MSCI (MSCI) Q3 2026 earnings review
MSCI's subscription sales jump, but its Analytics unit earns less
MSCI sold far more subscriptions, while fees tied to index funds remained its biggest source of growth. Revenue rose 12%, and net new subscription sales, after cancellations, were up 41%. Chief executive Henry Fernandez called it the best quarter ever for new sales in Analytics and private markets. Profit per share climbed 14%, helped by buybacks.
| Revenue | $892.0M +12.4% from a year ago |
|---|---|
| New subscription sales, net of cancellations | $54.8M +41% from a year ago |
| Profit per share, excluding one-offs | $5.11 +14.3% from a year ago |
| Full-year cash outlook | Unchanged free cash flow $1,485–1,545M |
⚖️ Verdict: 🟢 Bullish
The story got better because subscription sales, which barely grew last quarter, rose in three of MSCI's four units. One caution: one quarter does not settle it, and management warned in July that sales would swing between quarters. The bad news: Analytics earned less on higher sales, and MSCI borrowed to fund $552 million of buybacks.
The question now is whether this jump in subscription sales starts faster growth or stands alone. The optimistic answer is that spending on new products is turning into sales; the cautious one, that a few large deals landed together. Fourth-quarter net new sales will tell in late January.
🐂 Bull Case
Subscription Sales Rose in Three of Four Businesses
MSCI sells data subscriptions to asset managers, banks and hedge funds. Last quarter those sales grew only 2%, and the worry was that the business could not speed up. This quarter it did.
Chief executive Henry Fernandez cited "our best-ever recurring net-new sales in Analytics and Private Capital Solutions" and the best third quarter ever in Index. Across the group, net new sales (new subscriptions minus cancellations) reached $54.8 million, 41% more than a year ago.
- Private Assets: $8.7 million, from $5.2 million, led by Total Plan Manager
- Subscription run rate (yearly value of signed contracts): up 8.7% excluding acquisitions, after 8.1% in June
- Retention: 95.0% of subscription value kept, from 94.7%
The case against MSCI rested on subscriptions standing still while fund fees carried growth. But one quarter does not settle it: in July management warned that sales would swing between quarters. The release gives no AI product figure, only Fernandez's promise to "transform our business for today’s AI-first world".
What to watch: fourth-quarter net new subscription sales, usually the year's largest, reported in late January. A reading above last year's $65 million would show the acceleration is real.
Fewer Index Clients Cancel, and Subscriptions Grow 12%
Index is MSCI's largest business, selling benchmarks to asset managers, banks and hedge funds. Growth came from "market cap-weighted and custom Index products", the company said, and from every client type.
- Cancellations: $7.3 million, from $9.9 million a year ago
- Retention: 97.1% of subscription value kept, from 95.8%
- Subscription run rate, the yearly value of signed contracts: up 12.0%, after 11.4% in June
This matters because index subscriptions are MSCI's steadiest revenue; unlike fund fees, they do not move with markets. Fewer cancellations lift growth for several quarters, because each contract bills over a year.
What to watch: Index cancellations in the fourth quarter, when most annual renewals fall due. A figure near last year's would mean the drop was timing, not a change in client behaviour.
Index-Fund Fees Rose 25% on Record Assets
About a quarter of MSCI's revenue is fees on exchange-traded funds, or ETFs, that track its indexes. Those fees move with asset values, not with anything MSCI sells, so a market fall cuts them at once.
- ETF assets tracking MSCI indexes: $2.9 trillion at September 30
- New money: $76 billion, against $11 billion from rising markets
- Fund fees: $246.6 million, up 24.9%, half of the group's revenue increase
New money, not the market, drove the growth. But exposure grew too: fund fees are now 27.6% of sales, and MSCI earns 5% less per dollar of assets than a year ago.
What to watch: assets in MSCI-linked ETFs at December 31, out in late January. A fall there cuts revenue in the same quarter, because MSCI charges on assets held.
🐻 Bear Case
Analytics Sells More but Earns Less
Analytics, MSCI's second-largest business, sells risk and portfolio software to asset managers and hedge funds. Fernandez led with "our best-ever recurring net-new sales in Analytics", and the figures support him. But profit fell, because costs grew three times faster than revenue.
- Net new sales (new minus cancelled): $19.8 million, from $12.1 million
- Costs: up 14.3%
- Costs as share of revenue: 55.1%, from 50.5%
- Margin, before interest, tax and depreciation: 44.9%, from 49.4%
The release blames cost growth on pay and technology but says nothing about Analytics. Last quarter's remarks passed over the same fall, and new contracts bill over a year, so costs land first.
What to watch: the Analytics margin in late January. A figure still below June's 46.5% would mean the cost base has moved up for good.
Sustainability Clients Keep Cancelling
Sustainability and Climate sells sustainability ratings and climate data. In July finance chief Andy Wiechmann said to expect net new sales of roughly zero to slightly negative over the second half. The third quarter landed at the negative end.
- Cancellations: $8.7 million, from $5.5 million a year ago
- Net new sales (new minus cancelled): minus $1.1 million, against plus $2.0 million
- Retention: 91.0% of subscription value kept, from 93.6%
- Costs: almost unchanged
MSCI has just bought First Street, a climate-risk data company, into this segment, which keeps losing clients. Its margin rose to 40.8% from 38.6%, but only because it spent less.
What to watch: fourth-quarter retention, when most annual contracts come up for renewal. A rate below last year's 91.0% would mean cancellations have not peaked.
MSCI Borrows to Fund Its Share Buybacks
MSCI returns most of its cash to shareholders, and by policy keeps debt at 3.0 to 3.5 times yearly profit before interest, tax and depreciation. This quarter the buyback far exceeded the cash the business produced.
- Buybacks: $552.3 million, from $145.0 million last quarter
- Cash after capital spending and dividends: $238 million, by our math
- Net new borrowing: $335 million
- Debt: 3.2 times that profit, from 3.1 in June
The borrowing now shows in the accounts: interest expense rose 39.6%, and MSCI raised its interest outlook again. By our math two-fifths of the growth in profit per share came from the smaller share count.
What to watch: the fourth-quarter buyback in late January. Another quarter of this size would need more borrowing, with $0.9 billion left to buy.
Risks This Quarter Didn't Answer
Five standing concerns got no new evidence, because the figures that would move them sit in the filing or on the call, not the release.
- Fee rate on the exchange-traded funds tracking its indexes: 2.28 basis points, unchanged since June; BlackRock's contracted cut on January 1 is the next test
- BlackRock as a client: about 12% of first-half revenue, almost all fund fees; the filing will give the quarter's share
- Active asset managers: subscription growth of 6% through June; the release gives no new rate
- New products: the many recent launches sell slowly outside hedge funds, by management's own account; no product revenue in the release
- AI substitution: whether MSCI again defended its proprietary data against large language models is visible only in the call transcript
👓 Other Themes
First Street Joins Sustainability and Climate
On August 3 MSCI bought First Street, "a provider of physics-based physical climate risk data and analytics", for $122.6 million net of cash. Extra payments over two years depend on revenue targets. First Street's results now sit inside Sustainability and Climate, so its reported growth will include First Street for a year, unlike the figure excluding acquisitions.
💲 Other KPIs
Fell 8.9% from a year ago, the first decline in the five quarters shown, after growth of 8.2% in the second quarter. Cash from operations slipped 3.0% because MSCI paid more interest, and capital spending nearly doubled. Free cash flow is the cash left after that spending, and it funds the dividends and buybacks.
Rose to 5.7% of revenue from 3.3% a year ago, the highest share in the five quarters shown. Most of the increase is software development that MSCI records as an asset rather than an expense. That line was $37.3 million against $22.2 million a year ago; it keeps reported costs lower now and raises depreciation later.
Up 6.4% from a year ago, slower than the 7.7% growth in subscription revenue. Deferred revenue is cash clients have paid for data they have not yet received, so it tends to lead subscription revenue by a few quarters. The growth rate was 9.6% in December, so it has slowed since the start of the year.
Almost unchanged from a year ago and down 68 people from June, while costs excluding depreciation rose 12.8%. So the cost growth is pay per head and outside services, not hiring. The group points to "higher incentive compensation and salaries" and to "higher information technology costs, professional fees and market data costs".
🔮 Guidance
Unchanged. The plan still has total operating costs of about $1.56 billion for the year. By our math that leaves $372–412 million for the fourth quarter, about the same as the third quarter's spending. MSCI raised the range once, in July, by $45 million at the middle, and third-quarter spending stayed on that path.
Unchanged. By our math the plan leaves $328–358 million of costs for the fourth quarter, excluding depreciation and amortisation. At the middle of the range that is 10.5% more than a year ago, a slower pace than the third quarter's. MSCI held the range in April, raised it $35 million at the middle in July, and held it again now.
Raised, for the second time this year. The middle of the range is now $289.5 million, up $12.5 million since January; July's step was the larger one. The borrowing for buybacks and the First Street purchase now carries a full quarter of interest. By our math the plan leaves $73–76 million for the fourth quarter, in line with the third.
Unchanged. By our math the plan leaves $46–56 million for the fourth quarter, slightly below the third quarter's charge. So the range already covers the extra amortisation of First Street's intangible assets. MSCI raised the range twice this year, by $5 million at the middle each time, and held it now.
Narrowed. The top of the range came down half a percentage point; the bottom stayed at 18.0%, which is where the third quarter's rate landed. The range excludes the $88 million tax benefit booked in the first quarter from an internal restructuring. So the reported full-year rate will be lower than the range.
Unchanged. By our math the plan leaves $36–46 million for the fourth quarter. Spending runs ahead of last year because MSCI capitalises more software development, so another quarter like the third would take the year above the range.
Unchanged. By our math the plan needs $541–591 million of operating cash in the fourth quarter. That is about 13% more than a year ago, after a third quarter in which it fell on higher interest paid. MSCI raised the range $15 million at the middle in July on faster collections, and the fourth quarter has to deliver them.
Unchanged. The plan still has free cash flow of about $1.5 billion for the year. By our math that leaves $495–555 million for the fourth quarter. The third quarter fell, so the year now rests on a fourth-quarter catch-up. That means 7–19% more cash than a year earlier. MSCI raised the range once, in July, by $15 million at the middle.
❓ Key Questions
How much run rate did First Street bring?
Sustainability and Climate's run rate, the yearly value of its contracts, grew 3.8% as reported but 2.4% excluding acquisitions and currency. Wiechmann said in July that First Street would add about $10 million; the split decides whether the segment's own book shrank this quarter.
When do Analytics' record sales become revenue?
Analytics booked its highest-ever sales net of cancellations, but its revenue grew less than 5%, because contracts start later and bill over a year. The lag decides whether the unit's higher costs meet their revenue in the fourth quarter or wait another year.
Which costs would fall if markets fell?
Costs grew faster than revenue with headcount flat. Part of that is bonus and share-based pay tied to fund assets, which would reverse in a downturn; part is acquired businesses and technology, which would not. MSCI has not given the split.
Will buybacks continue at this pace on borrowed money?
The remaining authorisation covers less than two quarters of buying at the third-quarter pace, and debt sits close to the middle of MSCI's own range. Management has not said whether it will seek a new authorisation or let the pace fall.
What replaces the dropped growth targets for each business?
MSCI stopped publishing growth targets for its individual businesses a year ago, and three of the four are growing in single digits. Without a dated target, investors have no way to say whether the smaller units are on plan.