It has been about a month since the last earnings report for Moody's (MCO Quick QuoteMCO - Free Report) . Shares have lost about 0.7% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Moody's due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the latest earnings report in order to get a better handle on the important catalysts.

Moody's Q2 Earnings Beat Estimates, Revenues & Expenses Rise Y/Y

Moody's has reported second-quarter 2025 adjusted earnings of $3.56 per share, which outpaced the Zacks Consensus Estimate of $3.44. The bottom line increased 8.5% from the year-ago quarter figure.

The results were primarily aided by an improvement in revenues and a steady demand for analytics. The company’s liquidity position was strong in the quarter. However, an increase in operating expenses posed a headwind.

After considering certain non-recurring items, net income attributable to Moody's was $578 million or $3.21 per share, up from $552 million or $3.02 per share in the prior-year quarter.

Revenues Improve, Costs Rise

Revenues were $1.90 billion, beating the Zacks Consensus Estimate of $1.85 billion. Also, the top line grew 4.5% year over year.

Total expenses were $1.08 billion, up 3.6% year over year.

Adjusted operating income of $966 million rose 7.1% year over year. The adjusted operating margin was 50.9%, rising from 49.6% a year ago.

Segment Performance Mixed

MIS segment revenues declined marginally year over year to $1.06 billion. The fall was due to weakness in Corporate Finance and Financial Institutions, partly offset by improvement in Structured Finance revenues.

MA segment revenues rose 10.5% to $891 million. Robust demand for Moody’s proprietary data and unique analytical insights contributed to the rise.

Balance Sheet Strong

As of June 30, 2025, Moody’s had total cash, cash equivalents and short-term investments of $2.29 billion, down from $2.97 billion as of Dec. 31, 2024.

The company had $7 billion in outstanding debt and $1.25 billion in additional borrowing capacity under the revolving credit facility.

Share Repurchases

In the reported quarter, MCO repurchased 0.6 million shares at an average price of $460.76.

2025 Guidance

Given the market volatility and uncertainty and first-half 2025 performance, Moody’s now expects adjusted earnings in the range of $13.50-$14.00 per share, changed from the prior target of the $13.25-$14.00 band.
 
On a GAAP basis, earnings are now projected between $12.25 and $12.75 per share, changed from the earlier mentioned $12.00-$12.75 range.

Moody’s projects revenues to increase in the mid-single-digit percent range.

Operating expenses are expected to rise in the low-to-mid-single-digit percent range. 

Net interest expenses are estimated to be in the range of $220-$240 million. Depreciation and amortization expenses are expected to rise 6%.

Adjusted operating margin is expected to be 49-50%. The operating margin is likely to be 42-43%.

Moody’s expects cash flow from operations in the $2.65-$2.85 billion range. Free cash flow is projected to be in the band of $2.30-$2.50 billion.

The effective tax rate is projected to be 23-25%.

Segment Outlook for 2025

MIS segment revenues are now expected to increase in the low to mid-single-digit range, changed from the previous guidance of stable to mid-single-digit growth.

Adjusted operating margin is expected to be 61-62%.

Coming to the MA segment, Moody’s anticipates revenues to rise in the high-single-digit percentage range.

Adjusted operating margin is expected to be 32-33%. Further, the segment’s organic Annualized Recurring Revenue (ARR) is projected to rise in the high-single-digit percent range.

Medium-Term Targets (Base Year: 2022 and to be Achieved by 2027-end)

Total revenues are projected to rise in the range of high-single to low-double-digit.

Adjusted operating margin is expected to be in the low-50s% range. 

Adjusted earnings are expected to grow in the low-to-mid-teens percentage range. 

Further, MIS and MS segment revenues are anticipated to jump in the range of high-single to low-double-digit percentages.

Additionally, in December 2024, Moody’s CEO approved a Strategic and Operational Efficiency Restructuring Program aimed at improving efficiency and focusing on growth areas. The initiative is expected to generate annual savings of $250–$300 million by consolidating functions, reducing staff, exiting leased office spaces and retiring legacy software. The program involves $170–$200 million in pre-tax personnel-related restructuring charges and an additional $30–$50 million in non-cash charges. It is projected to strengthen operating margins and support strategic investments, with substantial completion by the end of 2026 and related cash outlays continuing through 2027.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates review.

VGM Scores

At this time, Moody's has a average Growth Score of C, though it is lagging a bit on the Momentum Score front with a D. Charting a somewhat similar path, the stock was allocated a grade of F on the value side, putting it in the fifth quintile for value investors.

Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Interestingly, Moody's has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.