Moody's Q3 Earnings Beat Estimates on Y/Y Revenue Growth

Moody's MCO has reported third-quarter 2025 adjusted earnings of $3.92 per share, which outpaced the Zacks Consensus Estimate of $3.70. The bottom line grew 22.1% from the year-ago quarter.

The results were primarily aided by an improvement in revenues. Steady demand for analytics and robust performance of the Moody’s Investors Service segment supported the results. The company’s liquidity position was strong in the quarter. However, an increase in operating expenses posed a headwind.

After considering certain non-recurring items, net income attributable to Moody's was $646 million or $3.60 per share, up from $534 million or $2.93 per share in the prior-year quarter.

MCO’s Revenues Improve, Costs Rise

Revenues were $2.01 billion, which surpassed the Zacks Consensus Estimate of $1.96 billion. Also, the top line rose 10.7% year over year.

Total expenses were $1.09 billion, up 1.4% year over year.

Adjusted operating income of $1.06 billion rose 22.5% year over year. The adjusted operating margin was 52.9%, rising from 47.8% a year ago.

Moody's Segment Performance Strong

Moody’s Investors Service (“MIS”) revenues increased 11.8% year over year to $1.10 billion. The rise was driven by strength in Corporate Finance, Financial Institutions, Structured Finance, and Public, Project and Infrastructure Finance revenues.

Moody’s Analytics (MA) revenues rose 9.4% year over year to $909 million. The rise was driven by 11% growth in Decision Solutions, a 7% rise in Research and Insights, and a 9% rise in Data & Information.

MCO’s Balance Sheet Solid

As of Sept. 30, 2025, Moody’s had total cash, cash equivalents and short-term investments of $2.26 billion, down from $2.97 billion as of Dec. 31, 2024.

The company had $7 billion in outstanding debt and $1.25 billion in additional borrowing capacity under the revolving credit facility.

Moody's Share Repurchase Update

In the quarter, MCO repurchased 1 million shares at an average price of $503.66.

As of Sept. 30, 2025, $398 million of share repurchase authorization was available.

On Oct. 21, the company’s board of directors authorized an additional $4 billion in share repurchase authority, with no expiration date.

MCO Updated 2025 Guidance

Moody’s expects adjusted earnings of $14.50-$14.75 per share, changed from the prior target of $13.50-$14.00. 

On a GAAP basis, earnings are projected to be $13.15-$13.40 per share, changed from the earlier mentioned $12.25-$12.75.

Moody’s projects revenues to increase in the high-single-digit percent range, changed from the previous range of mid-single-digit.

Net interest expenses are estimated to be $215-$225 million, changed from the prior range of $220-$240 million.

The adjusted operating margin is expected to be 51%, changed from the previously mentioned 49-50%. The operating margin is likely to be 43-44%, changed from the prior outlook of 42-43%.

Moody’s expects the cash flow from operations to be $2.85 billion, changed from the prior mentioned $2.65-$2.85 billion. The free cash flow is projected to be $2.50 billion, up from the previously stated $2.30-$2.50 billion.

The effective tax rate is projected to be 22-23%, changed from the prior mentioned 23-25%.

MIS segment revenues are expected to increase in the high-single-digit range, changed from the previous guidance of low to mid-single-digit range. The adjusted operating margin is expected to be 63-64%, up from the previously mentioned 61-62%.

Coming to the MA segment, Moody’s anticipates an adjusted operating margin of 33%, changed from the prior stated 32-33%.

Key Q3 Development for Moody’s

In August, MCO announced that it plans to secure a majority equity ownership in MERIS, an affiliate of Moody’s and a domestic credit rating agency in Egypt. The terms of the deal remain under wraps. This move strengthens the firms’ longstanding partnership. It expands Moody’s presence in the Middle East and Africa, reinforcing its commitment to supporting the growth of local capital markets worldwide.

Our Take on MCO

Moody’s remains well-positioned for growth on the back of a solid market position, strength in diverse operations and strategic acquisitions. However, elevated operating expenses and geopolitical and macroeconomic concerns are likely to hurt its financials.

Moody's Corporation Price, Consensus and EPS Surprise

 

Moody's Corporation price-consensus-eps-surprise-chart | Moody's Corporation Quote

Currently, Moody’s carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Earnings Release Dates of Other Finance Stocks

Ares Capital Corporation ARCC is scheduled to announce third-quarter 2025 numbers on Oct. 28. 

The consensus estimate for Ares Capital’s quarterly earnings has been unchanged at 50 cents over the past week. The figure implies a fall of 13.8% from the prior-year quarter’s reported number.

Hercules Capital, Inc. HTGC is slated to report third-quarter 2025 results on Oct. 30. 

The Zacks Consensus Estimate for Hercules Capital’s quarterly earnings has been unchanged at 48 cents over the past week. The figure implies a decline of 5.9% from the prior-year quarter’s actual.

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This article originally published on Zacks Investment Research (zacks.com).

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