Executive Summary / Key Takeaways

• S&P Global (SPGI) is strategically reshaping its portfolio, highlighted by the planned spin-off of its Mobility segment and the divestiture of the OSTTRA joint venture, aiming to enhance focus on its core, high-margin data, analytics, ratings, and index businesses.
• The company delivered a solid start to 2025, with Q1 revenue growing 8% year-over-year to $3.777 billion and adjusted diluted EPS increasing 9% to $3.54, demonstrating broad strength across segments despite a complex macro environment.
• SPGI is leveraging its deep data estate and AI capabilities, including tools like Spark Assist and AI-powered features in Capital IQ Pro and Platts Connect, to drive internal efficiency and deliver differentiated, workflow-integrated solutions for customers, strengthening its competitive moat.
• While market volatility and a slowing pace of decision-making present near-term headwinds, particularly impacting bond issuance expectations (now flat for FY2025), the company's resilient business mix (approximately 75% recurring revenue) and expense discipline support its full-year 2025 guidance for revenue growth of 4-6% and adjusted EPS of $16.75-$17.25.
• Key areas for investors to monitor include the successful execution of the Mobility spin-off, the impact of evolving market conditions on transaction and asset-linked revenues, and the continued realization of benefits from strategic investments in AI, private markets, and energy transition.

Powering Global Markets: A Strategic Evolution

S&P Global Inc. (NYSE: SPGI) stands as a foundational pillar in the global capital, commodity, and automotive markets, providing essential credit ratings, benchmarks, analytics, and workflow solutions. With roots tracing back to 1860, the company has evolved significantly, notably through the transformative IHS Markit merger in 2022, which shaped its current structure across five distinct, yet interconnected, segments: Market Intelligence, Ratings, Commodity Insights, Mobility, and Indices. This diversified portfolio, underpinned by a vast and proprietary data estate, positions SPGI at the nexus of critical global trends, from the shift to passive investing and the growth of private markets to the complexities of energy transition and the pervasive impact of artificial intelligence.

The competitive landscape is dynamic and multifaceted. In credit ratings, SPGI shares a duopoly with Moody's (MCO), where differentiation hinges on analytical depth, global coverage, and regulatory standing. In market intelligence, rivals like FactSet (FDS) and LSEG (Refinitiv) (LSEG) compete on data breadth, workflow integration, and technological innovation. The indices business sees competition from players like MSCI (MSCI), particularly in the burgeoning ESG and thematic index space. While SPGI holds strong positions, competitive intensity requires continuous investment and strategic adaptation. SPGI's strategic framework, "Powering Global Markets," emphasizes enhancing foundational capabilities, evolving core businesses, and pursuing growth in adjacent areas, leveraging its enterprise-wide strengths to deliver an integrated customer experience and maintain its competitive edge.

Central to SPGI's strategy and competitive positioning is its technological differentiation, particularly in leveraging its extensive data assets and pioneering AI capabilities. Building on the foundation of Kensho, acquired in 2018, SPGI has developed and deployed advanced AI tools both internally and within customer-facing products. The internal S&P Spark Assist platform, already used by approximately 14,000 employees, exemplifies the focus on driving productivity and efficiency across the organization by automating mundane tasks and accelerating workflows.

For customers, this technological edge translates into more powerful and intuitive solutions. The iLevel automated data ingest tool, a joint innovation between Market Intelligence and Kensho, uses AI to pull, tag, and load data from structured and unstructured sources into the iLevel platform, significantly streamlining portfolio management for private equity and credit clients. This capability is designed for scalability, allowing its underlying technology to be applied across other products and internal processes. Furthermore, SPGI is embedding generative AI directly into its flagship platforms, such as ChatAI on Platts Connect and ChatIQ and Document Intelligence within Capital IQ Pro. These features empower users to query vast datasets using natural language, summarize complex documents, and more quickly extract critical insights, enhancing workflow efficiency and decision-making speed. The Kensho-LLM-ready API enables seamless integration of SPGI's high-quality data sets into customers' own generative AI models, meeting clients where they are in their AI adoption journey.

While specific, universal quantifiable metrics on the direct performance advantage of SPGI's technology over all competitors are not readily available, the strategic intent and stated benefits are clear. Management emphasizes that these investments aim to maximize the value of SPGI's data estate, drive efficiency, accelerate product development, and enhance the capabilities of both employees and customers. The competitive analysis suggests that SPGI's data aggregation technology enables faster analytics (e.g., 20% faster processing) and contributes to pricing power (e.g., 10-15% higher pricing power due to data tech), providing a tangible advantage in the marketplace. This technological leadership is not merely about features; it's about creating a deeper, more integrated relationship with customers, making SPGI's solutions indispensable to their critical workflows.

Strategic Portfolio Optimization and Recent Performance

In a decisive move to sharpen its strategic focus and unlock shareholder value, S&P Global recently announced its intent to pursue a full separation of its Mobility segment. This planned spin-off, expected to be tax-free for U.S. federal income tax purposes and completed over the next 12 to 18 months, aims to create two distinct, well-capitalized public companies. The core SPGI will concentrate on its data, analytics, ratings, and index businesses, which share similar characteristics and customer profiles, allowing for a more unified strategy and accelerated product development. The standalone Mobility business, with its strong brands like Carfax and Automotive Mastermind, will gain the flexibility to pursue its own growth strategy, leveraging its deep data assets (including over 35 billion vehicle history records and 72 million lines of monthly forecast data) and strong competitive moat in the automotive value chain. This decision follows a rigorous internal analysis and is unanimously supported by the board and management.

Further portfolio optimization includes the agreement to sell the OSTTRA joint venture, a 50/50 partnership with CME Group (CME), to KKR (KKR) for $3.1 billion. SPGI's share of the proceeds is expected to result in a pre-tax gain of $220 million ($140 million after-tax) and will be used for additional share repurchases in the latter part of 2025. This divestiture, expected to close in the second half of 2025, allows SPGI to exit a non-core asset while returning capital to shareholders. Complementing these divestitures are targeted acquisitions, such as the recent agreement to acquire ORBCOMM's (ORBC) AIS data services business to enhance maritime and supply chain offerings within Market Intelligence, and the acquisition of TeraHelix to strengthen data modeling capabilities. These actions underscore a disciplined approach to portfolio management, focusing investments on core and adjacent high-growth areas.

This strategic evolution is taking place against a backdrop of mixed market signals. While the broader macro environment presents unpredictable market movement, geopolitical risk, and regulatory fluidity, SPGI delivered a solid first quarter in 2025. Total revenue increased 8% year-over-year to $3.777 billion, with growth across all five segments. Operating profit saw a notable 14% increase to $1.578 billion, reflecting revenue growth and disciplined expense management, even after accounting for specific items like Executive Leadership Team transition costs and acquisition-related costs. Adjusted diluted EPS grew 9% to $3.54.

Segment performance in Q1 2025 highlighted broad strength:

• Market Intelligence: Revenue grew 5% to $1,199 million, driven by subscription growth in Data, Analytics & Insights (benefiting from the Visible Alpha acquisition), Credit Risk Solutions, and Enterprise Solutions, partially offset by the Fincentric sale impact. Operating profit increased 16% to $220 million.
• Ratings: Revenue increased 8% to $1,149 million, fueled by growth in both non-transaction (surveillance, commercial paper, medium-term notes) and transaction revenue (structured finance, bank loan ratings, U.S. Public Finance). Operating profit rose 11% to $757 million, achieving a strong 66% operating margin.
• Commodity Insights: Revenue was up 9% to $612 million, driven by demand for market data/insights, increased conference revenue (CERAWeek), and higher sales usage-based royalties. Operating profit grew 13% to $255 million.
• Mobility: Revenue increased 9% to $420 million, primarily from growth in the Dealer and Financial businesses. Operating profit jumped 22% to $86 million.
• Indices: Revenue saw robust 15% growth to $445 million, led by higher asset-linked fees (benefiting from increased ETF AUM, up 18% year-over-year to $4.3 trillion), exchange-traded derivative revenue, and data subscription revenue. Operating profit increased 16% to $315 million, maintaining a high 71% operating margin.

Consolidated profitability metrics show a healthy picture, with a TTM gross profit margin of 67.47%, operating margin of 40.39%, and net margin of 27.27%. While some competitors like MSCI demonstrate higher net margins (39%), SPGI's diversified portfolio and scale contribute to strong absolute profitability and cash flow generation.

Cash provided by operating activities was $953 million in Q1 2025, contributing to $816 million in free cash flow after capital expenditures and distributions. The company maintains a solid liquidity position, supported by its cash balance ($1.469 billion at March 31, 2025) and a $2 billion credit facility, with a manageable debt-to-equity ratio of 0.36. Capital return remains a priority, with $650 million spent on share repurchases in Q1 2025.

Outlook and Risks

Looking ahead, S&P Global's full-year 2025 guidance reflects a pragmatic view of the current market environment and the planned strategic actions. The company expects total revenue growth in the range of 4% to 6%, adjusted operating margin between 48.5% and 49.5%, and adjusted diluted EPS in the range of $16.75 to $17.25. This outlook is based on macroeconomic assumptions including global GDP growth lower than 3%, U.S. inflation higher than 2.3%, Brent crude averaging in the low seventies, flat bond issuance year-over-year (with a double-digit decline expected in Q2 before flattening), and flat M&A volumes. The guidance for market-driven segments reflects these assumptions: Ratings revenue is expected to be flat to up 4%, and Indices revenue is projected to grow 5% to 7% (assuming the S&P 500 is flat from April 15th). Guidance for Market Intelligence, Commodity Insights, and Mobility revenue growth remains unchanged from prior expectations. Management intends to maintain margin guidance across all divisions, planning to offset potentially lower revenue in Ratings and Indices with expense discipline and adjustments to incentive compensation. The OSTTRA sale proceeds are expected to be used for share repurchases, helping to offset the EPS impact of the divestiture.

Despite the solid Q1 performance and strategic clarity, several risks could impact the investment thesis. Macroeconomic uncertainty, including potential shifts in interest rates, inflation, and GDP growth, could further affect market activity and customer spending. Market volatility, particularly in debt and equity markets, directly impacts transaction and asset-linked revenues in the Ratings and Indices segments. Geopolitical risks and trade conflicts could disrupt global supply chains and commodity markets, affecting the Commodity Insights and Mobility segments. Regulatory scrutiny, especially for the Ratings business, remains a constant factor, with potential for adverse outcomes from ongoing proceedings or inquiries. The planned separation of the Mobility segment, while strategically beneficial, carries execution risk and the possibility that the transaction may not be completed on the anticipated timeline or achieve the full expected benefits. Competition across all segments, including from nimble fintechs and large diversified players, could intensify, putting pressure on pricing and market share. Litigation, such as the class action lawsuits in Australia related to historical CDO ratings, presents potential financial and reputational risks, though the eventual outcome and impact remain uncertain.

Conclusion

S&P Global is navigating a complex global landscape by proactively shaping its future. The planned spin-off of Mobility and the divestiture of OSTTRA represent significant steps to streamline the portfolio and sharpen focus on core strengths in data, analytics, ratings, and indices. These actions, coupled with ongoing investments in technological differentiation, particularly in AI-powered solutions, are designed to enhance operational efficiency, accelerate growth in strategic areas like private markets and energy transition, and strengthen the company's competitive moat.

While near-term market volatility and a cautious macroeconomic outlook temper the 2025 guidance, SPGI's resilient business model, characterized by a high proportion of recurring revenue and stable non-transaction fees, provides a solid foundation. The company's commitment to expense discipline and capital return further supports its financial outlook. For investors, the story is one of a market leader leveraging its foundational data and technology assets to adapt and grow in a dynamic environment. Success will hinge on the effective execution of its strategic separation and divestiture plans, the continued ability to innovate and integrate AI into valuable customer solutions, and its capacity to capitalize on long-term secular trends while managing the inherent volatility of its market-sensitive businesses.