Moody's Corporation third-quarter diluted EPS rises 18% to $4.24 and reaffirms 2026 guidance

Moody's Corporation (MCO) said Wednesday that third-quarter 2026 revenue rose 1% to $2,023 million and diluted earnings per share rose 18% to $4.24, while it reaffirmed full-year 2026 guidance.

The company reported results for the quarter ended Sept. 30 in a press release attached to an 8-K filing dated Oct. 21.

Here's how the company did:

• Revenue: $2,023 million vs. $2,007 million a year earlier
• Diluted EPS: $4.24 vs. $3.60 a year earlier
• Adjusted diluted EPS: $4.14 vs. $3.92 a year earlier
• Operating margin: 44.8% vs. 45.7% a year earlier
• Adjusted operating margin: 52.6% vs. 52.9% a year earlier

The quarter included a $115 million gain on business divestitures, which the company excludes from adjusted results. Net income attributable to Moody's rose to $734 million from $646 million a year earlier. Adjusted diluted EPS rose 6% to $4.14.

Revenue for the first nine months rose 8% to $6,287 million from $5,829 million a year earlier. Year-to-date operating cash flow was $2,471 million, up 21%. Free cash flow, or operating cash flow minus capital additions, was $2,200 million, up 22%.

The effective tax rate was 24.0%, compared with 25.4% a year earlier, reflecting tax benefits from the lapse of a statute of limitations and non-U.S. tax benefits.

"Moody's delivered another quarter of strong profitability and earnings growth, with disciplined execution and healthy cash generation amidst an increasingly complex operating environment," President and Chief Executive Officer Rob Fauber said. "It's in markets like these that our customers truly value our independent insights and connected intelligence."

Segment results

Moody's Analytics revenue rose 3% to $936 million, or 8% on an organic constant currency basis, which excludes acquisitions, divestitures and currency effects. Recurring revenue made up 99% of the segment.

Transaction revenue fell 76% from a year earlier, primarily reflecting the Learning Solutions divestiture and a continued shift toward recurring revenue.

Banking revenue fell 16% to $118 million, while organic constant currency Banking revenue rose 19%.

Annualized recurring revenue, or ARR, rose 8% to $3.7 billion, led by Decision Solutions, which grew 10%. The segment's adjusted operating margin was 35.3%, up 100 basis points from 34.3%.

Moody's Investors Service revenue fell 1% to $1,087 million from $1,098 million, primarily reflecting lower Leveraged Finance issuance, the company said.

Transaction revenue fell 5% to $714 million, while Investment Grade revenue growth of 18% was supported by large corporate financing, including AI-related financing and hyperscaler investments.

Adjusted operating margin for the segment was 64.4%, compared with 65.2% a year earlier.

Operating expenses rose 2% from a year earlier, as investments to support growth and higher incentive compensation were partly offset by recent business divestitures and continued cost discipline.

Guidance and capital return

Moody's reaffirmed full-year 2026 guidance, including diluted EPS of $16.00 to $16.50 and adjusted diluted EPS of $16.50 to $17.00. Operating cash flow is guided to $3.15 billion to $3.35 billion, and free cash flow to $2.7 billion to $2.9 billion.

The company's assumption for the global speculative grade default rate by year-end rose to around 3.8% from around 3%.

Share repurchases for 2026 remain up to $3.0 billion, subject to available cash, market conditions, M&A opportunities and other capital allocation decisions.

Moody's returned approximately $3.1 billion to shareholders year to date, including $2.6 billion of share repurchases and $543 million in dividends.

The board declared a regular quarterly dividend of $1.03 per share on Oct. 20, payable Dec. 11 to holders of record at the close of business Nov. 20.

Costs and headcount

Restructuring charges were $27 million in the quarter, up from $21 million, and the company recorded $7 million of duplicate rent tied to the move to its new New York City headquarters.

Moody's said it has approximately 16,000 employees across more than 40 countries. The filing does not give a quarter-end headcount.