S&P Global Inc. (SPGI) Q3 2025 Earnings Call Transcript

Access earnings results, analyst expectations, report, slides, earnings call, and transcript.

Overview

The earnings call summary indicates strong financial performance across multiple divisions, with significant revenue growth in Commodity Insights, Mobility, and Indices. The Q&A section highlights positive sentiment towards AI-driven growth and productivity, strong Ratings business outlook, and strategic partnerships enhancing Private Markets growth. Despite some unclear responses, overall guidance and market strategy appear optimistic. The positive sentiment is reinforced by strong adjusted operating margins and a stable subscription model. Given these factors, the stock price is likely to move positively, although the lack of market cap information limits precision.

Key Financial Performance

Revenue Revenue increased 9% year-over-year with subscription revenue increasing 6%. The increase was attributed to strategic investments, productivity, and disciplined execution.

Adjusted EPS Adjusted EPS increased by 22% year-over-year. This was driven by margin expansion and disciplined execution.

Operating Margin Operating margin expanded by 180 basis points on a trailing 12-month basis. This was due to productivity improvements and disciplined execution.

Shareholder Returns Nearly $1.5 billion was returned to shareholders through dividends and buybacks since the last earnings call. This was part of a strategy to return approximately 85% of 2025 adjusted free cash flow.

Ratings Revenue Ratings revenue increased 12% year-over-year, driven by strong investor demand, resilient market sentiment, and favorable financing conditions.

Market Intelligence Revenue Market Intelligence revenue grew 9% year-over-year, with organic constant currency growth at 8%. This was supported by strong demand for subscription products and volume-driven products.

Commodity Insights Revenue Commodity Insights revenue increased 6% year-over-year, driven by double-digit growth in Energy & Resources Data & Insights and Price Assessments.

Mobility Revenue Mobility revenue grew 8% year-over-year, driven by strong performance in products like CARFAX and automotiveMastermind.

S&P Dow Jones Indices Revenue Revenue increased 11% year-over-year, driven by higher equity market appreciation, strong net inflows, and growth in data and custom subscriptions.

Energy Transition & Sustainability Revenue Revenue grew 6% year-over-year to $96 million, driven by demand for data and insights from Commodity Insights and sustainability products in the Indices division.

Private Markets Revenue Revenue growth doubled from last quarter, accelerating to 22% year-over-year to $164 million. Growth was driven by Ratings benefiting from strength in private debt issuance and middle market CLOs.

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Operating Highlights

AI-powered document search within iLEVEL: Announced in Q3, this feature enhances portfolio monitoring by making it easier to extract portfolio intelligence.

Document Intelligence 2.0: Launched within Capital IQ Pro, it allows users to extract insights across multiple documents simultaneously.

Collaborations with tech companies: Partnerships with Microsoft, Anthropic, Google, Salesforce, and IBM to integrate S&P Global's data into leading tools.

Acquisition of With Intelligence: Planned acquisition to enhance private markets data, including private equity, credit, and infrastructure.

Collaboration with Cambridge Associates and Mercer: Strategic partnership to deliver private markets performance analytics.

Acquisition of ARC Research: Completed acquisition to strengthen private wealth market data and benchmarking capabilities.

Revenue growth: Achieved 9% year-over-year revenue growth, with subscription revenue up 6%.

Margin expansion: Delivered 180 basis points of margin expansion on a trailing 12-month basis.

Shareholder returns: Returned $1.5 billion to shareholders and announced an additional $2.5 billion share repurchase.

Portfolio optimization: Divested Enterprise Data Management and thinkFolio businesses to streamline operations.

AI investments: Invested over $1 billion in AI innovation since 2018, focusing on foundational capabilities and GenAI.

Energy Transition & Sustainability: Revenue grew 6%, driven by demand for data and insights in sustainability products.

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Risk or Challenges

Sanctions Impact on Commodity Insights: The introduction of additional sanctions has created a headwind of approximately $6 million in 2025 and $20 million in 2026 for the Commodity Insights business. This could impact revenue growth and operational performance in the division.

Upstream Data & Insights Revenue Decline: The Upstream Data & Insights segment experienced a 2% revenue decline due to customer consolidation in the energy sector and lower oil prices, which have reduced discretionary spending. These headwinds are expected to persist into the next year.

Regulatory and Tariff Uncertainty in Mobility: Ongoing tariff and regulatory uncertainties are negatively affecting consulting revenues and discretionary spending in the automotive OEM and manufacturing sectors, impacting the Mobility division's performance.

Energy Market Uncertainty: Uncertainty in the energy markets has led to headwinds in consulting and non-subscription revenue for the Commodity Insights division, which may continue to affect performance in the near term.

High Yield Refinancing Pull Forward: While High Yield refinancing activity has been strong, there is a risk of reduced activity in the future as some refinancing has been pulled forward from the 2026 maturity wall.

Customer Consolidation in Energy Sector: Customer consolidation in the energy sector is negatively impacting the Upstream Data & Insights business, reducing revenue and creating challenges for growth.

Incremental Debt for Acquisition: The planned acquisition of With Intelligence will be funded through $1 billion in incremental debt and cash on hand, which could increase financial leverage and interest expenses.

Sanctions and Market Conditions Impact on Growth: Sanctions and market conditions are expected to create modest headwinds for the Commodity Insights division, potentially affecting revenue growth and margin expansion into early next year.

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Guidance & Outlook

Revenue Growth: S&P Global raised its enterprise outlook for total revenue growth to a range of 7% to 8% for 2025, reflecting strong performance across divisions.

Adjusted Margins: The company expects adjusted margins in the range of 50% to 50.5% for 2025, with margin expansion driven by disciplined execution and productivity improvements.

Adjusted Diluted EPS: Guidance for adjusted diluted EPS was raised to a range of $17.60 to $17.85, representing growth of 12% to 14% year-over-year.

Ratings Revenue Growth: Revenue growth for the Ratings division is expected to be in the range of 6.5% to 8.5%, supported by mid- to high teens billed issuance growth in Q4.

Market Intelligence Revenue Growth: Revenue growth guidance for Market Intelligence was raised to 5.5% to 6.5%, reflecting strong execution and acceleration in organic growth.

Indices Revenue Growth: Revenue growth for S&P Dow Jones Indices is now expected to be 10% to 12%, reflecting market strength and higher net inflows.

Commodity Insights Revenue Growth: Guidance for Commodity Insights was slightly lowered at the upper end due to sanctions and other factors, but strong revenue growth and margin expansion are still expected for 2025.

Mobility Division Revenue Growth: Revenue guidance for the Mobility division was raised towards the upper end of the prior range, reflecting strong execution and demand for products like CARFAX.

Private Markets Growth: Revenue growth in Private Markets accelerated to 22% year-over-year, driven by strength in private debt issuance and middle market CLOs.

Energy Transition & Sustainability: Revenue in this segment grew 6% to $96 million in Q3, driven by demand for data and insights from Commodity Insights and sustainability products in Indices.

Acquisition of With Intelligence: The acquisition is expected to close by early 2026, enhancing S&P Global's private markets data capabilities and accelerating growth in the Market Intelligence division.

AI and Product Innovation: S&P Global continues to invest in AI-powered tools and product innovations, including new features in iLEVEL and Capital IQ Pro, to drive customer value and operational efficiency.

Sanctions Impact on Commodity Insights: Recent sanctions are expected to contribute a headwind of approximately $6 million in 2025 and $20 million in 2026 for the Commodity Insights division.

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Shareholder Return Plan

Dividends and Buybacks: We also returned nearly $1.5 billion to shareholders through dividends and buybacks since our last earnings call.

Share Repurchase Program: We're also announcing today that we expect to launch an additional $2.5 billion share repurchase during the fourth quarter following our Investor Day. This will allow us to return approximately 85% of 2025 adjusted free cash flow while still using the net proceeds from the OSTTRA divestiture for additional share repurchases.

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Key Q&A

Q:What contributed to the 8% organic growth in Market Intelligence (MI)?

A:The growth was driven by strong execution, revenue transformation, product innovation, competitive wins, and investments in AI technologies. Specific examples include a major investment bank choosing Capital IQ Pro as their primary desktop due to its comprehensive nature and AI capabilities.

Q:How is the Ratings business performing and what is the outlook?

A:The Ratings business saw growth beyond expectations, driven by strong High Yield and Bank Loans issuance, opportunistic issuance, and M&A activity. The maturity walls through 2026 are 8% higher than last year, and the outlook for Ratings is strong with consistent growth expected.

Q:What role does AI play in expanding margins in Market Intelligence?

A:AI contributes to both growth and productivity. Growth is driven by product innovation, add-ons like automated document ingestion, and partnerships with companies like IBM. Productivity improvements include consolidating workflows and tools, leading to multimillion-dollar savings.

Q:What is the significance of the Private Markets growth and partnerships?

A:Private Markets growth was driven by strong issuance in Ratings and partnerships with Cambridge, Mercer, and the acquisition of With Intelligence. These initiatives address market gaps, such as providing like-for-like comparisons for benchmarking and enhancing data quality.

Q:What is the impact of the EDM and thinkFolio divestiture on Market Intelligence?

A:The divestiture is not material to consolidated financials but is slightly accretive to MI revenue growth and margins. It helps reshape the portfolio and aligns with the company's strategy.

Q:How defensible is Market Intelligence against AI-driven changes?

A:Approximately 88% of MI is considered highly defensible due to proprietary data, workflow tools, and integrated client solutions. Only 12% is less defensible, consisting of undifferentiated data like ownership data and directories.

Q:What drove the strong adjusted operating margin in Q3?

A:The margin expansion was partly due to a 3 percentage point tailwind from incentive compensation changes. Revenue growth substantially exceeded expense growth, contributing to the strong margin performance.

Q:How does the enterprise-wide subscription model protect against market volatility?

A:The model provides stability by mitigating the impact of headcount fluctuations in end markets. It focuses on delivering value and efficiency to clients, ensuring consistent engagement and retention.

Q:What is the significance of the With Intelligence acquisition?

A:The acquisition enhances multi-asset class data coverage, including private equity, private credit, and infrastructure. It complements existing data and partnerships, accelerating growth in Private Markets.

Q:What is the revenue sensitivity to IPO volumes?

A:Revenue sensitivity is primarily in MI's volumetric and transactional usage revenues, which benefit from increased IPO and capital market activities.

Q:How does the company approach pricing with AI functionalities?

A:Pricing is based on the value generated for clients. AI functionalities contribute to retention, new sales, and price increases. New products and features using AI also drive commercial value.

Q:What is the incremental margin profile from data partnerships?

A:Currently, customers need an S&P subscription to access data through partnerships. The company is exploring new revenue models, but the focus remains on licensing and customer acquisition.

Q:Review of Unclear Management Responses

A:Management avoided directly addressing whether there is an improvement in end markets for Market Intelligence, focusing instead on execution and product strength. Additionally, they did not provide specific details on the potential new revenue models for data partnerships in the AI era.

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Earnings Word Cloud

The most frequently occurring keywords in this quarter's earning call

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Frequently Asked Questions

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