earnings Call Highlights Growth and Optimism

Globe and Mail

a day ago

Moody's ((MCO)) has held its Q2 earnings call. Read on for the main highlights of the call.
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Moody's Earnings Call Reflects Positive Sentiment Amid Revenue Growth and Strategic Investments
The recent earnings call for Moody's Corporation conveyed a generally positive sentiment, underscored by notable revenue growth and strategic advancements. While challenges were acknowledged in areas like Corporate Finance and Structured Finance issuance, the overall outlook remains optimistic, driven by strong performance in private credit and Moody's Analytics segments. The company's strategic investments in GenAI and private credit further contribute to this positive sentiment.
Revenue Growth
Moody's reported a revenue of $1.9 billion for the second quarter of 2025, marking a 4% increase year-over-year. The adjusted operating margin saw an improvement to 50.9%, up 130 basis points from the previous year, highlighting the company's robust financial health.
Earnings Per Share Increase
The company achieved a significant milestone with an adjusted diluted EPS of $3.56, reflecting a 9% growth compared to the previous year and a remarkable 60% increase from the same quarter three years ago.
Private Credit Revenue Surge
Private credit-related transactions were a standout, accounting for nearly 25% of first-time mandates. Revenue from private credit grew by an impressive 75% in the second quarter, showcasing the company's strong foothold in this market.
Moody's Analytics Performance
Moody's Analytics segment delivered an 11% revenue growth and a 12% increase in recurring revenue. The adjusted operating margin improved by 360 basis points year-over-year to 32.1%, reflecting the segment's robust performance.
GenAI Integration
The integration of GenAI into Moody's products is progressing well, with approximately 40% of products now featuring some form of GenAI enablement. Early adopter customers have contributed nearly $200 million, with spending growing at twice the rate of Moody's Analytics overall.
Corporate Finance Transaction Revenue Decline
Despite the overall positive outlook, Corporate Finance transaction revenue experienced a 6% decline year-over-year. This was attributed to a slowdown in bank loans issuance and subdued M&A activity.
Structured Finance Issuance Decline
Structured Finance issuance faced a 25% decline in the second quarter due to market volatility and wider spreads in April. However, transaction revenue only saw a 3% decline, thanks to a favorable mix.
KYC Growth Deceleration
The growth of KYC ARR moderated to 15%, impacted by the strategic termination of a long-standing redistribution partnership. This decision affected new business growth but aligns with Moody's strategic direction.
Forward-Looking Guidance
Moody's provided an optimistic forward-looking guidance during the earnings call. The company expects full-year revenue growth in the mid-single-digit percent range and has adjusted its fiscal guidance accordingly. With a focus on disciplined expense management and continued investment in growth opportunities, Moody's remains optimistic about the second half of the year. Strategic investments in private credit markets and partnerships are expected to drive future growth.
In conclusion, Moody's earnings call painted a positive picture of the company's financial health and strategic direction. Despite some challenges in specific segments, the overall sentiment was buoyant, driven by strong revenue growth, strategic investments, and a promising outlook for the future.