Moody's adjusted earnings of $4.14 a share miss estimates as revenue growth slows
Key Facts
Moody's reported adjusted earnings of $4.14 a share for the third quarter of 2026, below Wall Street expectations, in results released on the morning of October 21, as revenue growth slowed and leveraged finance debt ratings activity weakened. Analysts had expected adjusted earnings of $4.25 a share on average, according to FactSet data cited by Dow Jones. The company's reported revenue rose 1% year on year to $2.02 billion, continuing to grow despite a decline in revenue at its Investors Service segment. That growth, however, left revenue below analysts' average forecast of $2.08 billion, according to the same report. The results thus missed market estimates for both adjusted earnings per share and revenue in a quarter of diverging performance across the ratings and analytics businesses.
The third-quarter performance followed faster expansion in the preceding second quarter, when Moody's revenue grew 15% year on year, according to Investing's coverage of that period's earnings presentation. Revenue then stood at $2.19 billion, a comparison that places the latest slowdown in quarterly growth alongside a decline in revenue from the previous quarter's level. Adjusted earnings per share had risen 31% year on year in the second quarter to $4.68, according to the same coverage. In the third-quarter ratings business, Investors Service revenue fell 1% year on year to $1.09 billion, according to Dow Jones. The report linked the decline to lower leveraged finance debt issuance, which weighed on the segment's activity during the period. By contrast, investment-grade debt ratings transaction revenue grew 18%, amid strong demand for AI infrastructure financing. This divergence within the ratings business showed continued growth in investment-grade transactions despite a decline in the segment's overall revenue.
The Analytics segment reported third-quarter revenue of $936 million, up 3% from the corresponding period a year earlier, according to Dow Jones. Its growth came as Investors Service revenue declined, supporting Moody's total revenue during the period. Recurring revenue accounted for 99% of total Analytics revenue, according to Investing, making up the overwhelming majority of the segment's quarterly business. At the company level, the adjusted operating margin was 52.6%, according to the same source, as operating expenses grew during the quarter. The margin had stood at 52.9% in the corresponding period of 2025, meaning growth in the analytics business and total revenue coincided with a decline in the adjusted operating margin from its year-earlier level.
Moody's operating expenses rose 2% year on year in the third quarter, according to the earnings statement the company filed with the U.S. Securities and Exchange Commission. The company attributed the increase to spending on investments intended to support growth, alongside higher incentive compensation. It said in the statement that expenses increased with "investments to support growth and higher incentive compensation." Expenses rose faster than revenue during the same period, alongside a decline in the adjusted operating margin. The increase in spending accompanied a slowdown in leveraged finance debt ratings activity, while Analytics and investment-grade debt transactions continued to grow.
In the market, Moody's shares fell 2.81% following the earnings announcement, according to an Investing report published on the day of the release. MCO shares had closed at $475.35 in the October 20, 2026 session, according to EL7 data, before the results were released the following morning. The decline followed the announcement that earnings and revenue had fallen short of analysts' average forecasts. It coincided with the company maintaining its full-year guidance without raising its adjusted earnings per share range. According to Investing, the midpoint of that range remained below analysts' average estimate for the year, alongside the gap between actual quarterly results and market expectations.
Moody's maintained its full-year 2026 adjusted earnings guidance in a range of $16.50 to $17.00 a share, according to Investing. The midpoint of the range is $16.75, compared with analysts' average forecast of $16.90, according to the same source. The company retained this guidance despite slower revenue growth and a decline in Investors Service revenue in the third quarter. In its statement, Moody's scheduled its discussion of the results with investors for October 21, 2026 at 9:00 a.m. U.S. Eastern time. The company also announced that a replay of the discussion would be available after the call.