Moody's Corporation runs two businesses that feed each other. The first, Moody's Investors Service (MIS), assigns letter grades to bonds and loans, telling banks and investors how risky it is to lend money to a company or government. Issuers pay for those ratings every time they borrow in the debt markets. The second, Moody's Analytics (MA), sells software and data on subscription, helping banks, insurers, and corporations monitor credit risk, run stress tests, check the identity of new customers, and model the damage that hurricanes or floods might cause. MIS earns money when debt gets issued. MA earns money every month, whether debt markets are busy or quiet. Together they brought in $7.7 billion in revenue in 2025. The diagram below traces where the money goes.
Five years of financial data tell a clear story about direction. Revenue fell from $6.2 billion in 2021 to $5.5 billion in 2022, when rising interest rates froze debt markets and companies stopped issuing new bonds. That single year shows exactly how exposed MIS is to market cycles. But recovery came fast. Revenue climbed back to $5.9 billion in 2023, then jumped to $7.1 billion in 2024, and reached $7.7 billion in 2025. That is a 40% increase over three years.
Gross margins held remarkably steady through that dip. They sat at 73.7% in 2021, slipped to 70.5% in 2022, and recovered to 74.4% by 2025. That tells you the cost base did not balloon during the downturn. Free cash flow follows a similar pattern: $1.9 billion in 2021, $1.2 billion in the difficult 2022, back to $1.9 billion in 2023, $2.5 billion in 2024, and $2.6 billion in 2025. More cash is flowing out of the business than ever before. Net debt edged down from $5.6 billion in 2021 and 2022 to $4.6 billion in 2025, meaning the company is slowly reducing what it owes even while spending on acquisitions.
The MA segment is the part of the business that smooths out those swings. It generated $3.6 billion in revenue in 2025, up 9% from the year before. Its Decision Solutions unit, which includes insurance catastrophe modeling tools, know-your-customer compliance software, and banking workflow tools, grew 12%. The KYC product line alone grew 19%. These are subscription products. Customers sign annual or multi-year contracts. Annual recurring revenue for MA grew 8% in 2025. That means the revenue base for next year is already largely locked in.
The MIS ratings business generated $4.1 billion in revenue in 2025, also up 9%. Tight credit spreads and strong investor demand meant companies were eager to issue debt. But that enthusiasm is not guaranteed. The 2022 experience proved the point. When the US Federal Reserve raised interest rates sharply, debt issuance collapsed and MIS revenue fell hard. The ratings business has no subscription cushion. When bond markets close, the fees stop.
The documented risk factors are specific and worth naming clearly. Regulators in the US, European Union, and UK are tightening rules on how credit rating agencies price their services and share their data. New EU rules on environmental, social, and governance ratings take effect in July 2026, and some Moody's products may fall inside their scope. The company is still assessing what that means for its operations. Separately, Moody's faces lawsuits from investors who lost money on securities that Moody's rated highly before those securities lost value. The company describes these legal risks as potentially material to its finances.
Two other risks cut to the heart of the business model. First, companies are finding ways to raise money without issuing rated bonds, for example through private credit markets where ratings are not required. If that trend grows, it shrinks the pool of work available to MIS. Second, artificial intelligence tools are getting better at assessing credit risk cheaply. If a bank or insurer can get a good enough credit assessment from an AI tool for a fraction of what Moody's charges, the pricing power that supports those 74% gross margins could erode. Moody's acknowledges both threats directly in its filings.
Moody's also holds a 30% stake in a Chinese credit rating company and operates inside China. US-China trade and political tensions create a specific risk: US sanctions, Chinese blocking laws, or restrictions on cross-border data flows could limit or eliminate Moody's ability to operate in that region. The filing treats this as a medium-severity risk, but it is not theoretical given the direction of US-China relations.