Moody's Q3 2026: A Leveraged Finance Slump Snaps a Five-Quarter Win Streak
As seen on the 24/7 Wall St. homepage on October 21, 2026.
A collapse in leveraged finance ended five straight quarters of beats, with high yield transaction revenue down 40%. Both EPS and revenue missed expectations, yet management reaffirmed full-year adjusted EPS guidance of $16.50 to $17.00 and kept buying back stock.
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Moody's ended a five-quarter run of beating expectations, with Q3 2026 adjusted diluted EPS of $4.14 missing the consensus estimate and revenue also missing expectations.
The damage was concentrated in Moody's Investors Service, where a sharp pullback in leveraged finance issuance hit hard. High yield transaction revenue fell 40%, overwhelming otherwise solid results in investment grade, structured finance, and public and infrastructure finance.
Moody's Analytics provided a partial offset, posting 8% organic constant currency growth. Recurring revenue now represents 99% of total MA revenue, a mix shift that makes the segment far less exposed to the transaction-volume swings that hurt Investors Service this quarter.
Despite the miss, management reaffirmed full-year adjusted diluted EPS guidance of $16.50 to $17.00 and maintained its expectation for high-single-digit revenue growth. Macro assumptions now reflect a higher speculative-grade default rate by year-end and one additional rate hike each from the Fed and the ECB.
Through Q3 2026, Moody's had repurchased approximately $2.6 billion of stock and declared a quarterly dividend payable December 11. The combination signals management's confidence in cash generation even as credit market volatility clouds the near-term rating transaction outlook.
Mentioned: MCO