Executive Summary / Key Takeaways

• Robust Financial Performance Driven by Core Strengths: MSCI delivered strong Q3 2025 results with 9% organic revenue growth, 10% adjusted EBITDA growth, and over 15% adjusted EPS growth, underpinned by a record asset-based fee run rate of nearly $800 million and $6.4 trillion in AUM linked to its indexes globally.
• AI as a Transformative Engine: Artificial intelligence is a "godsend" for MSCI, enabling dramatic scaling of data, accelerated model development, and significant operational efficiencies, with AI-powered products already generating $15 million to $20 million in sales this year.
• Strategic Expansion into Private Markets: MSCI is aggressively building out its private assets franchise with new solutions like MSCI PACS and a Private Credit Factor Model, enhancing transparency and risk assessment in a rapidly growing, opaque asset class through proprietary data and strategic partnerships.
• Diversified Growth Vectors Beyond Active Management: While active asset managers face cyclical pressures, MSCI is strategically expanding its footprint and driving strong subscription run rate growth in hedge funds (21%), wealth managers (nearly 11%), asset owners (9%), and banks/broker-dealers (9%).
• Commitment to Shareholder Value: The company's strong cash flow supports a new $3 billion share repurchase program, demonstrating management's conviction in the franchise's long-term value and its disciplined capital allocation strategy.

The Foundation of Global Investment Decisions

MSCI Inc. (NYSE:MSCI), incorporated in 1998, has evolved into a cornerstone of the global investment community, providing critical decision support tools and solutions that empower investors to understand risk, analyze returns, and construct effective portfolios. The company's "all-weather franchise" is built on a foundation of mission-critical data, models, and technology, which become even more indispensable during periods of market uncertainty and volatility. This enduring relevance is reflected in its predominantly recurring revenue model, with annual subscriptions and asset-based fees forming the bedrock of its financial stability.

MSCI's strategic journey has been marked by a consistent focus on extending its leadership in research-enhanced content across asset classes and expanding solutions for client customization. Key acquisitions, such as Fabric RQ, Inc. in January 2024 (a wealth technology platform) and Foxberry Ltd. in April 2024 (a front-office index technology platform), have been swiftly integrated to bolster its Analytics and Index segments, respectively. These strategic moves underscore MSCI's commitment to enhancing its offerings and diversifying its client base beyond traditional active asset managers.

The broader industry landscape is characterized by several powerful secular trends that play directly into MSCI's strengths. The persistent growth of passive investing, the increasing allocation to private assets, and the imperative of integrating sustainability and climate factors into investment decisions all create significant demand for MSCI's specialized expertise. As of September 30, 2025, MSCI served approximately 6,900 clients in over 95 countries, highlighting its extensive global reach and deep integration within the financial ecosystem.

Technological Leadership and the AI Advantage

At the heart of MSCI's competitive differentiation lies its proprietary technology, which underpins its industry-leading indexes, advanced analytics platforms, and comprehensive ESG data solutions. This technological edge provides tangible benefits to clients, enabling enhanced risk modeling, more precise portfolio construction, and seamless integration of complex data sets. For instance, MSCI's Global Industry Classification Standard (GICS) is a widely recognized framework that brings consistency to market segmentation, a qualitative advantage that strengthens its market positioning for asset managers.

The advent of artificial intelligence (AI) is proving to be a transformative force for MSCI, with CEO Henry Fernandez describing it as a "godsend". AI is rapidly being integrated across MSCI's data, models, and platforms to deliver innovative solutions and drive significant efficiencies. This includes dramatically scaling data acquisition and processing, accelerating the development of new investment and risk models, and enhancing content distribution to clients.

Quantifiable benefits of AI are already emerging. MSCI has successfully doubled its data production throughput while simultaneously reducing costs by 25% through the implementation of generative AI. This operational efficiency is crucial for a data-intensive business. Furthermore, AI-powered products have generated between $15 million and $20 million in sales this year, demonstrating a clear revenue impact from technological innovation. Management also anticipates that AI will lead to a 5% to 15% reduction in operating expenses, freeing up substantial resources for reinvestment into the business to fuel faster growth. This strategic intent is to leverage AI to achieve mass personalization and real-time processing, further solidifying MSCI's competitive moat.

Competitive Landscape and Strategic Positioning

MSCI operates in a highly competitive environment, facing off against established players like S&P Global Inc. (SPGI), FactSet Research Systems Inc. (FDS), and Morningstar, Inc. (MORN), as well as indirect competitors such as in-house solutions and emerging AI-driven analytics providers. MSCI's competitive strategy emphasizes specialization and depth, particularly in its core Index business and its expanding Sustainability and Climate and Private Assets segments.

Compared to S&P Global, which offers a broader suite of services including credit ratings, MSCI maintains a specialized focus on investment decision support tools. MSCI's proprietary indexing methodologies and ESG data platforms provide a qualitative edge in depth and user-specific applications, enabling clients to address complex regulatory and sustainability demands more effectively. While S&P Global's diversified revenue streams offer scale, MSCI's targeted innovation, particularly with AI, allows it to maintain an advantage in emerging market segments.

Against FactSet, known for its user-friendly platforms and strong data aggregation, MSCI differentiates itself with more specialized tools in indexes and ESG, offering comprehensive risk assessment and climate-related analytics. MSCI's focus on long-term risk modeling and its proprietary GICS framework enhance its market positioning, particularly for institutional investors. While FactSet may excel in real-time data delivery, MSCI's depth in analytical content provides a strong counter.

Morningstar, with its brand strength in retail investor tools and ESG ratings, serves a broader audience. MSCI's offerings, however, are more institutionally oriented, providing advanced analytics and indexes with comprehensive global coverage for large asset managers. MSCI's leadership in innovation speed for regulatory compliance in ESG and climate areas further distinguishes it from Morningstar's more generalized approach.

MSCI's competitive advantages are rooted in its proprietary technology, strong brand, and network effects from its global client relationships. The company's ability to develop and integrate AI-powered solutions, such as the Private Credit Factor Model, allows it to create unique offerings that are difficult for competitors to replicate. Strategic partnerships, like the one with Moody's for independent credit risk assessments in private credit, further enhance MSCI's competitive edge by combining complementary capabilities and expanding its market reach.

Despite its strengths, MSCI faces vulnerabilities, including customer concentration, with BlackRock accounting for 10.60% of its consolidated operating revenues and 18.50% of its Index segment revenues for the nine months ended September 30, 2025. This reliance could pose a risk if BlackRock's strategies or business needs change. Additionally, operational costs have increased, with Index segment Adjusted EBITDA expenses rising 11.2% in Q3 2025. However, MSCI's strategic response to these challenges involves continuous product innovation and diversification across client segments, leveraging its technological leadership to maintain its market position.

Financial Performance: A Resilient Growth Engine

MSCI's financial performance in the third quarter of 2025 underscored the resilience and growth momentum of its business model. The company reported organic revenue growth of 9%, adjusted EBITDA growth of 10%, and adjusted earnings per share growth exceeding 15%. Total operating revenues reached $793.4 million, marking a 9.5% increase year-over-year. This growth was achieved with a robust adjusted EBITDA margin of 62.3%, demonstrating efficient cost management and strong profitability.

Segment-wise, the Index segment, MSCI's largest, continued to be a primary growth driver. Its operating revenues grew 11.4% to $451.2 million in Q3 2025. This was significantly fueled by a 17.1% surge in asset-based fees, which reached a record run rate of nearly $800 million. This performance reflects record AUM levels of approximately $6.4 trillion in both ETF and non-ETF products linked to MSCI indexes globally. Recurring subscriptions within the Index segment also saw healthy growth, increasing by 8.30% for the quarter.

The Analytics segment reported operating revenues of $182.2 million, up 5.7%, driven by strong adoption of risk tools and equity models by multi-strategy hedge funds. The Sustainability and Climate segment, recently renamed to reflect its broader offerings, generated $90.1 million in operating revenues, an increase of 7.7%. This growth was primarily attributed to Ratings and Climate products, with EMEA being a key contributor. The "All Other - Private Assets" segment, encompassing Real Assets and Private Capital Solutions, saw operating revenues rise 9.7% to $70.0 million.

MSCI's total Run Rate, an indicator of future recurring revenue, stood at $3.19 billion as of September 30, 2025, representing a 10.1% increase year-over-year. This was supported by an 8% increase in recurring subscriptions and a 17% increase in asset-based fees. The company's overall retention rate remained strong at 94.7% for the quarter, underscoring the stickiness of its mission-critical solutions.

From a liquidity perspective, MSCI maintains a robust financial position. As of September 30, 2025, cash and cash equivalents totaled $400.09 million. The company's long-term debt stood at $5.51 billion, resulting in a Consolidated Leverage Ratio of 2.0x. MSCI actively manages its capital structure, having repurchased over $1.5 billion worth of shares year-to-date through Q3 2025. The Board's authorization of a new $3 billion share repurchase program on October 25, 2025, further signals management's strong conviction in the company's value and its commitment to returning capital to shareholders.

Strategic Growth Vectors and Outlook

MSCI's strategic initiatives are designed to capitalize on evolving market dynamics and expand its footprint across a diverse client base. A two-pronged approach involves both supporting the active asset management industry with innovative solutions and aggressively growing its presence in other client segments.

For active asset managers, MSCI is focused on helping them create new products, particularly in the burgeoning active ETF space. Management believes that the shift from traditional mutual funds to active ETFs represents a significant growth opportunity, with MSCI playing a large role in this transformation. The company already serves 50 clients representing $1.01 trillion in AUM in active ETFs.

Beyond active asset managers, MSCI is seeing strong traction in other client segments. Hedge funds delivered 21% recurring net new subscription sales growth in Q3 2025, driven by demand for risk tools and equity models. Wealth managers achieved nearly 11% subscription run rate growth, leveraging MSCI's private capital fund transparency data and the MSCI Wealth Manager platform. Asset owners posted 9% subscription run rate growth, increasingly using MSCI's private capital indexes and total portfolio solutions. Banks and broker-dealers also saw 9% subscription run rate growth, with strong demand for Index data to support OTC derivatives and structured products.

A significant strategic vector is the expansion into private assets. MSCI recently launched MSCI PACS (Private Asset Classification Standard), an AI-powered global taxonomy for private companies, real estate, and infrastructure, aiming to bring consistent standards to this opaque market. The company is "very bullish" on private credit, having developed terms and conditions for 80,000 loans from 2,800 private credit funds, and launched a Private Credit Factor Model to enhance transparency and risk assessment. The partnership with Moody's (MCO) to provide independent credit risk assessments further solidifies MSCI's leadership in this space.

Looking ahead, MSCI's 2025 guidance reflects continued investment in these growth areas. Total operating expenses are projected to be between $1.415 billion and $1.445 billion, with Adjusted EBITDA expenses between $1.230 billion and $1.250 billion. Interest expenses are anticipated to be $205 million to $209 million, reflecting recent debt issuance. Net cash provided by operating activities is expected to be $1.54 billion to $1.59 billion, and free cash flow is guided to $1.41 billion to $1.47 billion, supported by business growth and tax benefits. Capital expenditures are projected at $120 million to $130 million. Management assumes gradually increasing market levels throughout the year, noting that expenses would trend towards the middle of the guidance range if AUM levels remain at current highs. However, the company explicitly expects near-term pressures in the Sustainability and Climate segment to persist.

Risks and Challenges

Despite its strong positioning, MSCI faces several pertinent risks. Client concentration remains a notable vulnerability, with BlackRock (BLK) representing a significant portion of its revenues. Any shifts in this relationship could impact financial stability. Operational costs are also a factor, with Adjusted EBITDA expenses in the Index segment increasing, necessitating continuous efficiency management.

Market volatility and regulatory changes pose ongoing challenges. MSCI is exposed to foreign currency exchange risk, with approximately 17% of its revenues for the nine months ended September 30, 2025, subject to fluctuations, primarily in Euros, British pounds sterling, and Japanese yen. Declines in these currencies against the U.S. dollar could reduce asset-based fees.

The Sustainability and Climate segment continues to experience cyclical headwinds, with management expecting these dynamics to persist in the near term. While the long-term secular trend for sustainability remains positive, the evolving demand and regulatory complexities require continuous adaptation. The reliance on AI, while a significant advantage, also introduces operational risks if integration is not managed effectively.

Conclusion

MSCI stands as a formidable force in the global investment ecosystem, leveraging its "all-weather franchise" and technological prowess to deliver consistent financial performance and drive strategic expansion. The company's core investment thesis is rooted in its indispensable role as a provider of mission-critical decision support tools, particularly its proprietary indexes and advanced analytics. The strategic integration of AI is not merely an efficiency play but a fundamental catalyst for new product development, enabling MSCI to scale its data and models dramatically while enhancing profitability.

MSCI's aggressive push into private assets, coupled with its diversified client engagement across hedge funds, wealth managers, and asset owners, positions it for sustained growth beyond traditional active asset management. While cyclical headwinds in the Sustainability and Climate segment and ongoing market volatility present challenges, MSCI's robust financial health, disciplined capital allocation, and unwavering commitment to innovation underscore its capacity to generate long-term value. Investors looking for a resilient compounder with a strong competitive moat and a clear roadmap for future growth will find MSCI's strategic trajectory compelling.