Moody's Corporation (MCO) Earnings

Management highlights

### Leadership Update - Christina Kosmowski joined as CEO of Moody's Analytics in late June 2026, bringing 3 decades of experience scaling technology and analytics businesses, and is already accelerating progress on MA's next strategic chapter ### Moody's Investor Service Strategic Highlights - Broad-based issuance growth driven by multiple secular funding drivers: AI-related infrastructure investment, refinancing activity, private credit, digital finance, energy transition, and emerging market development - 20% of Q2 2026 issuances over $5 billion were tied to AI-related investment and supporting infrastructure, with 80% diversified across other sectors; hyperscaler AI-related debt issuance has already exceeded full-year 2026 forecasts, with projected 2026 hyperscaler CapEx approaching $800 billion - Private credit transaction growth of more than 40% year-over-year, with 110+ new first-time mandates as demand for independent analytical rigor grows - Became the first rating agency to deliver on-chain ratings, extended token integration to the Solana blockchain, and rated BlackRock's $2.6 billion tokenized money market fund - Re-entered the insurance-linked securities market, combining ratings and catastrophe modeling expertise to address the $375 billion global insurance protection gap ### Moody's Analytics Strategic Highlights - Focused on embedding trusted, auditable decision-grade intelligence directly into customer mission-critical workflows for lending, underwriting, and compliance - Launched multiple strategic AI and cloud integrations: Moody's connected intelligence integrated into Amazon QuickSight for AWS customers; all remaining on-premise insurance modeling customers will migrate to the cloud-based Intelligent Risk Platform (IRP), which is now available on AWS Marketplace; launched the first Moody's AI skill for Microsoft 365 Copilot - Over 100 MCP and smart API connections are currently used or trialed by customers, demonstrating strong demand for Moody's proprietary data delivered via AI platforms - Proprietary data covers over 630 million entities; AI-powered screening solutions deliver an approximately 50% reduction in false positive alerts for KYC and compliance use cases - Multiple large customer wins demonstrate platform expansion: grew ARR by nearly 60% with a top 3 U.S. auto and property insurer, more than doubled ARR with a large global APAC life insurer, and deployed an enterprise AI early warning solution across 19 countries for a top 3 Southeast Asian bank ### Company-Wide Strategic Themes - Management highlighted that the dual franchise model combining MIS's ratings capabilities and MA's recurring analytics growth generates strong operating leverage and bottom-line expansion

Guidance

- Full-year 2026 MIS rated issuance growth guidance raised from low single-digit to mid single-digit percent growth; MIS full-year revenue guidance maintained at high single-digit growth - MA full-year ARR growth guidance maintained at high single-digit percent growth; MA full-year adjusted operating margin guidance maintained at 34% to 35%, on track to reach a mid-to-high 30s target by the end of 2027 - Adjusted diluted EPS guidance range raised to $16.50 to $17.00, with a midpoint of $16.75, representing 12% growth year-over-year - Full-year 2026 share repurchase guidance raised to up to $3 billion, up from prior guidance; full-year free cash flow guidance adjusted to $2.7 billion to $2.9 billion, a $100 million downward revision reflecting updated working capital forecasts and restructuring costs - The restructuring program envelope expanded by $100 million and extended through the end of 2027, with expected annualized savings of $300 million to $350 million upon completion - Q3 2026 MIS revenue is expected to be roughly flat year-over-year consistent with normal summer seasonality, with MIS margin following the same seasonal pattern - Full-year 2026 effective tax rate is expected to land at the high end of the 23% to 25% guidance range

Segment performance

1. Moody's Investor Service (MIS): Revenue grew 25% year-over-year, with transaction revenue up 34%. Total rated issuance exceeded $2 trillion for the second consecutive quarter, up 33% year-over-year and 20% year-to-date. Recurring revenue grew 6% to $369 million, with first-time mandates up 45% year-over-year. Adjusted operating margin expanded 410 basis points to 68.3%. Revenue contribution from MIS was not explicitly stated as a percentage of total company revenue. 2. Moody's Analytics (MA): Total reported revenue increased 4% (8% organic constant currency), with recurring revenue growing 7% (9% organic constant currency) to represent 99% of total MA revenue. Transactional revenue declined 72% year-over-year to $10 million, consistent with deliberate portfolio repositioning. Annual Recurring Revenue (ARR) reached approximately $3.7 billion, up nearly 9% year-over-year, with trailing 12-month retention holding at 95%. Adjusted operating margin expanded 150 basis points to 33.6%. ARR breakdown by segment: Decision Solutions represents 44% of total MA ARR and grew 10%; Banking ARR grew 10%; Insurance ARR grew 9%; Research and Insights ARR grew 6%; Data and Information ARR grew 8%.

Risks & headwinds

- Geopolitical volatility and headline risk can trigger risk-off market environments that disrupt debt issuance activity (e.g., high yield market disruption at the start of July 2026) - Extended disruption to global energy flows could put upward pressure on inflation expectations and lead companies to defer M&A and financing activity - The second half of 2026 faces a difficult year-over-year comparable, as the second half of 2025 saw very robust issuance activity - Lower than expected demand or slower than expected migration of on-premise insurance customers to the cloud-based IRP could create uneven growth trajectories for MA's insurance segment - New lower-cost frontier AI models could alter competitive dynamics, though Moody's management views this as a potential tailwind rather than a major risk at this time

Analyst Q&A

• Q: Why is full-year revenue guidance maintained even after stronger than expected Q2 issuance and raised issuance guidance, and what are the key assumptions for the second half? /

  A: Stronger than expected Q2 activity pulled forward the recovery from the Q1 market volatility that management had originally expected to occur in Q3. The upside to issuance is concentrated in lower-yield data center and frequent financial institution issuer transactions, which are less revenue-accretive per dollar of volume than more complex transactions like CLOs or CMBS. The stronger first half performance de-risks the full-year target, leaving management comfortable holding the original annual revenue guidance. Today Moody's is exactly at the full-year planned position at the halfway mark of 2026.

• Q: What are the key potential upside drivers and risks for issuance in the second half of 2026, and how can rising first-time mandates drive upside? /

  A: Key upside risks include stronger than expected M&A activity, hotter than forecast hyperscaler issuance, a potential interest rate cut that would drive incremental opportunistic refinancing, tighter than expected high yield spreads supporting leveraged finance issuance, and a second half issuance split closer to the historical 45% back-half average rather than the guided more front-loaded mix. Key risks include ongoing geopolitical headline risk and energy market disruption. 45% year-over-year growth in first-time mandates builds a strong pipeline of future recurring revenue for MIS.

• Q: What is the growth trajectory for MCP (Model Control Protocol) adoption of Moody's content, and how long can this act as a positive driver? /

  A: MCP and smart API adoption is showing strong early momentum, with large banks among the early paid customers. Demand is driven by five core content sets: AI-ready research, entity data, news, economic data, and credit models. Going forward, the larger opportunity is expanding from simple content access via MCP to agentic connected intelligence embedded deeper into customer workflows, which creates significant long-term runway for growth.

• Q: How do falling AI token costs impact Moody's business, competitive dynamics, and internal efficiency? /

  A: Moody's already actively manages and monitors internal token costs, so it has not experienced the uncontrolled cost growth seen at some peer firms. Management views falling token costs as a net tailwind: lower costs will increase broader AI adoption among customers, which Moody's is well positioned to benefit from, and lower costs will also allow Moody's to innovate faster and cheaper. Moody's core competitive advantage is its proprietary decision-grade intelligence, not just AI model access, so it is insulated from competition from firms that only offer AI wrappers on third-party models.