Moody's Corporation

Company Overview

Business Model: Moody's Corporation is a global integrated risk assessment firm that empowers organizations to anticipate, adapt, and thrive in an era of exponential risk. The Company's offerings are distinguished by vast proprietary and curated data and validated analytical models, transforming information into decision-grade intelligence interconnected across risk domains. Moody's Corporation provides insights into financial stability and creditworthiness for organizations, debt instruments, and securities, contributing transparency to global debt markets. The Company operates through two reportable segments: Moody's Analytics (MA) and Moody's Investors Service (MIS). MA provides curated data, intelligence, and analytics, including AI-enabled cloud-based workflow tools for business relationships, risk management, compliance, and reporting. MIS is a leading global provider of credit ratings, research, and risk analysis.

Market Position: Moody's Corporation positions itself as a leading source of relevant insights and integrated risk assessment solutions. Moody's Analytics is recognized for its premier fixed income and economic research business (Research & Insights) and a data business powered by the world’s largest database on companies and credit (Data & Information). Moody's Investors Service has been a leading global provider of credit ratings, research, and risk analysis for over 115 years, serving a key role in global debt markets.

Recent Strategic Developments:

• Technology Integration: Moody's Corporation is an early adopter of Generative Artificial Intelligence (Gen AI) and agentic AI, leveraging these technologies and Machine Learning (ML) to enhance insights and integrate solutions across platforms, aiming to improve customer efficiency and productivity.
• Market Expansion: Expanded its footprint in Latin American markets through Moody's Local domestic rating business, including the acquisition of ICR Chile in 2025.
• Strategic Acquisitions: Acquired Praedicat in the third quarter of 2024 and CAPE Analytics in the first quarter of 2025, contributing to growth in the insurance sector. Acquired Numerated in the fourth quarter of 2024, supporting growth in banking offerings.
• Divestitures: Completed the divestiture of the MA Learning Solutions business in the fourth quarter of 2025 and entered into an agreement to sell the MA Regulatory Solutions business, expected to close in the first half of 2026.
• Sustainability Initiatives: Launched a Net Zero Assessment framework to provide independent and comparable evaluations of entities' carbon transition plans.
• Operational Efficiency: Approved the Strategic and Operational Efficiency Restructuring Program in December 2024, expected to generate annualized savings of $250 million to $300 million by realigning operations, consolidating functions, and simplifying the organization.

Geographic Footprint: Moody's Corporation has a diverse global presence with approximately 16,000 employees across more than 40 countries.

• Revenue Distribution (2025):
  • U.S.: $4,171 million (54.0% of total revenue)
  • Non-U.S.: $3,547 million (46.0% of total revenue)
    • EMEA: $2,376 million
    • Asia-Pacific: $699 million
    • Americas (excluding U.S.): $472 million
• Long-lived Assets (2025):
  • U.S.: $4,516 million
  • Non-U.S.: $4,722 million

Financial Performance

Revenue Analysis

Profitability Metrics:

• Operating Margin: 43.4% (2025) vs 40.6% (2024)
• Net Margin: 31.9% (2025) vs 29.0% (2024)

Investment in Growth:

• Capital Expenditures: $326 million (2025)
• Strategic Investments: Acquisitions of CAPE Analytics and ICR Chile in 2025. Acquisitions of GCR (Global Credit Rating Company Limited), Numerated, and Praedicat in 2024. Ongoing investment in AI-powered technologies and climate-related risk offerings.

Business Segment Analysis

Moody's Analytics

Financial Performance:

• Revenue: $3,599 million (+9% YoY)
• Operating and SG&A Expenses: $2,415 million (+5% YoY)
• Adjusted Operating Margin: 33.1% (+240 BPS)
• Key Growth Drivers: Organic constant currency revenue growth was 7%. Recurring revenue grew 11%, with organic constant currency recurring revenue growth at 8%. Annualized Recurring Revenue (ARR) increased 8% to $3,498 million. Growth was observed across all lines of business, driven by sustained demand for subscription-based offerings and recent acquisitions.

Product Portfolio:

• Hosted research and data subscriptions, installed and hosted software subscriptions, perpetual installed software licenses and related maintenance, and professional services.
• AI-enabled cloud-based workflow tools.

Market Dynamics:

• Empowers financial services, corporate, and public sector customers to anticipate and manage risks.
• Driven by increasing customer need to understand interconnected and emerging risks, including operational and reputational risks, digitization and Artificial Intelligence, evolving regulatory environments, fluctuations in credit and financial markets, extreme weather impacts, and geopolitical risks.

Sub-segment Breakdown:

• Decision Solutions (DS):
  • Revenue: $1,692 million (+12% YoY)
  • Recurring revenue growth: 15%
  • Organic constant currency revenue growth: 8%
  • Organic constant currency recurring revenue growth: 11%
  • ARR: $1,579 million (+10%)
  • Banking: $569 million (+3% YoY). Recurring revenue grew 9%, driven by expansion of existing customer relationships into cloud-hosted subscription-based banking offerings and revenue from Numerated. Transaction revenue declined 18% due to a strategic shift to cloud-hosted subscription-based solutions.
  • Insurance: $685 million (+15% YoY). Recurring revenue grew 16%, attributable to continued demand for catastrophe modeling tools and revenue from Praedicat and CAPE Analytics.
  • KYC: $438 million (+19% YoY). Recurring revenue grew 21%, reflecting strong demand and customer retention for KYC and compliance solutions, driven by increased customer and supplier risk data usage.
• Research and Insights (R&I):
  • Revenue: $995 million (+7% YoY)
  • ARR: $1,002 million (+8%)
  • Growth was attributable to sales growth for credit research product offerings.
• Data and Information (D&I):
  • Revenue: $912 million (+7% YoY)
  • Organic constant currency revenue growth: 5%
  • ARR: $917 million (+7%)
  • Growth was mainly driven by continued strong demand for ratings data feeds and company data applications.

Moody's Investors Service

Financial Performance:

• Revenue: $4,119 million (+9% YoY)
• Operating and SG&A Expenses: $1,571 million (-1% YoY)
• Adjusted Operating Margin: 63.6% (+350 BPS)
• Key Growth Drivers: Global revenue growth across all ratings lines of business, supported by operating leverage, benefits from technology investments, and disciplined expense management.

Product Portfolio:

• Credit ratings and assessment services on a wide range of debt obligations, programs, facilities, and entities.
• Non-ratings-related operations (MIS Other) include financial instruments pricing services in the Asia-Pacific region, Second Party Opinions, Net Zero Assessments, and ICRA's non-ratings operations.

Market Dynamics:

• Long-term growth opportunities from strong secular trends, including economic expansion, proven rating accuracy, and the development of capital markets and evolving risks.
• Revenue is substantially dependent on the dollar-equivalent volume and number of ratable debt securities issued in global capital markets.

Sub-segment Breakdown:

• Corporate finance (CFG):
  • Revenue: $2,132 million (+9% YoY)
  • Transaction revenue increased $144 million, primarily due to higher issuance activity for investment-grade bonds (including jumbo transactions in the technology sector) and high-yield bonds (taking advantage of favorable conditions).
  • Recurring revenue increased $38 million, reflecting annual price increases and higher monitored credits.
• Structured finance (SFG):
  • Revenue: $558 million (+8% YoY)
  • The increase reflected growth across all asset classes, supported by tight credit spreads and strong investor demand.
• Financial institutions (FIG):
  • Revenue: $759 million (+4% YoY)
  • Growth was driven by strong issuance volumes from infrequent issuers in the banking sector, partially offset by lower volumes from infrequent issuers in the insurance sector.
• Public, project and infrastructure finance (PPIF):
  • Revenue: $635 million (+13% YoY)
  • The increase reflected higher issuance in U.S. Public Finance (particularly within the state, regional, and healthcare sectors) and higher investment-grade issuance within U.S. Infrastructure Finance (most notably from the utilities sector), coupled with a favorable issuance mix.
• MIS Other:
  • Revenue: $35 million (+3% YoY)
  • This segment's revenue is not material to the overall results of the MIS segment.

Capital Allocation Strategy

Shareholder Returns:

• Share Repurchases: $1,607 million, repurchasing 3.3 million shares in 2025.
• Dividend Payments: $677 million, representing $3.76 per share in 2025.
• Future Capital Return Commitments: As of December 31, 2025, approximately $4.0 billion of share repurchase authority remained under the Board's authorization, with no established expiration date. The Board approved a quarterly dividend of $1.03 per share on February 10, 2026, payable March 13, 2026.

Balance Sheet Position:

• Cash and Equivalents: $2,384 million as of December 31, 2025.
• Total Debt: $7,200 million as of December 31, 2025.
• Net Cash Position: -$4,816 million (net debt position).
• Debt Maturity Profile: The Company's debt repayment schedule includes $0 million in 2026, $587 million in 2027, $500 million in 2028, $400 million in 2029, $881 million in 2030, and $4,800 million thereafter. Future interest payments and fees associated with the debt are expected to be $3.7 billion.

Cash Flow Generation:

• Operating Cash Flow: $2,901 million in 2025, an increase of $63 million compared to the prior year, primarily reflecting growth in operating income.
• Free Cash Flow: $2,575 million in 2025.

Operational Excellence

Production & Service Model: Moody's Corporation's operational philosophy centers on leveraging its vast proprietary and curated data, validated analytical models, and innovative technologies to transform information into decision-grade intelligence. This enables customers to develop a holistic view of interconnected risks and unlock opportunities. The Company's solutions are deeply integrated across various risk domains, supporting mission-critical workflows in areas like lending, risk management, compliance, and reporting.

Supply Chain Architecture: Key Suppliers & Partners:

• Information Data Providers: Third-party providers supply financial information (e.g., market and index data, financial statement data, research data, default data, security identifiers), as well as AI software, software development tools, and various financial, credit risk, compliance, firmographic, management, ownership, and news data.
• Technology Service Providers: Relies on third-party providers, including cloud-based service providers, for essential services and to store cloud-based data.
• Cybersecurity Experts: Contracts with third-party technical subject matter experts to assist in managing cybersecurity risk management processes.

Facility Network:

• Manufacturing/Development: Operations involve complex processes for developing and delivering products and services, including internal-use computer software development for cloud-based solutions.
• Distribution: Operates from 24 U.S. offices and 99 non-U.S. office locations, geographically distributed across more than 40 countries to meet operating and sales requirements. A new headquarters operating lease in New York City was entered in Q4 2025, with payments commencing in 2026.

Operational Metrics:

• Workforce: Total employees were 16,076 as of December 31, 2025, a 2% increase from 2024.
  • Moody's Analytics: 7,803 employees, primarily software engineers, product managers, data and operations analysts, advisory and implementation teams, economists, and sales professionals.
  • Moody's Investors Service: 6,128 employees, primarily credit analysts, data and operations analysts, credit strategy and methodology professionals, software engineers, and sales teams.
  • Moody's Shared Services: 2,145 employees, primarily information technology professionals and other professional staff (finance, human resources, compliance, legal).
• Decarbonization Efforts: The Company's decarbonization plan includes procuring 100% renewable electricity in its office spaces and optimizing operational efficiencies through its hybrid work program.

Market Access & Customer Relationships

Go-to-Market Strategy: Distribution Channels:

• Direct Sales: Utilizes sales, business development, and sales support professionals within Moody's Analytics and sales and sales operations teams within Moody's Investors Service to engage directly with customers.
• Digital Platforms: Leverages AI-enabled cloud-based workflow tools and platforms to deliver its proprietary data and analytics, enabling customers to integrate Moody's solutions into their mission-critical workflows.

Customer Portfolio: Enterprise Customers:

• Tier 1 Clients: Serves a broad base of financial services, corporate, and public sector customers, including banks, insurers, investors, and corporations.
• Customer Concentration: No single customer accounted for 10% or more of accounts receivable as of December 31, 2025 or 2024.

Geographic Revenue Distribution:

• U.S.: 54.0% of total revenue
• EMEA: 30.8% of total revenue
• Asia-Pacific: 9.1% of total revenue
• Americas (excluding U.S.): 6.1% of total revenue

Competitive Intelligence

Market Structure & Dynamics

Industry Characteristics: The markets for credit ratings, research, credit risk management services, business intelligence, and analytical services are highly competitive. They are characterized by rapid technological change, including the emergence of Generative Artificial Intelligence (Gen AI) and agentic AI, evolving customer and investor demands, and dynamic regulatory requirements and industry standards. The Company operates in an environment of increasing financial complexity and exponential risk.

Competitive Positioning Matrix:

Direct Competitors

Primary Competitors:

• Moody's Analytics: Competes with providers of software and analytic solutions, economic data, financial research and analysis, and commercial and financial data.
• Moody's Investors Service: Competes with other Credit Rating Agencies (CRAs), investment banks, and brokerage firms offering credit opinions and research. Many users of Moody's Investors Service's ratings also possess in-house credit research capabilities.

Emerging Competitive Threats:

• Development of quantitative methodologies or related services by competitors, including those based on Gen AI or utilizing agentic AI workflows, which customers may deem preferable or more cost-effective.
• Increased availability of free or relatively inexpensive information online and through the use of Gen AI.
• Development of alternative, proprietary systems for assessing risk by customers or other entities.
• Indirect competitors, such as consulting firms and technology and information providers, could potentially become direct competitors.
• Non-Nationally Recognized Statistical Rating Organizations (NRSROs) that evaluate debt risk for issuers or investors.

Competitive Response Strategy:

• Continuous investment in new product development and global expansion, including enhancements to ratings quality and product extensions.
• Focus on integrated solutions that allow customers to assess multiple risk factors concurrently.
• Leveraging AI and ML capabilities to deliver deeper, more integrated perspectives on risk.
• Maintaining operational efficiency and disciplined cost management, supported by restructuring programs and technology investments.

Risk Assessment Framework

Strategic & Market Risks

Market Dynamics:

• Economic Conditions: Exposure to general economic conditions, including inflation, recessions, and related monetary policy actions, which impact worldwide credit markets, economic activity, and the volume of debt and other securities issued.
• Geopolitical Events: Risks from ongoing geopolitical events and conflicts (e.g., Russia-Ukraine military conflict, military conflicts in the Middle East, tensions between India and Pakistan) affecting global financial markets, economic conditions, and the Company's operations.
• Debt Capital Markets Activity: A substantial portion of Moody's Investors Service's revenue is transaction-based, making it highly dependent on the volume and number of ratable debt securities issued. Conditions that reduce issuers' ability or willingness to issue debt, such as interest rate volatility or declining growth, can materially impact revenue.
• Disintermediation of Credit Markets: Increased use of alternative financing sources (e.g., loans from non-bank lenders) and securities issued without traditional CRA ratings can reduce demand for Moody's Investors Service's services.
• Technology Disruption: Rapid technological change, including the emergence of Gen AI and agentic AI, poses risks if competitors develop superior or more cost-effective solutions, or if increased availability of free information reduces demand for Moody's products.

Operational & Execution Risks

Supply Chain Vulnerabilities:

• Third-Party Dependency: Reliance on third-party providers, including cloud-based service providers, for essential services and data storage exposes the Company to risks of service disruption, quality reduction, or failure to meet evolving needs.
• Geographic Concentration: Operations in various countries, including large employee populations in New York City and India, are vulnerable to local infrastructure malfunctions, geopolitical events, and differing legal/regulatory standards.
• Capacity Constraints: Cost reduction initiatives, while beneficial, could hinder the Company's ability to rapidly expand operations to meet unexpected increases in demand. Infrastructure Malfunctions:
• System Disruptions: The Company's ability to conduct business can be materially impacted by disruptions in physical or technological infrastructure (e.g., electronic delivery systems, data centers, networks) due to human error, capacity constraints, hardware failure, natural disasters, cyber-attacks, or political unrest. Acquisition & Integration Risks:
• Failure to Realize Benefits: Acquisitions, dispositions, and strategic investments may not produce anticipated results, leading to integration challenges, undisclosed liabilities, regulatory scrutiny, failure to retain key personnel, and potential significant impairment charges for goodwill and intangible assets. Reputation & Credibility Concerns:
• Loss of Trust: The Company's reputation and brand strength are critical. Factors such as perceived conflicts of interest, performance of rated securities, timing/nature of rating changes, major compliance failures, security breaches, data inaccuracies, or negative publicity (including "anti-ESG" sentiment) can significantly impact credibility and business.
• AI-Related Risks: Development of Gen AI product offerings introduces risks related to data quality/integrity, potential adverse impacts on business operations or reputation, and increased regulatory scrutiny. Loss of Skilled Employees:
• Talent Competition: Intense competition for skilled professionals (financial analysts, data scientists, software engineers) in financial services and technology industries poses a risk to recruitment and retention, especially if competitive compensation or flexible work arrangements are not met.
• Key Personnel Dependency: The Company is highly dependent on the continued services of its President and Chief Executive Officer, Robert Fauber, and other senior officers and key employees.

Financial & Regulatory Risks

Market & Financial Risks:

• Foreign Exchange: Exposure to market risk from changes in foreign exchange rates, as approximately 39% of revenue and 38% of expenses are non-U.S. dollar denominated, and 52% of assets are located outside the U.S. Regulatory & Compliance Risks:
• Extensive Regulation: Subject to extensive and evolving regulation in the U.S. (SEC, Dodd-Frank Act, Reform Act), EU (ESMA, DORA, EU Regulation on ESG Rating Activities, EU AI Act), U.K. (FCA), and other jurisdictions (e.g., Hong Kong, China).
• Increased Costs & Legal Risk: Existing and proposed laws can increase compliance costs, legal risk, and negatively impact profitability and competitiveness, or alter demand for products and services.
• Data Privacy: Subject to various continuously evolving data privacy laws (e.g., GDPR, CCPA, CPRA, China's Cyber Security Law), requiring changes to business practices, increasing costs, and exposing the Company to litigation or regulatory actions.
• Trade & Sanctions: U.S. and foreign laws governing economic and trade sanctions, tariffs, embargoes, and anti-corruption (e.g., Foreign Corrupt Practices Act, U.K. Bribery Act) apply to international operations, increasing costs and posing risks of fines or sanctions.

Geopolitical & External Risks

Geopolitical Exposure:

• Global Operations: Conducting operations in various countries exposes Moody's Corporation to legal, economic, and regulatory risks such as economic and geopolitical events, market conditions, and political instability.
• Trade Relations: Uncertainty regarding U.S.-China relations and other trade tensions may result in restrictions or actions by governments affecting trade, cross-border data transfer, and foreign investment.
• Sanctions & Export Controls: Compliance with sanctions laws and export controls, particularly concerning countries like Russia and China, can limit business activities and increase compliance requirements.

Innovation & Technology Leadership

Research & Development Focus: Core Technology Areas:

• Artificial Intelligence (AI) & Machine Learning (ML): Moody's Corporation has leveraged AI and ML for over a decade and is an early adopter of Generative Artificial Intelligence (Gen AI) and agentic AI. These technologies are central to unlocking deeper, more integrated perspectives on risk for customers.
• Cloud-Based Solutions: Significant investment in the development of cloud-based solutions, particularly within Moody's Analytics, to enhance efficiency and productivity for customers. Innovation Pipeline:
• The Company's strategy involves internally-led organic development and targeted acquisitions to enhance ratings quality, expand in emerging markets, and develop new products, services, proprietary data, and technologies. This includes evolving how insights on exponential risk are delivered to customers, with the potential to reimagine knowledge-intensive workflows.

Intellectual Property Portfolio:

• Patent Strategy: Moody's Corporation and its affiliates own patents (granted, allowed, and pending) and rely on a combination of copyright, trademark, trade secret, patent, non-disclosure, and other contractual and technological safeguards for protection.
• Licensing Programs: Licenses access to its databases, cloud-based and other software applications, credit, catastrophe, and other risk models, assessments, research, and publications to customers. The Company also licenses third-party technology, data, and intellectual property rights, including financial information and AI software.
• IP Litigation: Actively pursues instances of third-party infringement to protect its rights.

Technology Partnerships:

• Engages in strategic partnerships to enable Gen AI and agentic AI capabilities, both through internal innovations and external collaborations.

Leadership & Governance

Executive Leadership Team

Leadership Continuity: The Company's success is highly dependent on its ability to recruit, retain, and motivate highly skilled, experienced professionals, including financial analysts, data scientists, and software engineers. It is also highly dependent on the continued services of its President and Chief Executive Officer, Robert Fauber, and other senior officers and key employees.

Board Composition: The Board of Directors provides oversight of management's efforts to assess and manage cybersecurity risks and respond to incidents. The Audit Committee regularly receives reports on financial and compliance risks, including cybersecurity. The Governance & Nominating Committee oversees sustainability matters, including corporate social and environmental responsibility. The Compensation & Human Resources Committee oversees the inclusion of sustainability-related performance goals for senior executive compensation. The Board receives regular presentations and updates from the Chief Information Security Officer (CISO), Chief Risk and Resiliency Officer (CRRO), and Chief Administrative Officer (CAO) regarding technology and cybersecurity.

Human Capital Strategy

Workforce Composition:

• Total Employees: 16,076 as of December 31, 2025, a 2% increase from 15,838 in 2024. This includes approximately 2,000 employees of majority-owned Moody's Investors Service affiliates for both years.
• Geographic Distribution: 5,043 employees in the U.S. and 11,033 employees in non-U.S. locations as of December 31, 2025.
• Skill Mix:
  • Moody's Analytics: Primarily software engineers, product managers and strategists, data and operations analysts, advisory and implementation teams, and economists, as well as sales, business development, and sales support professionals.
  • Moody's Investors Service: Primarily credit analysts, data and operations analysts, credit strategy and methodology professionals, software engineers, sales and sales operations, and international strategy teams.
  • Moody's Shared Services: Primarily information technology professionals and other professional staff such as finance, human resources, compliance, and legal.

Talent Management: Acquisition & Retention:

• Hiring Strategy: Focuses on attracting and maintaining a high-performing, engaged, and motivated global workforce through market-competitive compensation, performance-based annual bonuses, and equity grants.
• Retention Strategies: Offers industry-leading benefits programs, including AI-powered technologies for benefits access, a global paid parental leave policy, and an updated tuition reimbursement program. Promotes flexible work arrangements through its "PurposeFirst" framework. Fosters a culture of continuous learning via Moody's University and emphasizes high-potential and high-performance programs with tailored development, mentorship, and strategic project opportunities.
• Employee Value Proposition: Measures employee engagement through listening sessions and the Business Engagement Survey (BES) to gather anonymous feedback and inform decisions to improve employee experience and retention.

Diversity & Development:

• Diversity Metrics: Committed to cultivating a culture where every individual feels a sense of belonging and has an equal opportunity to succeed, believing that a diverse workforce strengthens opinions and fosters innovation.
• Development Programs: The Inclusion Operating and Governance Model guides the inclusion strategy, supported by a Global Inclusion Council (senior leaders) and three Regional Inclusion Councils. Operates 11 active Business Resource Groups (BRGs) with 51 chapters, involving over 5,300 employees globally as of December 31, 2025.

Environmental & Social Impact

Environmental Commitments: Climate Strategy:

• Emissions Targets: Moody's Corporation is taking steps to reduce emissions across its operations and value chain in accordance with its decarbonization strategy.
• Renewable Energy: The decarbonization plan outlines strategies including the procurement of 100% renewable electricity in the Company’s office spaces.
• Operational Efficiency: Optimizing efficiencies in operations through its hybrid work program. The costs associated with the implementation of the decarbonization plan are not expected to be material.

Social Impact Initiatives:

• Product Impact: Leverages its expertise, technology tools, and research and analytical services to help other organizations evaluate sustainability-related risk and make better risk mitigation and planning decisions.
• Climate Capabilities: Integrated RMS’ climate capabilities into existing offerings, providing analysts and researchers with streamlined access to consistent and high-quality climate insights.
• Net Zero Assessments: Launched a Net Zero Assessment framework to provide an independent and comparable evaluation of the strength of an entity’s carbon transition plan.

Business Cyclicality & Seasonality

Demand Patterns:

• Economic Sensitivity: Moody's Corporation's business is significantly impacted by general economic conditions and volatility in world financial markets.
• Industry Cycles: Moody's Investors Service's revenue is largely transaction-based, making it especially dependent on the dollar-equivalent volume and number of ratable debt securities issued in global capital markets. Factors such as interest rates, business investment spending, corporate refinancing needs, merger and acquisition activity, issuer financial health, consumer borrowing levels, and securitization activity influence growth.
• Market for Integrated Data and Analytics: Moody's Analytics' growth is influenced by the health of major economies, debt capital markets activity, fiscal and monetary policy of governments, and business investment spending.

Regulatory Environment & Compliance

Regulatory Framework: Industry-Specific Regulations:

• U.S. Regulation: Moody's Investors Service is registered with the SEC as a Nationally Recognized Statistical Rating Organization (NRSRO) and is subject to extensive regulation under Section 15E of the Exchange Act and the Dodd-Frank Act.
• EU Regulation: The CRA industry in the EU is supervised by ESMA. Moody's Investors Service's EU CRA subsidiaries are registered with ESMA. The EU Digital Operational Resilience Act (DORA) imposes requirements on ICT risk management for financial institutions and their third-party providers; Moody's Analytics is an ICT service provider but has not been designated as a Critical ICT third-party provider (CTPP). A new EU Regulation on ESG Rating Activities, applicable in July 2026, may subject certain Moody's Investors Service products to substantive and procedural requirements and ESMA supervision. The EU AI Act, published in July 2024, introduces a risk-based framework for AI systems, with uncertain but potentially increasing costs and penalties.
• U.K. Regulation: Moody's Investors Service U.K. is registered with and regulated by the FCA. U.K. legislation has been passed to authorize the FCA to regulate ESG ratings, which may impact certain Moody's Investors Service products.
• Other Jurisdictions: Moody's Investors Service is subject to formal regulation and inspections in other foreign jurisdictions such as Australia, Singapore, Japan, and Hong Kong. In China, Moody's Corporation holds a 30% investment in China Cheng Xin International Credit Rating Co. (CCXI), a licensed domestic CRA.

Trade & Export Controls:

• The Company is subject to U.S. and foreign laws and regulations governing economic and trade sanctions, tariffs, embargoes, and anti-corruption, including the Foreign Corrupt Practices Act of 1977 and the U.K. Bribery Act of 2010. U.S. economic sanctions have increasingly targeted Chinese persons, and China has issued a blocking statute, creating potential conflicts of law.

Legal Proceedings:

• Moody's Corporation faces exposure to litigation and government/regulatory proceedings, investigations, and inquiries related to Moody's Investors Service's ratings actions and other business practices within both Moody's Investors Service and Moody's Analytics. This includes increased regulatory attention on the private credit market and evolving expectations regarding climate-risk and sustainability disclosures.
• New technologies, including Gen AI and agentic AI product offerings, may introduce new risks related to data integrity, adverse business impacts, and increased regulatory scrutiny and litigation exposure.

Tax Strategy & Considerations

Tax Profile:

• Effective Tax Rate: The effective tax rate for 2025 was 21.3%, a decrease of 240 basis points from 23.7% in 2024. This decrease primarily reflects tax benefits recognized in 2025 due to the lapse of a statute of limitations related to tax exposures assumed in a prior-year M&A transaction.
• Geographic Tax Planning: As a global company, Moody's Corporation is subject to taxation in the U.S. and various other countries and jurisdictions. The effective tax rate is influenced by the composition of earnings in jurisdictions with differing tax rates. The Company repatriates a portion of its non-U.S. cash, which may be subject to state and local taxes or withholding taxes.
• Tax Reform Impact: The Global Anti-Base Erosion (GloBE or Pillar II) tax model rules, effective in 2024 in multiple foreign jurisdictions, impose a minimum effective tax rate of 15% for multinational companies with consolidated revenue above €750 million; this is not anticipated to have a material impact on the Company's results. The One Big Beautiful Bill Act (OBBBA), enacted in the U.S. on July 4, 2025, is also not expected to have a material impact on the Company’s consolidated financial statements or future tax rates.

Insurance & Risk Transfer

Risk Management Framework:

• Risk Transfer Mechanisms: Moody's Corporation utilizes derivative financial instruments to manage financial exposures. This includes foreign exchange forward contracts to partially mitigate changes in the fair value of certain assets and liabilities denominated in non-functional currencies.
• Hedging Strategies: The Company designates derivative instruments and foreign currency-denominated debt (e.g., €500 million of 2015 Senior Notes and €750 million of 2019 Senior Notes) as net investment hedges to mitigate foreign currency risk of net investments in certain foreign subsidiaries. Interest rate swaps are used to convert fixed interest rates on certain long-term debt to floating rates, designated as fair value hedges.