Credit rating agency Moody's (NYSE: MCO) reported Q3 CY2025 results topping the market’s revenue expectations, with sales up 10.7% year on year to $2.01 billion. Its non-GAAP profit of $3.92 per share was 6.4% above analysts’ consensus estimates.

Is now the time to buy MCO? Find out in our full research report (it’s free for active Edge members).

StockStory’s Take

Moody’s third quarter results topped analyst expectations, supported by robust revenue growth across both its credit ratings and analytics segments. Management pointed to a surge in debt issuance activity, particularly in leveraged finance and private credit, as a key driver. CEO Rob Fauber noted, “Markets closed with the busiest September on record, and Moody’s notched a new record of our own.” The company also benefited from tight credit spreads and heightened demand in specialty areas like data center financing and emerging market debt. Strong execution on cost control and operating leverage led to a meaningful margin expansion, while investments in technology and analytics helped Moody’s capture opportunities in evolving capital markets.

Looking ahead, Moody’s raised its full-year outlook as management anticipates continued issuance momentum, ongoing strength in private credit, and further margin expansion. Executives highlighted that “refunding needs over the next four years are projected to surpass $5 trillion,” creating a favorable backdrop for future ratings activity. The company expects M&A activity to accelerate, supporting transaction volumes, while increased adoption of its AI-powered analytics solutions and expansion in climate risk offerings are expected to sustain growth. Management cautioned, however, that external risks such as global trade tensions or a prolonged government shutdown could impact activity, but overall believes the operating environment remains constructive for the coming year.

Key Insights from Management’s Remarks

Management attributed Moody’s quarterly outperformance to elevated issuance in leveraged finance and private credit, strong adoption of analytics products, and disciplined cost management. Strategic investments in AI and expansion into new regions also played a role.

• Leveraged finance issuance surge: Moody’s Ratings experienced 12% revenue growth, led by a sharp increase in leveraged loan and high-yield bond activity. Management cited record transaction volumes in speculative-grade debt, with repricing and M&A-driven issuance supporting the strong quarter.

• Private credit as a growth engine: Revenue tied to private credit transactions grew over 60% year-over-year across multiple business lines. The company highlighted growing demand for third-party ratings and analytics as more private deals refinance into public markets, creating new opportunities for Moody’s.

• Analytics recurring revenue expansion: Moody’s Analytics delivered 9% revenue growth, with recurring revenue accounting for 93% of the segment’s total. The company’s Decision Solutions and KYC (Know Your Customer) offerings gained traction beyond traditional financial services, including adoption by technology and social media companies.

• AI-driven product launches and partnerships: The company continued to invest in AI capabilities, launching agentic solutions that embed Moody’s proprietary data into customer workflows and partner platforms like Salesforce. Over 50 domain-specific AI agents have been developed, aimed at automating credit analysis and compliance tasks.

• Emerging markets and portfolio optimization: Moody’s signed a definitive agreement to acquire a majority interest in Egypt’s MIRAS, expanding its footprint in the Middle East and Africa. Additionally, the company divested its Learning Solutions business to focus on scalable, recurring-revenue offerings.

Drivers of Future Performance

Moody’s expects issuance volume, M&A activity, and adoption of advanced analytics to shape its growth trajectory, while emphasizing margin discipline and strategic investment.

• Sustained issuance pipeline: Management anticipates continued high issuance activity, supported by robust refinancing needs and a pickup in M&A transactions. The ongoing build-up of corporate debt maturities, particularly in speculative-grade bonds, is expected to sustain demand for Moody’s Ratings services.

• AI and analytics monetization: The company is focused on scaling its AI-enabled analytics solutions, expanding into banking, insurance, and non-financial sectors. Management believes broader use of proprietary data and workflow automation will drive recurring revenue growth and efficiency gains over the medium term.

• Margin expansion and risk factors: Moody’s is targeting further operating margin improvement through cost optimization, R&D prioritization, and efficiency programs. However, management flagged external risks—such as trade policy uncertainty and potential government shutdowns—that could disrupt capital markets or slow issuance.

Catalysts in Upcoming Quarters

In coming quarters, the StockStory team will monitor (1) the pace and composition of global debt issuance, especially in speculative-grade and M&A-driven categories; (2) the adoption and monetization of Moody’s AI-powered analytics products across banking, insurance, and non-financial sectors; and (3) execution on portfolio optimization, including progress in emerging markets and margin expansion. Potential impacts from macroeconomic and regulatory developments will also be key indicators.

Moody's currently trades at $475.50, down from $484.91 just before the earnings. Is there an opportunity in the stock?See for yourself in our full research report (it’s free for active Edge members).

Our Favorite Stocks Right Now

Donald Trump’s April 2025 "Liberation Day" tariffs sent markets into a tailspin, but stocks have since rebounded strongly, proving that knee-jerk reactions often create the best buying opportunities.

The smart money is already positioning for the next leg up. Don’t miss out on the recovery - check out our Top 5 Strong Momentum Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 183% over the last five years (as of March 31st 2025).

Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 2025) as well as under-the-radar businesses like the once-micro-cap company Tecnoglass (+1,754% five-year return). Find your next big winner with StockStory today.

StockStory is growing and hiring equity analyst and marketing roles. Are you a 0 to 1 builder passionate about the markets and AI? See the open roles here.