Earnings
Moody's says AI-linked bond deals lifted investment-grade ratings revenue 18%, while high-yield and leveraged loan work slumped
Moody's kept its 2026 outlook unchanged after third-quarter revenue rose 1%, and raised its year-end forecast for the global speculative-grade default rate to about 3.8%.
HedgeWeekly News Desk ·
Moody's Corporation reported third-quarter revenue of $2.023 billion on Wednesday, up 1% from a year earlier, or 3% on an organic constant-currency basis. Adjusted diluted earnings per share rose 6% to $4.14, and diluted EPS rose 18% to $4.24. The diluted figure includes a $115 million pre-tax gain on the sale of its Regulatory Solutions business.
Revenue at the ratings arm, Moody's Investors Service, fell 1% to $1.087 billion against what the company called a record prior-year quarter. The split was sharp. Investment-grade revenue rose 18% as rated issuance grew 16%, driven by large corporate deals, especially technology borrowing tied to AI and hyperscaler spending. High-yield rated issuance fell 21%, with transaction revenue down 40%. Leveraged loan rated issuance dropped 35%, with transaction revenue down 27%. Together these pulled corporate finance revenue down 8% to $530 million.
Moody's Analytics revenue rose 3% to $936 million, or 8% organically. Annualised recurring revenue rose 8% to $3.688 billion. The company reaffirmed every line of its full-year 2026 guidance, including adjusted diluted EPS of $16.50 to $17.00, high-single-digit revenue growth and up to $3.0 billion of share buybacks. It has repurchased about $2.6 billion of stock so far this year.
For credit investors, the numbers in the release matter as much as the earnings. Moody's now expects the global speculative-grade default rate to end the year near 3.8%, up from its earlier assumption of about 3%. It also assumes high-yield spreads of about 300 basis points, tighter than the 330 basis points it used before, and it names the Middle East conflict as a downside risk. Taken together, the issuance mix points to a market where AI capex funding is flowing into high-grade bonds while riskier borrowers face thinner primary markets. That combination is worth watching for leveraged-credit and CLO allocators heading into year-end refinancing.