Moodys Corp /De/ Q1 FY2026 Earnings Call

Good day, everyone, and welcome to the Moody's Corporation First Quarter 2026 Earnings Call. At this time, I would like to inform you that this conference is being recorded. The call is scheduled to last approximately 1 hour. I will now turn the call over to Shivani Kak, Head of Investor Relations. Please go ahead.

Hello, and thank you for joining us today. I'm Shivani Kak, Head of Investor Relations at Moody's. This morning, we reported our first quarter 2026 results. The press release and today's presentation are posted at ir.moodys.com. We'll reference non-GAAP or adjusted measures; please see the tables in our earnings release for reconciliations to U.S. GAAP. Today's remarks may include forward-looking statements under the Private Securities Litigation Reform Act of 1995; please see the safe harbor language in our earnings release and the risk factors and the MD&A in our most recent Form 10-K and other SEC filings available on our website and the SEC's website. These factors could cause actual results to differ materially from those expressed or implied. Members of the media may be listening in a listen-only mode. With that, I'll turn it over to Rob.

Hey everybody, and thanks for joining us. Q1 was a strong start to the year despite a volatile geopolitical backdrop. And Moody's again delivered sustained revenue growth across both businesses and powerful operating leverage as we continue to capitalize on the deep currents driving demand for our ratings and solutions. Now there are three takeaways for the first quarter. First, we delivered strong financial performance. Both MIS and MA grew revenues by 8% and disciplined cost management drove 150 basis points of adjusted operating margin to 53.2%. Together, this contributed to adjusted diluted EPS of $4.33 and that was up 13%. We returned $1.7 billion through buybacks and dividends in the quarter, and we increased full year buyback guidance by $500 million to approximately $2.5 billion. Second, demand remains healthy across both businesses. And ratings issuance continues to reflect long-term funding needs tied to infrastructure, technology, private credit and energy transition even as volatility may affect timing. In analytics, engagement is strongest in our largest, most strategic relationships, which continue to grow materially faster in a broader MA base, and we have a growing pipeline of some of the world's largest financial institutions to consume our agent-ready intelligence, and that's supported by further expansion with our hyperscaler and AI partners. Third, we're executing on our strategic priorities. And when our intelligence is embedded directly into customer decision-making, we see tangible outcomes, higher retention, expanding relationships and more durable recurring revenue. And like last quarter, we'll share some specific examples of meaningful customer wins. So now let me turn to what's driving performance. In Ratings, as I said, issuance remains anchored in long-term funding needs tied to AI-driven infrastructure, private credit, energy transition in emerging markets. And these are multiyear funding needs. They're not short-term cycles. And as I said, volatility may affect timing, but the underlying demand is structural. And that showed up clearly in Q1. In fact, in the first quarter, rated issuance surpassed $2 trillion for the first time, and that was led by near-record investment-grade volumes, including several jumbo AI-related financings totaling more than $100 billion. Private credit activity remained durable this quarter despite increasing credit concerns. As private market scale comes under greater scrutiny, demand for our independent credit assessment continues to increase, and that dynamic contributed to private credit related revenue in Ratings growing more than 80% year-over-year. In Moody's Analytics, we're embedding our intelligence into mission-critical workflows, particularly lending, underwriting and compliance where accuracy and auditability and trust are essential. To support that shift and expand how and where our customers access Moody's intelligence, over the last several weeks, we announced a set of partnerships that significantly extend our distribution without compromising governance or independence. Through model context protocol integrations, Moody's licensed intelligence can now be accessed directly within enterprise AI environments such as ChatGPT Enterprise and Claude. This allows customers to bring trusted Moody's content into their own AI workflows rather than relying on generic or unverified data. With Anthropic for licensed users, our agentic credit and compliance workflows are now available natively inside the cloud interface through an MCT application. That's the first of its kind as far as we're aware, and it enables users to access Moody's agents to perform analysis, generate outputs and trade sources without leaving the Claude environment. By making our agentic solutions available through the AWS marketplace, we're meeting customers inside their existing cloud and procurement ecosystems, reducing friction by allowing customers to burn down their AWS commit when consuming Moody's agents and intelligence. We're scaling workflow-embedded distribution by launching a dedicated Moody's agent in Microsoft 365 Copilot and making Moody's intelligence available as a grounding data source across Copilot experiences — Copilot Chat, Researcher, Copilot and Excel. That brings trusted decision-grade context directly into everyday Microsoft tools, extending access beyond specialist teams and enabling faster, more consistent, explainable and auditable decisions. Importantly, these are bring-your-own-license models. They expand reach and usage but preserve our direct relationship with our customer. And all of this sets up what I'm going to turn to next, which is how customers are using these capabilities today and how that's translating into growth and differentiation across analytics and ratings. So I'll start with lending and credit decisioning. Our AI-enabled lending suite continues to gain traction as banks modernize end-to-end credit workflows. ARR for our lending suite grew 18% year-over-year, driven by customers upgrading to an integrated platform that spans origination, decisioning and monitoring. And what's driving adoption is workflow integration and AI enablement: faster decisions, greater consistency, clear auditability. We're also seeing demand for credit assessment and workflow beyond banks with asset managers and even corporates. In the first quarter, we expanded relationships with two of the world's five largest asset managers, representing nearly $20 trillion of assets under management. The first signed an approximately $6 million multiyear deal to bring our decision-grade intelligence to both public and private credit workflows, supporting risk investment decision-making at a global scale. The second asset manager signed a multiyear contract of over $2.5 million and adopted multiple Moody's modules to support front, middle and back operations credit and compliance workflows. It also represented our first structured finance software win with a trustee, which provides a strong reference for future opportunities. In the corporate space, a global athleisure brand tripled its relationship with us and signed a multiyear contract for an automated credit decisioning solution that accelerates decisions from days to minutes. These are all ways that customers are accessing what we believe are the best set of commercial credit scoring capabilities in the world. In insurance, growth was sustained from continued demand for digitization via our intelligent risk platform. That included adoption by one of the top three reinsurers in the world in the first quarter as well as adoption of our high-definition models. IRP cross-selling and upselling accounted for almost half of our insurance net growth in the first quarter. That growth was also supported by our trailing 12-month retention rate of 97%, which reflects how embedded we are in customers' workflows as what they call their primary view of risk. In KYC and compliance, growth continues to be driven by scale, complexity and regulatory expectations. These needs go beyond regulated financial institutions. A good example is our first Moody's for Compliance customer. In the first quarter, a global real estate firm spanning approximately 275,000 sites operating in more than 80 countries selected our enterprise-wide solution for counterparty screening and monitoring covering millions of entities. We replaced a fragmented region-specific approach with a single governed platform integrating ownership, sanctions, politically exposed people and adverse media representing both a competitive displacement and a meaningful expansion of our relationship. Finally, let me turn to Ratings and digital finance. As capital markets evolve, we're extending the same rigor and governance and independence that define our ratings franchise into new asset classes and new forms of market infrastructure. During the first quarter, we were the first rating agency to publish a methodology for stablecoins, an asset class that's expected to reach north of $2 trillion by 2030, and we already have a number of deals in the pipeline. We were also the first rating agency with blockchain-agnostic capabilities to ingest data and publish ratings directly on chain. We're now live on The Canton Network, making Moody's the first rating agency operating a node in the privacy-enabled blockchain ecosystem. During the quarter, we were the first rating agency to rate an inaugural bitcoin-backed bond where repayment is secured by bitcoin collateral. These are not pilots or proofs of concept; they reflect real customer demand for trusted comparable risk assessment as finance evolves, whether assets are traditional or digital. Taken together, this is what differentiates Moody's across analytics and ratings. We're embedding decision-grade intelligence directly into the workflows and decisions that matter most, driving durable growth today and reinforcing the long-term strength of the franchise. Now finally, before I close, I want to highlight an important leadership milestone, and I am absolutely thrilled that Christina Kosmowski will become Moody's Analytics CEO in June. She brings a blue-chip Silicon Valley pedigree, has been a pioneer in customer success and brings a track record of delivering high growth at scale. Her leadership materially strengthens our ability to accelerate execution in an increasingly AI-driven world, and I'm very excited about having her join us in June. I also want to thank Andy Frepp for stepping up to serve as the Interim President and for his steady and effective leadership. Andy has had a fantastic career with us for almost 15 years. He is deeply respected across Moody's. In a brief period of time, he provided focus and business direction and has ensured continuity and momentum during a critical period. We are tremendously grateful for his leadership and continued support through the transition. With that, I'll turn it over to Noemie to walk through the financials in more detail.

Thanks, Rob, and hello, everyone. Q1 represents a solid start to the year. Echoing Rob, our performance reflects disciplined execution across both of our businesses. Let me start with Moody's Analytics. Our Q1 results are delivering against the framework we've discussed over the last several quarters: durable recurring growth, strong retention and margin expansion, while we reshape the portfolio. MA revenue increased 8% in the first quarter as reported or 6% on an organic constant currency basis, reflecting healthy underlying demand across our core franchises. Recurring revenue grew 11% as reported or 7% on an organic constant currency basis and represented 98% of total MA revenue, underscoring the shift towards renewable subscription-based solutions. As expected, transactional revenue declined materially, down 54% year-over-year, reflecting both the Learning divestiture and our deliberate focus on scalable recurring revenue streams. This is fully consistent with the portfolio actions we've taken over the last several years to prioritize durable, high-quality revenue. ARR remains the clearest indicator of underlying demand and of the health of our future revenue base while reported revenue can move quarter-to-quarter due to timing effects and portfolio actions. ARR ended Q1 at $3.6 billion, up 8% year-over-year. Decision Solutions continues to be a key growth engine for MA, representing approximately 44% of total MA ARR and delivering 10% ARR growth. KYC grew 13%, driven by deeper penetration within existing banking customers and expansion beyond financial services. Our new Moody's for Compliance offering officially launched in April, and we have already seen success in prelaunch activity, as Rob highlighted earlier. We are building pipeline, with April renewals as the first cohort of upgrades, and we expect this revenue to build progressively through the year. Banking ARR grew 10%, supported by strong adoption of our lending solutions, which grew in the high teens. We continue to see good customer uptake of our new package. Strength in lending was partially offset by more modest growth in the RAG product portfolio. Insurance ARR grew 7% reflecting sustained demand for higher-definition models and cloud-based delivery via the intelligent risk platform, which is enabling the cross-sell and upsell motion that is central to our strategy in this business. Research and Insights ARR grew 7% year-over-year, driven by our flagship CreditView suite, now Moody's View and EDF-X with broader adoption across banking customers and deeper integration into customer workflows. Data and Information ARR grew 6% year-over-year and we closed several high-value agreements that illustrate two distinct, but reinforcing demand patterns for Moody's decision-grade intelligence. The first is mission-critical workflows where precision and auditability are nonnegotiable. Two government tax authorities—one supporting national-scale fraud detection and tax compliance across thousands of users and the other powering AI-driven tax risk assessment and transfer pricing enforcement—selected Moody's as their long-term data partner. In these environments, the consequence of error is too high for 'good enough.' Moody's curated, auditable data, we believe, is the best viable choice. The same dynamic plays out in financial services. A leading specialty insurer embedded our private company data and proprietary risk signals directly into its real-time surety underwriting workflows, replacing manual processes with automated point-of-decision analytics. The second pattern is front office and investment intelligence, where our data drives commercial advantage. As Rob shared, a major asset manager embedded our private and public credit risk data sets directly into its core portfolio platform to enhance credit modeling and surveillance across public and private markets. A leading global professional services firm expanded access to our real-time information and research intelligence across thousands of consultants to sharpen customer advisory and business development workflows. Together, these wins reinforce that Moody's decision-grade intelligence is becoming foundational infrastructure across both the risk and growth agenda of our customers across public institutions, financial services and global enterprises. Quarterly retention improved to 96%, up 200 basis points year-over-year as the outsized government and ESG-related churn we saw in Q1 2025 has now left. On a trailing 12-month basis, retention was 95%, improving 1 percentage point versus Q4 '25 and within our historical range, evidence that our solutions remain mission-critical as customers modernize their workflows, including with AI. Turning to profitability. MA adjusted operating margin was 32.5%, up 250 basis points year-over-year. We are well on track for full year margin of 34% to 35% and our mid- to high-30s target by the end of 2027. This expansion reflects the impact of prior restructuring actions, disciplined cost management as well as a thoughtful reallocation of resources, which enables us to fund priorities without increasing costs. As we look ahead, margins are expected to continue improving as efficiency initiatives scale, including usage of AI-enabled tools that lower unit costs in product development and tighter alignment of sales capacity to our highest growth opportunities with full benefit building into 2027. These structural changes underpin confidence in our medium-term margin trajectory. Turning to MIS. We delivered the strongest quarter on record. Rated issuance surpassed $2 trillion in Q1 for the first time, supported by strong primary market activity, relatively tight spreads, increased M&A and solid investor demand. While investment grade and high yield spreads widened in March by roughly 15% and 30%, respectively, they remained well below the level seen around last year's volatility and the market stayed open and functional. Transactional revenue grew 8% year-over-year, outpacing the 6% increase in rated issuance. Recurring revenue grew 9%, supported by growth in our portfolio of monitored credit, new mandates and pricing. First-time mandates increased 20% year-over-year, an important leading indicator of future recurring revenue. Here is how transactional revenue performed across the major categories. Investment grade was the largest contributor with revenue up 33% year-over-year. Investment grade revenue within Corporate Finance was driven by a record first quarter and the second-highest quarter ever for issuance, including several jumbo transactions from hyperscalers and other technology issuers. Issuance from the top five hyperscalers year-to-date has already exceeded full year 2025 levels. Specialty grade revenue grew 31%, with investor appetite holding up well for most of the quarter despite geopolitical volatility. We are watching this closely as sub-investment-grade issuers tend to be more sensitive to issuance windows. Bank loan revenue declined as activity moderated in March following a strong start to the year. M&A-related issuance in Q1 was the highest in a number of years, which we view as an encouraging indicator for the balance of 2026. Public, Project and Infrastructure finance grew 8% driven by infrastructure finance, which delivered its second-strongest quarter of the past decade. Funding needs tied to the energy transition, transportation and AI-related infrastructure remain key demand drivers. Financial institutions revenue was modestly higher year-over-year. Funds and asset management remained strong, supported by private credit activity, partially offset by lower opportunistic issuance from infrequent issuers in banking and insurance. Structured Finance revenue was slightly lower year-over-year as large RMBS and ABS reductions in EMEA were offset by softer CMBS and CLO activity in the U.S., especially refinancing. On profitability, MIS delivered an adjusted operating margin of 66.7%, reflecting strong operating leverage, disciplined cost management and technology investments that are improving analytical productivity. We're streamlining credit workflows so analysts can spend more time on credit analysis and less time gathering and formatting information, while maintaining the controls and human judgment regulators and the market expects. Those investments supported our ability to handle record issuance volumes while expanding margins. Looking ahead, our full year guidance remains unchanged across revenue, adjusted operating margin and adjusted diluted EPS. Our base case assumes the current market turbulence is largely contained to April with issuance recovering through Q2 and Q3 on the back of ongoing refinancing needs, a healthy M&A pipeline and sustained demand for high-quality investment-grade issuance, including AI-related financing. For the second quarter, we expect MIS revenue growth in the low to mid-teens with adjusted diluted EPS of approximately $4.15 to $4.30. If volatility persists beyond April, we'd have less confidence in a full recovery in Q2 and Q3 and would expect full year MIS revenue growth to moderate to the mid-single-digit range with adjusted diluted EPS trending towards the low end of our guidance range. For MA, we expect to close the sale of our Regulatory Solutions business on April 30. We have, therefore, excluded its contribution from our reported revenue outlook, which moves us towards the lower end of our mid-single-digit MA revenue guidance range. Importantly, this does not change our expectations for ARR or organic constant currency recurring revenue growth, which both remain anchored in the high single-digit percent growth range. On MA margins, we expect a modest step up in Q2 and a more meaningful ramp in the second half, consistent with our typical revenue seasonality. Pulling this together, in terms of MCO revenue guidance, as I shared, we expect to be within the high single-digit percent growth range we previously provided. For modeling purposes, taking into account the impact from the MA divestiture, we anticipate growth to be towards the lower end of the high single-digit percent range for MCO for the full year. Finally, a few housekeeping items to help with your modeling assumptions. Excluding restructuring and other charges, we anticipate Q2 expenses to be broadly in line with Q1 with increases in the second half, reflecting typical seasonality. This includes ongoing investments and annual salary increases, partially offset with our continued cost containment initiatives. We expect MCO adjusted operating margins to be above the midpoint of our full year guidance range for Q2 and Q3 before taking down in Q4, consistent with MIS revenue seasonality and historical patterns. There is no change to our tax rate guidance for the full year, and we expect Q2 to be in the high end of the full year range of 23% to 25%. Please note that our revised nonoperating income and GAAP EPS guidance reflects the expected gain on the sale of our Regulatory Solutions business in April, but it doesn't impact adjusted diluted EPS guidance. We again delivered strong cash flow this quarter with free cash flow of $844 million, up 26% year-over-year. Given price levels and market dynamics, we were active in the market repurchasing shares in Q1. We returned approximately $1.7 billion to shareholders through a combination of share repurchases and dividends. Given the nearly $1.5 billion of buybacks executed in Q1, we have increased our full year repurchase guidance by $500 million and now expect approximately $2.5 billion of share buybacks in 2026. We remain on track to return approximately 110% of free cash flow to shareholders by year-end. Importantly, our balance sheet remains strong, providing us with the flexibility to continue investing in growth while maintaining a disciplined and consistent capital return framework. In summary, we delivered another quarter of strong growth and profitability expansion and remain confident in the trajectory of the business. We believe we are well positioned to deliver sustainable growth, margin expansion and long-term shareholder value. With that, operator, we'd like to take questions.

Our first question will come from the line of George Tong with Goldman Sachs.

You talked about your MCP strategy allowing Moody's data to be accessed through LLMs. Can you discuss how many customers are accessing Moody's data through these channels and what your plans are to monetize MCP distribution?

George, good to have you on the call. So yes, I talked a little bit about these different partnerships. That's enabling integration of our intelligence through MCPs and through those surfaces. We also have customers who are looking to take the data directly into their own internal AI workflow orchestration platforms at their institution. We have a number of large financial institutions who are trialing what we call our agent-ready data either through the MCPs directly into the institution or through one of these channels. That gives us the opportunity to up-level the commercial model that we have with these institutions because if they want to bring our intelligence into the corporate and investment bank, we need to make sure that there's an arrangement and a license that allows them to access that content across that entire division as opposed to in the past when we may have been serving different use cases in different parts of the bank. So I would say it's early days. Lots of really good engagement and a number of trials, and we'll be looking to convert those to sales through the balance of the year. The commercial approach will depend on the kind of institution and the use case, so we may see some of this show up in different segments across MA.

Our next question will come from the line of Scott Wurtzel with Wolfe Research.

Wondering if you guys can help maybe contextualize how much of the operating leverage in MIS is being driven by the technology innovations and AI efficiencies, in the context of maybe some softer-than-expected MIS revenue growth in the quarter. It was still encouraging to see the 70 basis points of margin expansion. How much of that is being driven by AI efficiencies?

Yes. You're right to say that we've been able to deliver on $2 trillion of issuance this quarter and still expand our margins. We've talked a lot about the investments we've made over the past few years in technology and workflow automation for all the work and steps that precede the ratings committee—where the analysts actually gather, discuss and make decisions. The work that precedes that has been automated over the past few years. We've enabled them to be more efficient, avoiding repetition in different tasks. As you can imagine, Moody's being a 120-year company, we had some technology infrastructure that needed to be updated. We've done that over the past few years, and now we're adding AI to those workflows in large parts of our analyst groups to help allow them in areas like financial statement spreading, data gathering, and all the information that precedes the Ratings Committee moment, which remains a human-in-the-loop discussion across industry sectors. That's what's behind our margin expansion. I'm pretty pleased with that.

And Scott, to double-click, I think AI enablement really picked up in the back half of last year. As Noemie said, there was a lot of foundational work that put us in a very good position. We also had to work through our risk teams and make sure that we're deploying that in an appropriate way across ratings. It's not only about efficiency. We're capturing more and more structured and unstructured information across our ecosystem, and we're already seeing that this will give us new insights for our analysts that support ratings quality as well as new research insights.

Our next question will come from the line of Jeff Silber with BMO.

I wanted to shift back to MIS. Rob, you had mentioned that volatility may impact timing and I was curious, do you think there was any pull forward in the first quarter or conversely have we seen any recent delays? If so, when do you think that debt might be issued?

Jeff, good to hear from you. We looked at pull forward and I'd say there was no more pull forward than what we would consider to be within typical ranges. Typically, there's less pull forward with investment-grade issuers because they have market access most of the time; speculative-grade issuers can show more pull forward. Overall, nothing out of the ordinary. Things have been choppier, but spreads have come back in from the highs in late March and so has the 10-year. From an investment grade perspective, markets are open. Last week was a big week for financials: four of the six largest banks hit the market with almost $40 billion in issuance. There is a backlog of Q1 deals that we've heard have been deferred into the second quarter. There's optimism we'll see some of that come back in May and June. Funding costs are attractive with tight spreads by historical standards, and default rates, depending on how things play out, are continuing to modestly decline. There's a bit more selectivity with a preference toward credits at the higher end of the spectrum. Last week was pretty strong for high-yield issuance and loans as well. So the market is open and constructive, and we'll continue to see risk-on and risk-off windows as headlines play out.

Our next question comes from the line of Andrew Nicholas with William Blair.

I wanted to follow up on the AI efficiency gains topic, and maybe asked a different way on the regulatory side. It seems like you guys have been first mover on many of these items and have made a lot of progress. Is there any gating factor on adoption internally tied to regulatory pushback or what the regulators are comfortable with you leveraging in Ratings or even within MA? Just trying to get a sense for the puts and takes on that side.

Andrew, good question. I'll take it in two parts. In Ratings, as you'd expect, we have a very active dialogue with our regulators. They want to understand how we're thinking about deploying and using AI and want assurance of a very strong control environment. There's heightened sensitivity around using AI to actually make decisions. A lot of what we're doing is around the rating process and tools to give analysts new insights, but we have a very good engagement with regulators and they understand and expect that we will deploy AI tools with transparency and a strong control environment. On the Analytics side, our customers—several thousand banks and about a thousand insurance customers—expect a strong control environment. They expect us to have strong AI governance and some customers audit our products and solutions. When we talk about decision-grade intelligence, it must be decision-grade: strong controls, auditability, and the elements regulated customers expect. That does mean a bit longer adoption cycles with big regulated institutions because they must satisfy internal and regulatory requirements for third parties they work with.

Our next question will come from the line of Peter Christiansen with Citi.

Congrats Rob. Best of luck on the next chapter here and also great to see first-mover strategy on digital assets. I had a question about private credit. Sentiment has been kind of going back and forth the last couple of months, and you called out 80% year-over-year growth, which is pretty impressive. Should we think there's been a bit of a build in the pipeline? I mean you did talk about some deals potentially creeping from Q1 to Q2, but specifically on private credit, are you seeing that dynamic and is there any way you could size that portion of the growth for us?

Peter, thanks. There are a few cross-currents on private credit. Fundamentally, when there's more credit stress in the market, there's more interest and demand in our ratings and solutions. That's exactly what we're seeing: investor demand pulling for third-party independent credit assessments on loans in funds. Alternative asset managers are making disclosures about ratings and insurers are doing that as well because investors are asking for these assessments. We've also seen deals shift from private into public markets this past quarter, which is not surprising since public markets can be a cheaper source of funding. But the underlying funding needs are massive and persistent—public and private markets will both be important sources of funding going forward. That dynamic, combined with our MA credit scoring tools and commercial credit capabilities, explains our strong growth in private credit. We believe we have a strong commercial credit franchise and are well positioned to serve these needs across the company.

Our next question will come from the line of Jason Haas with Wells Fargo.

I'm curious what caused ARR to come in a little better than expected since I think a few weeks ago you were talking about it maybe coming in towards the lower end of high single digits. I think the expectation then was that we would see an improvement through the year, maybe due to timing of new products getting pushed out. Does that timing cadence still hold?

Jason, I'll start and see if Noemie has anything she wants to add. You're right—at that conference I did mention there was a chance we might have a little downdraft in ARR from Q4 given how we sequenced sales kickoffs and product launches. We had good sales execution through the balance of March coming out of those kickoffs and we made up a bit of that ground. So the short answer is we had better execution in March than I had been anticipating at that earlier event.

You're right. We had some pretty good execution in March. We closed some swing deals and we're confident the pipeline is building with the new product releases. We've talked about what we're doing in KYC and we're confident about the high single-digit ARR for the full year.

Our next question will come from the line of Sean Kennedy with Mizuho.

Could you discuss a bit more about KYC and some of the trends you're seeing there and the longer-term opportunity? Was some of the slowdown due to macro later in the quarter?

Thanks, Sean. For KYC, 13% ARR growth — we had a tough comp for new business versus the first quarter last year when we had a couple of outsized deals. Retention improved notably as we lapped cancellations from last year. We expect growth to pick back up into the mid-teens through the balance of the year. The most important new initiative is Moody's for Compliance, a platform solution that serves nonregulated institutions and corporates. We've been building pipeline on that and expect it to continue through the year. Most of our growth so far has been from cross-selling to existing banking customers, and we're starting to see corporate growth pick up. We expect ARR growth to pick up through the balance of the year into the mid-teens.

Our next question comes from the line of Toni Kaplan with Morgan Stanley.

Rob, could you give an update on the hyperscalers and whether a number of them have moved to the frequent issuer program and whether the economics there are similar to other investment-grade issuers? Has that created price dilution or mix dilution between issuance numbers and ratings revenue, and should we expect that to continue with massive hyperscaler issuance over the next few years?

Toni, thanks. I mentioned roughly $100 billion of hyperscaler issuance through the first quarter — that number is getting close to what we thought for full year 2026, so there could be upside. Hyperscalers are similar to other frequent investment-grade issuers. We have serial investment-grade issuers on frequent issuer pricing programs, so when you see big hyperscaler issuance numbers, think of that as frequent issuer issuance. That can affect revenue mix, but it's consistent with how we've always thought about frequent investment-grade issuers.

Our next question comes from the line of Andrew Steinerman with JPMorgan.

Noemie, you said you're reshaping the MA portfolio. Was that primarily the Learning divestiture and Regulatory Solutions sale, or is that an ongoing process with more divestitures or product sunsetting to come?

You're pointing to the right things. We've closed a couple of divestitures—one last year and the Regulatory Solutions sale we're about to close in April. That's part of focusing on high-growth product suites where we have cross-selling opportunities with the rest of our customer ecosystem; that was an important driver for the Regulatory Solutions decision. Beyond that, we're reallocating resources within Moody's Analytics—product development and sales—to higher-growth areas. Some mature products that are in demand will be placed more in maintenance mode to serve existing customers as they migrate to new packages. That lets us fund investments in strategic areas like lending, decision-grade data, and insurance underwriting without increasing total developer resources for new product and go-to-market.

Our next question comes from the line of Alex Kramm with UBS.

Staying on MA, a numbers question: transactional revenue was very low this quarter, I think $17 million. Is this now the run rate for the rest of the year? Does this mean by 2027 ARR and recurring revenue growth and overall growth start converging? Or is there still more lumpiness on the transactional side?

On an organic basis recurring revenue is trending very close to ARR. The low transaction number reflects the Learning Solutions divestiture in Q1, which was expected and will carry through the rest of the year. We had a double-digit decline in transaction revenue, which we continue to expect as we move services and integration work to partners. Those revenues will be recorded outside our books. You'll continue to see that through '26 and '27. Organic constant currency growth for recurring revenue is aligned with ARR, though you can have some lumpiness in a given quarter from on-premise revenue recognition for long-term software arrangements. On a trailing 12-month basis, things are pretty close.

Our next question will come from the line of Owen Lau with Clear Street.

I want to go back to the organic revenue growth and ARR bridge because organic growth was 6% in the first quarter and ARR was 8%, but you still guide to a high single-digit range for organic revenue growth. Can you talk about the bridge from 6% to high single digits? Would that come from Moody's for Compliance, AI, and other items?

Our guidance for organic constant currency revenue is toward the low end of the high single-digit range. There's about a percentage point of headwind from transaction revenue decline—transaction was down 56% in Q1. Underlying organic recurring revenue growth typically accelerates through the year, consistent with our sales cadence; the second half is usually stronger for sales execution and pipeline build. That builds toward the high single-digit organic recurring growth and ARR guidance we've given. So transaction revenue is the primary delta and drag.

Our next question comes from the line of Curtis Nagle with Bank of America.

Just a quick modeling question on ratings issuance. Assuming we stay at your current guide for single-digit revenue growth, last time you spoke to calendarization you suggested mid-50s weighting in the first half of the year. Is that still roughly right or any changes baked into the current forecast?

Good question. We held guidance but issuance was a bit softer than expected. We're expecting issuance to grow high single digits for the first half of 2026 versus last year, then decline mid-single digits in the second half versus 2025. Remember bank loan repricings are included. Sequentially, we expect issuance to decline from Q1 to Q2 in the mid-teens, be flat Q2 to Q3, and then decline mid-20s Q3 to Q4. From a revenue perspective, we expect year-over-year revenue growth in every quarter in 2026 but stronger in the first half. For the first half, think low double-digit revenue growth; for the second half, mid-single-digit revenue growth. The delta reflects bank loan repricings and seasonality.

Our next question comes from the line of Craig Huber with Huber Research Partners.

Rob, one of the most important things you said earlier was that regulators are apprehensive about AI making decisions. Can you elaborate? This is a major issue—AI concerns and some hope AI tools can duplicate services of information companies. Could you talk further, please?

Craig, take this for what it is from my seat. Regulators want to understand how AI is deployed and want strong controls. There's heightened sensitivity when AI is used to actually make decisions—who gets a loan, who gets an insurance policy at what price, or what a credit rating might be. That raises questions about bias, model governance, data inputs and whether there's a human in the loop. Those are the areas of scrutiny. We're working closely with regulators and customers to ensure transparency and robust governance. There are decisions made by models in many parts of financial services—quant trading, consumer credit scoring, etc.—but when a model is making a decision, regulators want to understand it. That's generally where scrutiny is greater.

Our final question will come from the line of Shlomo Rosenbaum with Stifel.

A broader question on the guidance. Given the war in Iran and potential impact to inflation and spreads, how did you incorporate geopolitical risk into the guidance? You mentioned volatility; how are you thinking about it through the year for MIS and MA?

I'll focus on Ratings since that's where variability is greater, though it's relevant across the company. The current geopolitics are an important variable. We thought back to the volatility last year around LDI and the market impacts—April last year saw lower issuance but the back half of the year made up for much of it and we ended up essentially in line with full-year guidance. We're in a similar situation now: it's early in the year with a long way to go. An interesting stat: in March, 80% of investment-grade issuance was concentrated in six days—highlighting the risk-on, risk-off windows. That shows how much demand is waiting for an opportunity to hit the market. Given the underlying funding drivers are intact, we're holding to our current guidance. If we see heightened volatility persist into May and real softness in issuance, Noemie outlined what that would mean for our guidance. From where we sit now, holding guidance is the prudent approach and it's consistent with what banks are telling us.

This concludes our question-and-answer session, and I will hand the call back over to Rob for any closing comments.

Okay. With that, thank you very much for joining, and we look forward to talking with you on our next earnings call. Goodbye.

This concludes Moody's Corporation First Quarter 2026 Earnings Call. As a reminder, immediately following this call, the company will post the MIS revenue breakdown under the Investor Resources section of the Moody's IR homepage. Additionally, a replay will be made available after the call on the Moody's IR website. Thank you. You may now disconnect.