- Price
- $479.78
- Fair value
- $550.00
- Discount
- 12.8%
- Uncertainty
- Medium
- LSEG rating
- 1.96
- Moat
- Wide
- Next earnings
- 2026-10-21
- Next earnings is estimate
- No
- Company name
- Moody's
- Sector
- Credit ratings & financial data
- About
- Moody's has two segments. Moody's Investors Service (MIS) gives credit ratings to bonds, loans and other debt of companies, banks, governments and structured finance deals. Issuers pay a fee for each new rating, which is transaction revenue, and annual fees to keep ratings up to date, which is recurring revenue. Moody's Analytics (MA) sells data, research, software and risk models to banks, insurers and other firms, mostly as subscriptions. In Q2 2026, MIS gave $1.26 billion of revenue and MA gave $925 million. About 99% of MA revenue was recurring, and its annualized recurring revenue (ARR) was $3.7 billion at June 30, 2026. MIS transaction revenue moves with the amount of new debt that companies and governments issue.
- Thesis
- The market discounts Moody's for two reasons. First, investors fear that AI will make data, research and analytics cheaper to produce, which can hurt Moody's Analytics. In early February 2026, a sell-off spread from software companies to financial data firms, and Moody's stock fell more than 17% in 2026 before its February 18 report. Second, rating revenue depends on new debt issuance, which was very strong in Q2 2026, when MIS transaction revenue grew 34%. Investors ask whether this level can last after the Federal Reserve raised rates in September 2026. In October 2026, Morgan Stanley, BMO and JPMorgan cut their price targets before the Q3 report. For the gap to close, MA ARR must keep growing at about 9% or more, which shows that AI does not take its customers. MIS revenue must hold up when issuance growth slows, and Moody's must keep its adjusted operating margin near the 55% of Q2 2026. The first evidence comes with the Q3 2026 report on October 21, 2026, and the 2027 guidance in February 2027. If MA growth holds and issuance stays healthy, the gap can close over the next four to six quarters. If AI tools take share from MA or a credit downturn cuts issuance, the discount can last.
- Risks
- AI tools can make data, research and risk models cheaper to produce. If customers use AI tools in place of Moody's Analytics products, MA growth and pricing can fall. This fear caused a large sell-off in February 2026.
MIS transaction revenue depends on new debt issuance. Issuance was very strong in Q2 2026. Higher interest rates, a credit downturn or market stress can cut issuance and rating fees quickly.
Credit rating agencies are regulated in the US, Europe and other markets. New rules, fines or legal cases about ratings can raise costs or limit fees.
Moody's spends heavily on buybacks, up to $3.0 billion in 2026, and its equity fell from $4.2 billion to $3.2 billion in the first half of 2026. If profit falls, debt can rise relative to EBITDA.
- Balance sheet
- Cash: $1.5B
Debt: $6.9B
Net debt: $5.5B
EBITDA, last 12 months: $4.2B
Net debt / EBITDA: 1.3× (low)
Interest cover: 16×
Debt due within 12 months: $571M
Moody's funds itself with unsecured senior notes of the parent company, in US dollars and euros. At June 30, 2026, debt was $6.38 billion of long-term debt and $571 million of current debt, which includes euro notes due in 2027. Cash includes $29 million of short-term investments. EBITDA is operating income plus depreciation and amortization for the 12 months to June 30, 2026. Interest cover is operating income divided by net interest expense for the first six months of 2026. Moody's has a commercial paper program of up to $1 billion, backed by its revolving credit facility. Total shareholders' equity fell to $3.17 billion from $4.21 billion at December 31, 2025, because Moody's bought back about $2.2 billion of shares in the first half of 2026. Cash fell by $917 million in the same period. Moody's plans buybacks of up to $3.0 billion in 2026. Free cash flow was $1.53 billion in the first half of 2026.
As of 2026-06-30.
- Checkpoints
- Oct 21, 2026: Q3 2026 results: MA growth and rating revenue. Pending. Watch: MA ARR growth of about 9% or more and MIS revenue that still grows from a year earlier pass; MA ARR growth below 8% or a fall in MIS revenue fails.
Feb 2027 (estimate): Full-year 2026 results and 2027 guidance. Pending. Watch: 2027 guidance for revenue growth in the high single digits and higher adjusted EPS passes; guidance for flat revenue or a lower margin fails.
- Recent events
- 2026-10-14: JPMorgan cut its price target to $555 from $570 and kept an Overweight rating. A day earlier, BMO cut its target to $490 from $515.
2026-10-07: Morgan Stanley cut its price target to $470 from $512 and kept a Hold rating.
2026-09-30: Moody's said that it will release Q3 2026 results before the NYSE opens on October 21, 2026.
2026-08-11: Moody's elected Keith Demmings, the CEO of Assurant, to its board, effective November 1, 2026.
2026-07-22: Moody's reported Q2 2026 results. Revenue grew 15% to $2.19 billion, and adjusted EPS grew 31% to $4.68. MIS revenue grew 25%, and MA ARR grew 9% to $3.7 billion. Moody's raised its 2026 buyback plan to up to $3.0 billion and narrowed its 2026 adjusted EPS guidance to $16.50 to $17.00. In Q2 2026, it sold its MA Regulatory Solutions business for a pre-tax gain of $179 million, and in July 2026 it expanded its restructuring program.
2026-04-22: Moody's reported Q1 2026 results. Revenue grew 8% to $2.1 billion, and adjusted EPS grew 13%. It raised its 2026 buyback plan to about $2.5 billion and named Christina Kosmowski as CEO of Moody's Analytics, effective June 2026.