Management commentary
“Moody’s delivered another quarter of strong profitability and earnings growth, with disciplined execution and healthy cash generation amidst an increasingly complex operating environment.
It’s in markets like these that our customers truly value our independent insights and connected intelligence.”
Results
Third Quarter 2026 Highlights
MCO revenue of $2.0 billion increased 1% from the prior-year period and 3% on an organic constant currency 1 basis.
MCO’s operating margin was 44.8% and MCO’s Adjusted Operating Margin 1 was 52.6%.
2Diluted EPS and Adjusted Diluted EPS 1 increased 18% and 6%, respectively, from the prior-year period.
3Year-to-date, operating cash flow was $2,471 million, up 21%, and Free Cash Flow 1 was $2,200 million, up 22%.
Capital return
Returned approximately $3.1 billion to shareholders year-to-date, including $2.6 billion of shares repurchased.
Outlook
Reaffirmed guidance 2 for full-year 2026, including Diluted EPS range of $16.00 to $16.50 and Adjusted Diluted EPS 1 range of $16.50 to $17.00.Guidance reaffirmed
Results
Third Quarter 2026 Financial Results
The following table summarizes the key financial performance measures for the third quarter of 2026.
THIRD QUARTER 2026 SEGMENT RESULTS
Moody’s Analytics (MA)
Revenue increased 3% compared to the prior-year period, or 8% on an organic constant currency 1 basis.
Recurring revenue increased 6% year-over-year, or 9% on an organic constant currency 1 basis, and represented 99% of total MA revenue.
5Transaction revenue declined 76% year-over-year, primarily reflecting the Learning Solutions divestiture and a continued shift toward recurring revenue.
ARR 3 increased 8% year-over-year to $3.7 billion, led by Decision Solutions, which increased 10% year-over-year.
The following table summarizes MA revenue, revenue growth and organic constant currency 1 revenue growth by line of business, and recurring revenue for the third quarter of 2026.
The following table summarizes MA ARR 3 and ARR growth by line of business as of September 30, 2026.
7MIS delivered $1.1 billion in revenue, down 1% year-over-year against a record prior-year comparison, primarily reflecting lower Leveraged Finance issuance.
4Investment Grade revenue growth of 18% year-over-year was supported by strong large corporate financing activity, particularly in the technology sector, including issuance associated with AI-related financing and hyperscaler investments.
Public, Project and Infrastructure Finance revenue growth was driven by U.S. Public Finance, Sovereign and data center-related financing.
Financial Institutions revenue growth reflected recurring revenue growth in banking, while continued momentum in private markets contributed to higher funds & asset management activity, partially offset by lower transactional revenue in banking and insurance.
Structured Finance revenue growth was primarily supported by higher issuance in ABS, RMBS and Covered Bonds.
The following table summarizes MIS revenue and revenue growth by line of business and the split between recurring and transaction revenue for the third quarter of 2026.
The following table summarizes changes in MIS revenue, transaction revenue and rated issuance volume for the third quarter of 2026.
THIRD QUARTER 2026 OPERATING EXPENSES AND MARGIN
8Operating expenses increased 2% versus the prior-year period, as investments to support growth and higher incentive compensation were partially offset by recent business divestitures and continued cost discipline.
MCO operating margin was 44.8%; MCO adjusted operating margin 1 was 52.6%.
MA adjusted operating margin was 35.3%, up 100 bps from the prior-year period, reflecting strong revenue growth and continued investment in the business.
MIS adjusted operating margin was 64.4%.
Foreign currency translation had an immaterial impact on MCO operating and adjusted operating margins 1 .
Capital return
CAPITAL RETURN
Moody’s returned approximately $3.1 billion to shareholders year-to-date, consisting of approximately $2.6 billion in share repurchases and $543 million in dividends.
On October 20, 2026, the Moody’s Board of Directors declared a regular quarterly dividend of $1.03 per share of MCO Common Stock.
The dividend will be payable on December 11, 2026, to shareholders of record at the close of business on November 20, 2026.
Outlook
OUTLOOK
Projected for the Year Ended December 31, 2026
MA RevenueIncrease in the mid-single-digit percent range
Inorganic revenue from acquisitions and divestitures (7)Approximately 4%
FX impactApproximately (0.5)%
MA Organic Constant Currency RevenueIncrease in the high-single-digit percent range
The following reconciles the drivers of projected MCO Operating Expense growth:
Current Guidance
FY 2026 Operating ExpensesIncrease in the mid-single-digit percent range
1Operating Growth2.5 to 3.5%
Incentive and Stock-Based CompensationApproximately 1%
Depreciation and AmortizationApproximately 1%
Reserve for international non-income tax obligation and duplicate rentApproximately 1%
Restructuring ChargesApproximately 0.5%
Acquired and Divested CompaniesApproximately (1.5)%Guidance lowered
(5) Reflects duplicate rent expense related to the transition to Moody’s new global headquarters.
Relocations of Moody’s global headquarters have been infrequent, and accordingly, this duplicate rent does not reflect the Company’s ongoing operating cost structure.
(6) Approximately $75-to-$100 million in incremental capital expenditures is associated with office relocations in New York and London.
(7) Primarily relates to the impact from the divestitures of MA’s Learning and Regulatory Solutions businesses.
ASSUMPTIONS
This outlook incorporates various specific macroeconomic assumptions, including:
Full Year 2026 Moody's Corporation Guidance as of October 21, 2026
Forecasted ItemLast Publicly Disclosed AssumptionCurrent Assumption
U.S. GDP (1) growth1.5% - 2.5% (2)NC
Euro area GDP (1) growth0.5% - 1.5%NC
Global GDP (1) growth2.0% - 3.0% (2)NC
Global policy ratesCentral banks will maintain a tightening bias, with one U.S. Fed rate increase and a further ECB hike likely in 2026Central banks will maintain a tightening bias, with the U.S. Fed and the ECB each likely to raise rates once more by the end of 2026
U.S. high yield spreadsTo widen to around 330 bps in the coming 2 quarters, below the historical average of around 500 bpsTo widen to around 300 bps in the coming quarter, below the historical average of around 500 bps
U.S. inflation rate2.5% - 3.5% (3)NC
Euro area inflation rate2.0% - 3.0% (3)NC
U.S. unemployment rate4.0% to 5.0% during 2026NC
Global speculative grade default rateTo finish at around 3% by year-endTo finish at around 3.8% by year-end
Global MIS rated issuanceIncrease in the mid-single-digit percent rangeNC
GBP/USD exchange rate$1.33 for the remainder of the yearNC
EUR/USD exchange rate$1.14 for the remainder of the yearNC
NC - There is no difference between the Company’s current guidance and the last publicly disclosed guidance for this item.Guidance reaffirmed
Note: All current assumptions are as of October 21, 2026.
(1) GDP growth represents real GDP.
(2) Downside risk from the conflict in the Middle East to undermine the ongoing economic expansion.
(3) Upside risk from sustained high energy prices.
Results
6(1) The Effective Tax Rate (ETR) was 24.0%, lower than 25.4% reported in the prior-year period, reflecting tax benefits recognized pursuant to the lapse of a statute of limitations related to tax exposures assumed in a prior-year M&A transaction, coupled with non-U.S.-related tax benefits.
Table 4 - Non-Operating (Expense) Income, Net (Unaudited)
(2) Interest expense on UTPs and other tax related liabilities in 2026 includes interest accrued relating to a reserve pursuant to an international non-income tax obligation.
Table 5 - Financial Information by Segment (Unaudited)
The table below shows revenue and Adjusted Operating Income by reportable segment.
Adjusted Operating Income is a financial metric utilized by the Company’s chief operating decision maker to assess the profitability of each reportable segment.
Table 6 - Transaction and Recurring Revenue (Unaudited)
The following tables summarize the split between transaction revenue and recurring revenue.
In the MA segment, recurring revenue represents subscription-based revenue and software maintenance revenue.
Transaction revenue in MA represents revenue from one-time sales, including those from perpetual software license fees, software implementation services, risk management advisory projects, and training and certification services.
In the MIS segment, excluding MIS Other, transaction revenue represents the initial rating of a new debt issuance, as well as other one-time fees, while recurring revenue represents recurring monitoring fees of a rated debt obligation and/or entities that issue such obligations, as well as revenue from programs such as commercial paper, medium-term notes and shelf registrations.
In MIS Other, transaction revenue represents revenue from professional services, while recurring revenue represents financial instrument pricing services.
Table 7 - Adjusted Operating Income and Adjusted Operating Margin (Unaudited)
Table 8 - Free Cash Flow (Unaudited)
The increase in both operating cash flow and Free Cash Flow 1 was primarily driven by higher operating income in both segments.
Table 9 - Organic Constant Currency Revenue Growth (Unaudited)
Below is a reconciliation of the Company's reported revenue and growth (decline) rates to its organic constant currency revenue growth (decline) measures:
Table 10 - Key Performance Metrics - Annualized Recurring Revenue (Unaudited)
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