Moody’s (MCO) Net Margin At 31.7% Tests Debt‑Focused Bear Narratives

Moody's (MCO) opened 2026 with Q1 revenue of US$2.1b and basic EPS of US$3.74, setting the tone for how its profitability story is developing against a US$466.72 share price. Over recent quarters, revenue has moved from US$1.67b in Q4 2024 to between US$1.89b and US$2.08b across the last five reported periods, while quarterly basic EPS ranged from US$2.18 to US$3.74, underscoring how earnings power has tracked alongside higher net income figures. With a trailing net margin cited at 31.7%, the latest results put the spotlight firmly on how efficiently Moody's is turning that revenue base into profit.

See our full analysis for Moody's.

With the headline numbers on the table, the next step is to line them up against the prevailing Moody's narratives to see which views the latest earnings support and which they call into question.

See what the community is saying about Moody's

TTM earnings near US$2.5b with faster recent growth

• Over the last twelve months, Moody's booked about US$7.9b in revenue and US$2.5b in net income, with trailing basic EPS of US$13.99 compared with US$11.32 six quarters ago.
• Analysts' bullish narrative leans on this pattern of 4.1% annual earnings growth over five years and a stronger 18.5% jump in the last year, arguing that the higher recent pace helps support the idea of more durable profit growth tied to expanding private credit and data driven analytics.
  • The Q1 2026 net income of US$661 million sits above the US$395 million reported in Q4 2024, which lines up with the view that earnings power has been building rather than stalling.
  • Trailing basic EPS of US$13.99 versus US$11.63 at the start of 2025 fits the bullish claim that earnings momentum has improved compared with the longer term 4.1% yearly trend.

Over the last few quarters, that step up in profits is exactly what optimists have been pointing to as support for the growth story. If you want to see how they connect these numbers to their thesis, check out the bull case 🐂 Moody's Bull Case

31.7% net margin meets high debt concern

• The trailing net margin sits at 31.7%, up from 29.1% a year earlier, which means roughly one out of every three dollars of revenue dropped to net income over the last twelve months.
• Bears focus on balance sheet risk and competitive pressure, and this margin figure creates a tension with that cautious view by showing strong profitability alongside a flagged high level of debt and customer churn in areas like ESG and KYC.
  • The combination of US$7.9b in trailing revenue and US$2.5b in net income supports the idea of high earnings quality, yet the risk summary still calls out high leverage as a key concern that could weigh on that margin if conditions change.
  • Critics also point to growth rates that are lower than the cited broader US market forecasts, which can make the 31.7% margin look less comfortable if debt costs or pricing pressure start to bite into those earnings.

With profitability this strong on paper but leverage still flagged, skeptics argue it is worth stress testing how much protection that 31.7% margin really offers if conditions turn. You can see how they frame that risk in the bear case 🐻 Moody's Bear Case

P/E 33.3x between industry and peers

• Moody's trades on a P/E of 33.3x at a US$466.72 share price, compared with a DCF fair value of US$430.68 and an analyst price target of US$534.15, while its P/E sits below the wider US Capital Markets industry at 42.4x but above the peer average of 27.2x.
• Consensus narrative highlights Moody's mix of high margins and recurring revenue, and this valuation mix partly backs that by showing investors are paying more than peers but less than the broader industry, even though the current price is above the quoted DCF fair value.
  • The gap between the US$466.72 share price and the US$430.68 DCF fair value signals some premium to that particular model, yet the P/E discount to the 42.4x industry level is consistent with the idea that quality and scale still carry weight in how the market prices the stock.
  • At the same time, trading above the 27.2x peer P/E and below the US$534.15 analyst target shows investors are already recognising the earnings profile but still leaves room for different views on how much those 31.7% margins and US$13.99 of trailing EPS are worth.

Next Steps

To see how these results tie into long-term growth, risks, and valuation, check out the full range of community narratives for Moody's on Simply Wall St. Add the company to your watchlist or portfolio so you'll be alerted when the story evolves.

With both earnings strength and balance sheet concerns in view, this is a good moment to look through the numbers yourself and decide how convincing each side feels. Then weigh up the 3 key rewards and 2 important warning signs

See What Else Is Out There

High leverage concerns, a P/E of 33.3x above peers, and dependence on sustaining a 31.7% net margin all leave limited room for error.

If that mix of debt risk and valuation premium feels uncomfortable, you can quickly compare it with companies screened for stronger financial footing using the solid balance sheet and fundamentals stocks screener (42 results).

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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