Financial Trends -- 8.0/10
| Metric | FY2021 | FY2022 | FY2023 | FY2024 | FY2025 |
|---|---|---|---|---|---|
| Revenue ($M) | $6,218M | $5,468M | $5,916M | $7,088M | $7,718M |
| MIS Revenue ($M) | $3,977M | $2,873M | $3,046M | $3,986M | $4,317M |
| MA Revenue ($M) | $2,413M | $2,777M | $3,069M | $3,308M | $3,611M |
| Adj EPS | $12.29 | $8.57 | $9.90 | $12.47 | $14.94 |
| Adj Op Margin | 49.9% | 42.6% | 43.9% | 48.1% | 51.1% |
| FCF ($M) | $1,866M | $1,191M | $1,880M | $2,521M | $2,575M |
- Revenue recovered from the FY2022 issuance trough ($5.47B) to a record $7.72B in FY2025, a 41% increase over 3 years. MIS revenue surpassed its FY2021 peak ($3.98B) at $4.32B
- Adj EPS compounded from $8.57 (FY2022 trough) to $14.94 (FY2025) -- a 74% increase in 3 years, driven by operating leverage, margin expansion, and buybacks
- Adj operating margin expanded 850bps from the FY2022 trough (42.6%) to FY2025 (51.1%), demonstrating strong cost discipline through the cycle
- FCF grew from $1.19B (FY2022) to $2.58B (FY2025), a 117% increase. FY2026 guidance of $2.8-3.0B implies further expansion to ~35% FCF margin
- Q4 2025 revenue of $1.89B was +13% YoY despite seasonal softness. Q3 2025 hit a record $2.01B driven by strong issuance volumes
- Adj EPS improved YoY in every quarter: Q4 2025 at $3.64 (+39% YoY) reflects operating leverage and share buybacks. Full-year $14.94 is the sum of all four quarters
- Adj op margin expanded YoY in every quarter. Q3 2025 peaked at 52.9%; Q4 seasonal dip to 48.7% still +490bps YoY. The pattern shows consistent improvement across the cycle
- Quarterly FCF is lumpy but trending higher: Q4 2025 at $777M was +30% YoY, the strongest Q4 in the dataset
- MIS showed strong recovery: Q4 2025 at $995M was +16% YoY, driven by tight credit spreads, hyperscaler jumbo deals, and private credit growth (+40% in Q4). MIS remains the higher-margin, more cyclical segment
- MA delivered steady sequential growth from $802M (Q1 2024) to $946M (Q4 2025), a +18% increase. Q4 2025 was +9% YoY, with recurring revenue now 97% of total MA
- Decision Solutions (within MA) grew from $365M to $450M (+23% over 8 quarters), the fastest-growing sub-segment. DS powers KYC, insurance analytics, and banking solutions
- CFG is the largest and most volatile LOB: Q4 2025 at $480M was +26% YoY, driven by IG refinancing and M&A-related issuance. Q4 seasonal dip from Q3 peak ($576M) is typical
- PPIF showed the strongest Q4 YoY growth at +30% ($149M vs $115M), reflecting infrastructure and data center financing demand
- SFG and FIG were steady at +1% YoY in Q4 2025, though FIG saw strong mid-year performance (Q3 2025 at $208M) driven by private credit mandates
- Private credit is a cross-LOB growth driver: ~400 mandates across ratings, 30% of FIG first-time mandates, and 40% Q4 growth across all private credit asset classes
- MIS margins are exceptional: Q4 2025 at 58.5% was +720bps YoY. Q1 2025 peaked at 66.0%, well above the low-60% medium-term target. FY2026 guidance of ~65% suggests sustained outperformance
- MA margins expanded steadily from 29.7% (Q1 2024) to 35.7% (Q4 2025) -- 600bps of expansion over 8 quarters. This reflects recurring revenue scaling, portfolio pruning (sold Learning Solutions, Regulatory Reporting), and GenAI-driven productivity gains
- FY2026 MA margin guidance of 34-35% implies further expansion from FY2025 at 33.0%. The trajectory suggests 40%+ is achievable over the medium term as divestitures and AI benefits compound
- Total MA ARR grew from $3.06B (Q1 2024) to $3.50B (Q4 2025), +14% over 8 quarters. YoY growth of +7% in Q4 2025 has moderated from prior double-digit rates, a point of investor scrutiny
- DS ARR at $1.58B grew +9% YoY in Q4 2025, the strongest sub-segment. DS powers KYC/compliance, insurance analytics, and banking solutions -- all benefiting from regulatory complexity and AI adoption
- ARR growth deceleration from mid-teens to high-single-digits is a key debate point. Management points to leading indicators: largest strategic customers contributing 30%+ of MA net growth and growing at 2x the rate of the rest; customers who bought at least one AI solution growing at 2x
| Metric | FY2025A | FY2026 Guidance | FY2026E Consensus | Implied Growth |
|---|---|---|---|---|
| Revenue | $7,718M | High-single-digit growth | ~$8.3-8.5B | ~8-10% |
| Adj Op Margin | 51.1% | 52-53% | ~52.5% | +150bps |
| Adj Diluted EPS | $14.94 | $16.40-$17.00 | ~$16.47 | +10-14% |
| FCF | $2,575M | $2,800-$3,000M | ~$2,900M | +13% |
| MIS Adj Margin | 63.6% | ~65% | -- | +140bps |
| MA Adj Margin | 33.0% | 34-35% | -- | +150bps |
- EPS guidance of $16.40-$17.00 implies 10-14% growth, driven by margin expansion and share buybacks (~$2B repurchase program). Consensus at ~$16.47 sits near the low end, suggesting room for upside
- Margin guidance of 52-53% consolidated and ~65% MIS both exceed medium-term targets, reflecting the power of the ratings toll-road at scale
- FCF guidance of $2.8-3.0B implies ~35% FCF margin, up from 33% in FY2025. Capital return of 90%+ of FCF to shareholders via buybacks and dividends (10% dividend increase announced)
FY2025 demonstrated the earnings power of the ratings triopoly at full capacity: revenue grew 9% to $7.72B, adj EPS surged 20% to $14.94, and adj operating margin expanded 300bps to 51.1% -- the highest since FY2021. The recovery from the FY2022 issuance trough has been decisive: 850bps of margin expansion in 3 years, with MIS margins reaching 63.6% (well above the low-60% target) and MA margins expanding 600bps over 8 quarters to 35.7%.
The quarterly data reveals consistent YoY improvement across every metric. Q4 2025 showed MIS revenue +16% YoY (private credit +40%), total revenue +13%, and adj EPS +39%. The seasonal Q4 dip is structural (lower issuance volumes) rather than concerning.
MA transformation is progressing well: recurring revenue at 97%, DS ARR growing 9%, and portfolio pruning (Learning Solutions, Regulatory Reporting divestitures) concentrating the business on higher-growth, higher-margin products. The ARR deceleration from double-digits to 7% is the primary financial concern, though leading indicators (AI cohort growing 2x, strategic customers growing 2x) suggest re-acceleration potential.
FCF generation of $2.58B (33% margin) enables robust capital return: $2B annual buybacks, 10% dividend increase, with 90%+ of FCF returned to shareholders. FY2026 guidance is constructive across all metrics.
Minor deductions: (1) MA ARR growth deceleration to 7% YoY; (2) MIS cyclicality remains a structural risk -- FY2022 proved revenue can drop 28% in a single year; (3) FCF growth was only +2% in FY2025 despite strong operating performance.
Score: 8.0/10 -- Strong revenue recovery, exceptional margin expansion, and robust FCF generation. The ratings toll-road at scale is a powerful earnings compounder. Minor ding for MA ARR deceleration and inherent MIS cyclicality.