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Good morning, and welcome to S&P Global's Second Quarter 2026 Earnings Conference Call. I'd like to inform you that this call is being recorded for broadcast. To access the webcast and slides, go to investor.spglobal.com. I would now like to introduce Mr. Mark Grant, Senior Vice President of Investor Relations and Treasurer for S&P Global. Sir, you may begin.
Good morning, and thank you for joining today's S&P Global Second Quarter 2026 Earnings Call. Presenting on today's call are Martina Cheung, President and Chief Executive Officer; and Eric Aboaf, Chief Financial Officer. We issued a press release with our results earlier today. In addition, we have posted a supplemental slide deck with additional information on our results and guidance. If you need a copy of the release and financial schedules or the supplemental deck, they can be downloaded at investor.spglobal.com. The matters discussed in today's conference call may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including projections, estimates and descriptions of future events. Any such statements are based on current expectations and current economic conditions and are subject to risks and uncertainties that may cause actual results to differ materially from results anticipated in these forward-looking statements. Additional information concerning these risks and uncertainties can be found in our Forms 10-K and 10-Q filed with the U.S. Securities and Exchange Commission. In today's earnings release and during the conference call, we're providing non-GAAP adjusted financial information. This information is provided to enable investors to make meaningful comparisons of the company's operating performance between periods and to view the company's business from the same perspective as management. The earnings release contains financial measures calculated in accordance with GAAP that corresponds to the non-GAAP measures we are providing, and the press release and the supplemental deck contain reconciliations of such GAAP and non-GAAP measures. For today's discussion, references to revenue are to GAAP pro forma revenue on a consolidated basis, GAAP revenue for our Ratings and Indices segments and adjusted as recast revenue for our Energy and Market Intelligence segments. Other financial metrics discussed on today's call are presented on an adjusted basis and refer to pro forma non-GAAP adjusted measures. In a press release dated July 6, 2026, the company provided recast financial information, excluding contributions from Mobility for the 4 quarters of 2025, full year 2025 and the first quarter of 2026. That release can also be found at investor.spglobal.com. At this time, I would like to turn the call over to Martina Cheung. Martina?
Thank you, Mark, and thank you to everyone joining the call this morning. I'm excited to host our first earnings call since completing the Mobility spin, and I'm excited to be able to discuss the progress and the vision of our four divisions. We had very strong performance in the second quarter with 11% total revenue growth, outperforming our expectations on both a reported and an organic constant currency basis. Recurring revenue was up 8% year-over-year as well. The strength of our benchmark business has really shone through in the second quarter as well, with revenue increasing 15% year-over-year. With high incremental margins in our benchmark products and disciplined expense management across the business, we were able to deliver 200 basis points of margin expansion, leading to EPS growth of 23%. On capital return, we have decided to increase our target share repurchase for 2026 by nearly $3 billion to more than $7 billion for the full year. As Eric will walk through shortly, our strong cash flow and healthy balance sheet will allow us to repurchase the equivalent of more than 5% of our current market capitalization. In the last few months, we've seen the end result of a great deal of exceptional work from teams across the entire organization. On July 1, we finalized the spin of our former Mobility division into an independent publicly traded company, which immediately creates meaningful shareholder value. We announced the consolidation of our supply chain efforts into our Energy division as well as new leadership and a new operating model for Market Intelligence. We'll provide some additional insights on those points in a moment. We've also seen continued rapid adoption of our AI solutions, including our Kensho LLM-ready APIs, and we've continued to explore different monetization methods with our large, sophisticated customers. We also announced an agreement to purchase datacenterHawk and the majority stake in Agusto & Company. datacenterHawk will combine with our 451 Research and energy forecasting assets to extend our leadership in the data center space. Agusto & Company is a leading credit rating agency with operations in Nigeria, Kenya, Rwanda and Ghana. All of these milestones are evidence of the progress we are making in executing the strategy we announced at our Investor Day last year. With the completion of the Mobility spin and the division realignment, we are well positioned to deliver on the strategic objectives we have laid out. We will continue to invest to advance our market leadership and benchmarks across the debt, equity and commodity markets. In Market Intelligence, we will make focused investments in the fastest growth areas while improving the profitability of more mature platforms. That will help us optimize the Market Intelligence business to meet the evolving data and AI needs of our customers. We are also integrating our data to create new opportunities and expand our addressable markets through Kensho Data. Now that we have simplified the business down to four core divisions, it's more clear than ever how these divisions can create a powerful platform to help our customers navigate volatile markets and turbulent macroeconomic conditions. As I've shared with you before, we are primarily a benchmark business. Benchmarks include our Ratings division, our Indices division, the Platts business within our Energy division and the distribution of our Ratings content through Market Intelligence. These benchmark businesses account for nearly two-thirds of our revenue and now comprise more than 80% of our operating profits. Given this is the first earnings call since we completed the Mobility spin and realigned two of our four divisions, I wanted to discuss each division's growth drivers and strategic priorities before handing off to Eric to discuss financials and guidance. Beginning with Ratings, which is now our largest division by revenue. The market appears to be pricing in slightly higher rates than were expected at this point last year, though credit spreads remain very tight. Billed issuance increased 25% year-over-year in the second quarter, with strength across the risk spectrum. Investment-grade issuance was again bolstered by large issuance associated with AI infrastructure and data center CapEx as well as M&A. We also continue to drive innovation in fast-growing areas of credit with DeFi. Issuance from the hyperscaler infrastructure companies slowed in the second quarter as we expected, but remains quite strong and is pacing well ahead of our initial expectations for the year. In the first half, we saw approximately $169 billion in billed issuance from the hyperscalers while our initial outlook for the year assumed approximately $200 billion for the full year. Our updated financial guidance assumes billed issuance growth in the mid- to high single-digit range. We are now assuming $250 billion to $300 billion in hyperscaler issuance for the full year and double-digit growth in M&A-related issuance. As we look at our midyear refinancing study, we continue to see robust maturity walls for several years, reinforcing our expectation for strong average annual growth. Over the last 12 months, we have seen billed issuance grow at an average of roughly 20%. Despite that very strong issuance and our outperformance in the first half of 2026, the near term and multiyear maturity walls remain quite strong. This is a powerful indicator that the strength we are seeing this year in Ratings is not coming at the expense of future refinancing activity. In the next 4.5 years, we expect to see approximately $11 trillion in rated debt come up for refinancing, which bodes well for the multiyear growth opportunities in Ratings. Now turning to Indices. We continue to extend our leadership as the world's largest provider of indices by AUM. ETF AUM for S&P Dow Jones Indices ended the quarter at $6.35 trillion. We continue to see an even greater amount of AUM tied to our indices when we include mutual funds, OTC derivatives and insurance products. We have built an incredible index franchise founded on trust, transparency and disciplined methodology, while still being responsive to an ever-evolving market environment. Our results demonstrate the strength of that franchise as S&P Dow Jones Indices was the number one index provider yet again in terms of flow capture. Year-over-year, we have seen more than $600 billion in net inflows. June marked a significant milestone for the global markets as well as we saw the first-ever ETF surpass $1 trillion in AUM. We're incredibly proud to be part of that story as that ETF was based on the storied S&P 500. We also continue to invest to drive new innovative solutions in DeFi. Just last week, we launched the S&P Pantera Digital Asset Index, which uses a rules-based approach that focuses heavily on fundamentals versus focusing strictly on price momentum or market cap. That innovation is driving real economic value and competitive wins as well. In the second quarter, we saw multiple asset managers switch to S&P, bringing tens of billions of dollars in additional AUM now benchmarked against S&P Dow Jones Indices. Now turning to our Energy franchise. As we outlined back at Investor Day, we will be reporting Energy in two business lines going forward. The Platts benchmark business includes our price assessments, global trading services and other offerings associated with our Energy and Commodity benchmarks. The CERA business line includes the proprietary data, content, research and events, including the holistic supply chain suite that previously was spread across Energy and Market Intelligence. When we think about the performance of the Energy business, not just in the quarter but longer term, there are a number of factors impacting growth with long-term positive factors offset somewhat by near term headwinds. We are confident that the secular tailwinds in this business remain intact. Energy expansion continues to be one of those tailwinds and informs much of our strategic focus. Our price benchmarks remain the gold standard across Energy and Commodities markets, and we will continue to invest to launch and scale new benchmarks. As supply chains diversify and evolve, we continue to make investments in regions of the world like North Africa that are poised to play a more important role in global Energy and Commodity markets. We expect to see strong economic growth in these regions and look to work together with local partners to help deliver that growth. Global supply chains aren't just raw materials and manufacturing. They include technology supply chains involving data centers and power and represent a meaningful opportunity for our Energy business. That opportunity is exactly why you saw us acquire datacenterHawk. We're confident that as the demand for AI increases, the need for our data and insights will increase as well. We've also made great progress with CERA Titan and remain on track to officially launch our new AI-native platform for upstream data later this year. Despite the many long-term tailwinds in Energy, there are some factors that pressured results in the quarter, though not unexpectedly. Importantly, the Iran conflict has complicated contract renewals among some very large customers, and we have intentionally chosen to be flexible on price increases and other terms for affected customers during such a challenging time. Eric will walk through what that means for 2026 in a moment, but we remain confident that the headwinds are cyclical while the tailwinds are secular. Now turning to Market Intelligence. As we announced on July 6, we have created a new business structure for Market Intelligence with new leadership already on the ground running. We continue to see rapid changes in the technology landscape and in the ways our customers want to interact with our data. So we are refining our strategy and go-to-market motion to make sure we're best positioned for the future. Within Market Intelligence, we'll be reporting two business lines: Kensho Data & Platforms and Enterprise Solutions. Kensho Data consists of our data feeds, Kensho LLM-ready APIs, RatingsXpress and our vast estate of proprietary data. The Kensho Data component is roughly half the size of platforms by revenue, but is growing in the high single-digit to low double-digit range on an organic basis. The Platforms component includes desktop solutions, Consulting, Issuer Solutions, RatingsDirect, Visible Alpha and With Intelligence. Platforms is the larger component of the business line and in aggregate is growing low single digits on an organic basis. Our strategic focus in Kensho Data will be to deliver our differentiated and proprietary data in a channel-agnostic way, accelerating revenue growth at strong incremental margins. Our focus in Platforms will be to consolidate redundant platforms, leverage a more unified technology infrastructure across products and simplify operations while still growing revenue. We will maintain a high standard for innovation and customer value, but increase our efforts to leverage AI and traditional productivity measures to improve profitability. The other business line in Market Intelligence is Enterprise Solutions. Enterprise Solutions includes our entire Lending Solutions suite, ClearPar, Debtdomain, Pricing and Reference Data, Notice Manager and WSO. The Lending Solutions suite benefits from deeply connected data flows as well as strong network effects. Enterprise Solutions also includes iLEVEL, bookbuilding software for fixed income and equity origination and valuation services. These are important market-leading franchises that the markets depend on in order to function. In Market Intelligence, we have an incredible library of proprietary data and powerful workflow tools. We will emphasize those areas where S&P Global has a clear right to win. We are seeing customer buying behavior mature and evolve. Vendor consolidation continues to be a tailwind for our business, and we are beginning to see customers more rigorously evaluating AI budgets to prioritize those solutions that truly create positive ROI. Across the board, we want to align our priorities with those of our customers. We will be focused on the highest quality assets in Market Intelligence and on the highest growth opportunities. We will make more and more of our global data estate AI-ready by scaling our enterprise data fabric. We will look to fund these investments primarily out of productivity and AI-driven cost savings to ensure meaningful margin expansion. From a capital standpoint, small carve-outs are possible in the near term, but there remains no real appetite for transformational M&A. The simplified structure and clear objectives we've discussed today will better position Market Intelligence to serve customers in the future and drive long-term profitable growth. Now let me turn to the exciting progress we're making in artificial intelligence. As we shared with you last quarter, our customers leveraging our AI solutions are growing much faster than average. That gap widened in the second quarter for both Market Intelligence and Energy. ACV growth in Market Intelligence is now 60% faster for AI customers and is approximately three times in Energy. The demand signal from customers is incredibly strong. We continue to rapidly add customers to our LLM-ready APIs and MCP-connected solutions, with that number now sitting above 500 and increasing more than 70% quarter-over-quarter. API call volume continues to grow rapidly as well, showing that our customers are finding real value in these powerful solutions. Call volume for our LLM-ready API in the second quarter was more than five times the volume we saw in the first quarter. Internally, the EDO has achieved nearly 60% of its targeted $100 million in annualized cost savings through a combination of AI-driven efficiencies and traditional productivity initiatives. We are on track to deliver the full $100 million or roughly 20% of the EDO cost base before the end of 2027. Even as our AI solutions are seeing great demand, we are hearing more and more from customers that they are paying more attention to token costs and the overall expense of their own AI investments. Customers are looking for ways to minimize or manage token expenses, including building solutions in-house. Those customers want to build with S&P Global and with Kensho Labs. Over time, we believe that our AI offerings will create meaningful value for our customers without creating exorbitant costs. Overall, we are pleased with the performance of the business in the second quarter. We once again demonstrated the power and resilience of our benchmarks businesses while making meaningful progress on strategic growth initiatives across the board. We are energized by the opportunities and new leadership in Market Intelligence, and look forward to delivering a strong second half. With that, I'll hand it over to Eric to walk through the quarter's financial results and the guidance.
Thank you, Martina, and good morning, everyone. Starting with Slide 15, we delivered another quarter of strong financial results, including 11% revenue growth and 23% growth in adjusted diluted EPS. Our second quarter performance underscores the power of our benchmark businesses, which grew revenues 15% year-over-year on the back of excellent performance in Ratings and Indices. Revenue grew 11% on both an organic constant currency and all-in basis as M&A and FX had only modest net impacts. Adjusted expenses increased 6%. We tightened our spending with the start of the Iran conflict amid heightened volatility and macroeconomic risk. This discipline, along with our ongoing productivity savings carried through into the second quarter and enabled us to deliver 200 basis points of year-on-year margin expansion to 54.3% and a 15% growth in adjusted operating profit. Excluding OSTTRA from the prior year period, our second quarter 2026 margin expansion would have been 270 basis points. Finally, adjusted operating profit was up 15%, and our robust return of capital to shareholders through buybacks helped drive EPS further up 23%. Turning to our divisions with Slide 16. This quarter, Ratings reported a record quarter by revenue, which increased 17% year-over-year. We exceeded our internal expectations for both the quarter and for the first half of the year. Issuance in the quarter benefited from tighter spreads and favorable market conditions, though growth was also elevated due to a fairly soft compare in the year ago period, driven by last year's tariff uncertainty. Transaction revenue increased 25%, partly driven by high 20% growth in investment grade, supported by tech infrastructure and hyperscaler issuance and M&A transactions in the second quarter. We also benefited from double-digit revenue growth in bank loans, high-yield and structured finance. Private Markets Ratings revenue increased 60% year-over-year. Non-transaction revenue grew 8%, driven primarily by higher annual fee revenue, very strong growth in Ratings Evaluation Services, or RES, and CRISIL revenue. Adjusted expenses increased by 6%, reflecting higher compensation costs and continued strategic investments in our people, technology and product development, partially offset by productivity. With a high fixed cost, low variable cost model that we have in Ratings, top line outperformance continues to benefit margins, evidenced by the division's 310 basis points of expansion to 68.5%. Now turning to S&P Dow Jones Indices on Slide 17. Indices reported its 13th consecutive record quarter for revenue and the division surpassed $2 billion of revenue on a trailing 12-month basis. Revenue in the quarter grew 20%, with excellent growth in both asset-linked fees and exchange-traded derivatives. Revenues associated with asset-linked fees had their fourth consecutive record quarter. We delivered 22% growth year-over-year, driven by equity market appreciation and net inflows into products based on S&P Dow Jones Indices. Notably, we have our best quarter of net inflows on record. S&P Dow Jones Indices operates the world's largest index business by AUM. And as Martina mentioned, we have built a franchise on trust and discipline. That reputation was recognized again this quarter, and we're pleased to see that four of the five ETFs selected by the U.S. Treasury for inclusion in Trump accounts were linked to S&P Dow Jones Indices. Exchange-traded derivatives revenue grew 22%, driven by strong volumes, particularly in SPX. Data & custom subscriptions increased 9%, primarily driven by new business growth in end-of-day contracts. Adjusted expenses were up 16% year-over-year, driven by investments in growth initiatives and higher compensation costs. Indices operating profit grew 21% and operating margin expanded 90 basis points to 71.5%. Now turning to S&P Global Energy on Slide 18. Energy revenue grew 3% amid pressure from the challenging environment as well as the sanctions we have called out in recent quarters. The conflict in the Middle East led to continued volatility and uncertainty in the quarter. While the business remains resilient, the Iran conflict, tariffs and extreme volatility have put some strain on Energy subscription renewals, onetime sales and Global Trading Services, or GTS, as Martina mentioned. We believe these headwinds are transitory, however, and we expect growth to normalize after this year, back to the 6% to 8% average range we outlined at our Investor Day. As we discussed last quarter, we continue to see our customers turn to S&P Global for the data and insights that only we can provide, with our best-in-class data and the recent consolidation of our supply chain assets into Energy, we are in an excellent position to equip our customers with the data and intelligence they need to adjust and remap their supply chains. CERA grew 1% due to strong growth in market insights and analytics, largely offset by declines in upstream and conference and training revenue. Conference revenue was pressured by headwinds from the lower event attendance due to the Middle East conflict. We are pleased by continued progress on the various aspects of our upstream data transformation. Platts revenue grew 4% in the quarter, driven by strong growth in price assessments as demand for our benchmarks remain resilient. This was partially offset by declines in GTS. While higher volatility is usually a positive for GTS revenue growth, extreme Energy volatility like we saw in the second quarter can actually have a dampening effect on the market. We saw this dynamic in the second quarter. The sanctions we discussed last year had 120 basis points negative impact to Platts and a 30 basis point negative impact to CERA growth in the second quarter. Adjusted expenses grew by only 1%. Our teams remained disciplined through the quarter to support profitable growth during a volatile time period. The 1% expense growth we realized was driven by higher compensation costs and ongoing investments in growth initiatives, almost fully offset by productivity programs and careful expense management. Second quarter margins still expanded by 70 basis points to 47.5% even in this environment. Turning to Market Intelligence on Slide 19. On both the reported and organic constant currency basis, revenue grew 6% in the second quarter. We continue to deliver solid growth in Market Intelligence, supported by the ongoing vendor consolidation trend, momentum in key strategic areas, particularly our AI solutions and Kensho LLM-ready APIs and improving capital markets activity. As Martina noted, this has been partially offset by some softness in pockets of Market Intelligence as well as longer renewal cycles with some of our larger, more sophisticated clients. In Market Intelligence, we have some mature platforms that have a strong customer base with stable growth and potential for meaningful margin expansion. We also have high-growth products like Visible Alpha and our data feeds business that continue to benefit from favorable market positions and their proprietary nature. We've also identified a few smaller products that are facing headwinds and negatively impacting the growth of the division. As Martina mentioned, we will be prioritizing our investments going forward in favor of our highest growth opportunities, ultimately striving to maximize long-term shareholder value. In the second quarter, subscription revenue increased a solid 6% on both a reported and organic basis, benefiting from growth across the subscription franchises and benefiting from some upfront revenue from a 10-year renewal in the quarter. Volume-driven revenue increased by 9% with growth in market-linked revenue in Corporate Actions and the Primary Markets Group as well as usage-based revenue in ClearPar. Onetime revenue declined 2% in the quarter, primarily due to declines in the Consulting and Sustainable1 revenue. Kensho Data & Platform revenue increased by 8%, driven by Kensho Data and the With Intelligence acquisition as well as 4% organic growth driven by Data Management Solutions, RatingsXpress, desktop pro and Visible Alpha. Enterprise Solutions revenue grew 3%, reflecting the divestiture of EDM and thinkFolio. The business grew 10% organically, driven by data valuations and risk analytics, including Financial Risk Analytics, Lending Solutions and the Primary Markets Group. Market Intelligence's adjusted expenses increased 4% year-over-year, driven by expenses from the With Intelligence acquisition as well as compensation expense and long-term strategic investments, partially offset by the impact from recent divestitures and productivity programs. Market Intelligence delivered 120 basis points of operating margin expansion to 36% in the quarter. Now shifting to our outlook, starting with Slide 20. With our spin of Mobility Global completed on July 1, we are introducing our guidance for GAAP results. As a reminder, when we report the third quarter as well as the fourth quarter and full year, Mobility will have moved to discontinued operations. As such, our full year guidance on both a GAAP and adjusted basis now excludes the contributions from Mobility for the whole year. Slide 20 outlines our GAAP guidance. Slide 21 shows our adjusted guidance. For the reasons I just mentioned, the consolidated guidance we are giving today is not directly comparable to the adjusted guidance we had issued previously, which assumed a full year contribution from Mobility. For all material purposes, however, our division guidance is still comparable to prior guidance. On a consolidated basis, we expect organic constant currency revenue growth in the range of 6% to 8%. And our prior guidance, including Mobility, also called for 6% to 8% growth, but we have offsetting items. As you will recall, our Mobility business has historically had a higher revenue growth than the business overall, but with modestly lower margins. As such, excluding that revenue causes the overall revenue growth of the business to come down slightly, all else equal, but margins to improve. The outperformance of Ratings and Indices this year is enough to offset that impact, so we expect our overall growth to be in the same range. Ratings and Indices also have the highest incremental margin across our four divisions. We are reinvesting some of that upside in the second half, but we do expect margins to expand more than we had originally anticipated this year. We now expect consolidated margin ex OSTTRA to expand 75 to 100 basis points this year. Strong revenue growth, additional margin expansion and the additional buybacks, I'll discuss in a moment, allow us to deliver faster EPS growth as well. We expect adjusted EPS in the range of $17.50 to $17.75, representing double-digit growth across the entire guidance range. For adjusted free cash flow, the Mobility spin creates some nuance. In the first half of the year, including Mobility, the company generated $2.4 billion in adjusted free cash flow. In the second half of the year, excluding Mobility, we expect to generate adjusted free cash flow in the range of $2.9 billion to $3.1 billion. Seasonality typically drives higher free cash flow in the second half of the year. Now turning to our division guidance on Slide 22. Guidance is based on recast financials, which reflect the movement of 451 Research and Maritime & Trade from Market Intelligence to Energy in all periods. These products are fairly small in aggregate, so our division revenue growth guidance is comparable to prior guidance for all material purposes. For Ratings, we now expect revenue growth in the range of 5% to 8%, up 1 percentage point from the prior guide. Indices is expected to grow revenue in the range of 12% to 14%, up 2 percentage points from the prior guide. Our guidance for Market Intelligence and Energy is unchanged from the prior guidance with Market Intelligence expected to grow in the range of 5.5% to 7% and Energy in the range of 4.5% to 6%. Lastly, as Martina mentioned, we are once again increasing the expected share repurchase for the year. As you may have seen, we received approximately $2 billion in a dividend from Mobility Global upon the completion of the spin. These proceeds will be used primarily for the repurchase of shares with about $500 million for some debt retirement. In the second half, we expect to issue approximately $2 billion in additional debt to fund further buybacks with timing dependent on market conditions. We expect to end 2026 with gross leverage of approximately 2.7 to 2.8x EBITDA, modestly above our target leverage range of 2.0 to 2.5x. We expect natural deleveraging over the course of 2027 as our EBITDA continues to grow and would expect to be back in the target leverage range by the end of next year. In aggregate, this means we expect to repurchase over $7 billion in shares this year, representing more than 5% of our total market capitalization at the current share price. With that, let me turn the call back over to Mark for your questions.
Thank you, Eric. Operator, we will now take the first question.
分析師問答
Our first question comes from Faiza Alwy with Deutsche Bank.
I wanted to ask about the Kensho Data & Platforms business. I guess as you focus more on the Kensho Data side of the business and maybe lose the distribution and interface layer in some cases, give us some context on how your thoughts have evolved around future pricing and AI monetization, especially if your clients are able to approach data acquisition in a more modular way and kind of limit some of the data sources.
Faiza, it's Martina. Thanks for the question. Maybe I would start with one thing that didn't change about our organization announcement, and that is that we maintain direct relationships with customers. Our contracts are directly with customers. Consistent with our flexible delivery strategy, we will continue to distribute our content, whether through our own platforms, third parties or our traditional feeds distribution channels. One point about the role of Kensho coming into Market Intelligence is that it accelerates and amplifies what Kensho has been doing. The team will continue to work very closely with the Market Intelligence team on development of innovative capabilities. We have great building blocks. We started with the LLM-ready APIs, moved on to the adaptive retrieval we announced this week, and we are making great progress with the MCP applications. The team will also work closely with the Platform team to implement those capabilities on the desktop. Kensho Labs, which we launched last year, has gained tremendous momentum and has been a true differentiator as we discuss AI use cases with customers, bringing that work very close to the MI commercial team. These are ways we can scale the impact of Kensho Labs. Eric, do you want to talk about monetization?
Faiza, the monetization approach is multifaceted. First, we've continued to see a dramatic uptick in data usage by our clients through their AI calls. The MCP Connectors are up to 500 clients. Data usage is up 5x relative to the prior quarter and the prior quarter was up 5x prior to that. We're having ongoing discussions with clients about how we economically share in that. Clients get enormous benefits. It's a mix of some consumption pricing and some additional data set pricing. We feel quite comfortable that the revenues are beginning to come through and, along with higher retention and higher sales, bode well for our businesses.
Thanks for the question.
Our next question comes from Manav Patnaik with Barclays.
Martina, thank you for rehashing the strategy up front in the call. Clearly, it sounds like, especially in Market Intelligence and Energy, you're still refining the strategy in how you want the segments to look. So I'm curious: usually in that situation, we get more disclosure by segment as opposed to consolidating some of the stuff that you did. Does that imply you're still reevaluating exactly how those businesses might look with all the different components?
Manav, thanks. We're aiming for simplification in Market Intelligence and Energy. The strategies for both divisions have not changed. This is about wrapping ourselves more closely around our customers and giving teams operating similar platforms an opportunity to move more quickly and grow more profitably by developing a capability once and using it many times. This is about stronger and more efficient execution against the strategy. In Energy, we see a tremendous opportunity in AI infrastructure and the power grids required to support that infrastructure. We are executing changes to enable clients to get more clarity on the supply chains and forecasting models they need, whether for supply chains or data centers. No change in strategy; rather, more closely aligning around the clients as we move forward. Thanks for the question.
Our next question comes from Surinder Thind with Jefferies.
Eric, Martina, when we think about the margin expansions that we're seeing at this point, how are you thinking about balancing that against the opportunity to maybe accelerate investment and the trade-off? Can you do a lot more, or are you at the level you can reasonably absorb?
Surinder, we see quite a bit of opportunity with clients. We have our core clients in financial institutions and are expanding across corporate clients. The alignment of our supply chain businesses widens our client base and allows development of updated and leading-edge products. All that is funded relatively easily by productivity. We've described productivity in the EDO and other productivity programs in Market Intelligence, Energy, Ratings and Indices. Those free up resources—people, technology—to reinvest and build new products and services. It's a virtuous circle that allows us to continue to grow.
Thanks for the question.
Our next question comes from Toni Kaplan with Morgan Stanley.
I wanted to go back to Market Intelligence and ask a little more about the reorganization. Should we expect any disruption from the realignment? You talked about some parts of the portfolio facing headwinds. Can you size them? Would you look to sell or divest those, or will you try to fix those areas?
Toni, I don't expect disruption. If anything, I expect greater simplicity and continuity. For example, we moved Pricing and Reference Data into Enterprise Solutions, which simplifies our go-to-market around Private Markets because Pricing and Reference Data align closely with the Lending suite and valuations services. Another example is progress with Kensho Labs in partnership with the commercial organization; bringing the Kensho team into Market Intelligence and standing up Kensho Data brings innovation much closer to customers. The softer products are smaller, subscale items—some consulting services and some sustainability products—not our strategic products like WSO or ClearPar. We'll watch cyclical impacts closely. If growth doesn't come back, we'll consider strategic choices, including potential divestitures. Overall, this comes from a position of strength and allows us to operate more effectively around the customer.
Our next question comes from Curtis Nagle with Bank of America.
Just one quick one for me. Martina, you mentioned you're seeing some elongated sales cycles with your largest clients. Can you unpack that? What's driving it? Is it the budget environment, or what's behind that comment?
Curt, we view this as a positive because it means clients want to do more with us. During renewals, we're having substantial conversations around AI and use of our IP and data for AI. The conversations are more complex in some cases because we're intent on protecting our IP over the long term. We've seen some elongation for that reason. I view it as near-term baselining with customers on terms and conditions, not a medium- or long-term impact.
Our next question comes from Alex Kramm with UBS.
I want to ask about the Index business and the licensing relationship with CBOE. By my numbers that's more than $200 million a year, and there have been investor concerns around renewal that is coming up in a few years. What are your latest thoughts? Could you give this license to multiple exchanges or shop it around? It could be materially accretive.
Alex, we don't comment on partners or conversations with partners. Thank you for the question.
Our next question comes from Scott Wurtzel with Wolfe Research.
Can you talk about overall ACV bookings growth within Market Intelligence during the quarter? And how do you feel about the trajectory of subscription growth heading into the back half of the year?
Scott, we delivered solid revenue growth in Market Intelligence this quarter: 6% organic constant currency revenue growth and 6% subscription revenue growth. ACV was also in that 6% range. We continue to do well and intend to deliver on our guide for the full year and build from there.
Thanks for the question.
Our next question comes from Kean Fai Tong with Goldman Sachs.
Can you elaborate on trends you're seeing in private markets across the company? How much did private markets contribute to revenue growth in both Ratings and Market Intelligence?
Kean, we've had success in private markets. In Ratings, private markets revenue was up 60% year-over-year, which is strong and an area we've built around and expect to continue growing. In Market Intelligence, integrating With Intelligence has driven very strong growth in acquisition and the core business. We expect private markets to continue to grow organically and for us to lead the industry.
I'd add we still see good momentum in AUM inflows into private market funds, which creates demand for transparency through benchmarks and data and analytics. Despite media noise around private markets, our experience shows this increases demand for transparency. Thanks for the question.
Our next question comes from Ashish Sabadra with RBC Capital Markets.
Can you talk about the puts and takes on issuances in the back half of the year? Any thoughts on issuance in 3Q versus 4Q and the same for Ratings revenues?
Ashish, it's a continuation of what we've seen in the first half. M&A activity picked up and has been a tailwind. Hyperscaler issuance was significant in the first half and we expect a good amount in the second half. We've seen refinancings come through and expect that to continue. Year-on-year compares in the individual quarters in the second half will be lower just because last year started low and ended high, so you'll see patterning. But issuance volume and revenues per quarter continue to move strongly during the year.
Thanks for the question.
Our next question comes from Jeffrey Silber with BMO Capital Markets.
The market seems to be pushing back on hyperscalers’ capex. Are you expecting any potential slowdown in debt issuance from that? Also, if interest rates go up, would you expect the same effect?
Jeff, when we assessed the full year earlier, we looked at announced CapEx and discounted for what we thought would be debt financed. We're tracking well ahead of where we thought we'd be for the full year through the first half. We have set a range of about $250 billion to $300 billion for hyperscaler issuance for the full year, which suggests not too much more issuance relative to the first half. We remain prudent and see the market continuing to absorb these deals. Hyperscalers use many structures, including issuing outside the U.S. where there can be additional appetite. Overall, we've taken a prudent view for the rest of the year.
Jeff, we provided a guidance range with width to account for factors like the global economy, geopolitical conflicts, interest rate levels and credit spreads. We focus on execution and managing what we can control.
Thanks for the question.
Our next question comes from Craig Huber with Huber Research Partners.
Can you focus on how AI is benefiting efficiency and costs within Market Intelligence? Can you quantify how much it might be helping on an annualized basis and how that may help long-term margin expansion in the division?
Craig, there's a wide range of productivity effects across MI and other divisions. The EDO is on track to deliver 20% productivity gains on a base of $0.5 billion. We've rolled out programs around software development life cycles and product development life cycles, which present opportunities in Energy and parallel benefits in MI and Ratings. In Energy, we've focused on researchers and the research process; those benefits translate across divisions. These initiatives are why we accelerated margin guidance this year. We expect productivity gains from AI and other programs to build in coming years, enable more reinvestment and support growth.
Thanks for the question.
Our next question comes from Andrew Steinerman with JPMorgan.
Eric, on GTS in Energy, how are GTS revenues impacted by volatility? Also, is the upstream software divestiture now in your guide?
Andrew, GTS monetizes when energy prices and trading activity accelerate. Typically, as volatility increases, trading increases; however, extreme volatility can lead participants to pull back and not trade as much, which dampened GTS in the second quarter. Regarding upstream software, we now see the likely close during the third quarter and have updated the guide on an OCC basis accordingly to allow focus on organic constant currency growth.
Thanks for the question.
Our next question comes from David Motemaden with Evercore ISI.
On Market Intelligence subscription revenue growth, Eric, you called out some upfront revenue from a 10-year renewal that benefited the quarter. Can you size how much that helped MI subscription revenue growth and how you feel about building from that level for the rest of the year?
Subscription revenue saw a good 6% performance in MI for the first two quarters. Growth would have been slightly lower without that 10-year software renewal, but there's always lumpiness in software renewals. The 10-year contract underscores how valuable our software is to clients and bodes well for progress. We feel comfortable with our full-year guide and plan to execute against it.
David, we've been disciplined stewards of the MI portfolio and will continue to consider whether subscale products would create greater value outside our portfolio. Thanks for the question.
Our next question comes from Jeff Meuler with Baird.
How will MCP adoption impact vendor consolidation? Clients having an AI interface may make it easier to leverage data feeds from multiple vendors. How do you see this trend?
Jeff, this is why we emphasized flexible distribution. We benefit from demand for our proprietary content, which is unique in the market, positioning us well for vendor consolidation opportunities. One example this quarter was a large strategic renewal for Desktop, feeds, Visible Alpha and AI-ready data that resulted in an over 20% uplift over several years. That deal positioned our products alongside the firm's internal AI systems and third parties. MCP building blocks—LLM-ready APIs, Adaptive Retrieval, MCP applications—allow clients to do structured Q&A and multistep tasks across multiple data sets and render capabilities within their systems. We're seeing net new licensing and returning clients; about 15% of clients licensed for LLM-ready APIs are net new or returning. We see this as an opportunity to expand revenues across traditional and new distribution channels.
Our next question comes from Chinedu Bolu with Autonomous Research.
On AI infrastructure as an asset class, can you talk through your long-term strategy for compute and data center infrastructure and how you think about commercializing compute benchmarks, including via the S&P Dow Jones joint venture?
Christian, this ties back to hyperscaler issuance and data centers as an asset class in Ratings. We don't have heroic assumptions for the rest of the year. There are interesting opportunities for indices and benchmarks in compute and data centers, which is one reason we acquired datacenterHawk. datacenterHawk brings proprietary data center intelligence—pricing, supply chain, site selection—together with the forecasting models from 451 Research. Demand for benchmarks here is nascent, and we'll pay attention to how it evolves and how we can add value for investors.
Our next question comes from Jason Haas with Wells Fargo.
On the first-quarter call you said you expected an acceleration in MI subscription growth, but it doesn't look like it showed up this quarter. Why not, and do you expect subscription growth to accelerate in future quarters?
Jason, we had solid execution in MI. A couple of smaller products—consulting and sustainability—lagged and had an impact. Overall, OCC revenue growth in MI was 6%, subscription was 6%, net retention is ticking up, and we have good expense discipline and productivity programs. We're on track to deliver double-digit earnings growth through the first half and feel comfortable with our full-year guide. Over time, refinements like Kensho Data & Platforms will support growth.
Jason, a final point: we will continue to be disciplined about the MI portfolio and consider divestitures for subscale products if that unlocks value. Thanks for the question.
Our next question comes from Sean Kennedy with Mizuho.
In Ratings, for M&A-related issuance, you said up double digits for the year. How has M&A-related issuance progressed so far this year and how do you think about its growth in the second half?
Sean, we've seen a healthy M&A pipeline and some very large deals. M&A activity spans multiple sectors, not just one, and thematically we expect that to continue through the year, which is why we expect double-digit growth for the full year.
We will now take our final question from Owen Lau with Clear Street.
On private markets, can you add more color on new products and potential catalysts? It seems hard to expand revenue contribution despite AUM flowing into private markets. What would change that trajectory?
Owen, last year we saw about $600 million in private markets revenues across the company, which is a healthy base. We've seen strong growth driven by Ratings. A couple of points: inflows create greater appetite for transparency, benchmarks and data. Index has launched private credit indices with partners and broader private markets indices. Market Intelligence has launched data sets in partnership with firms like Cambridge Associates and Mercer, mapped to new taxonomy and LoanX IDs. These are examples of how we're monetizing and growing in this space, and we remain constructive about private markets opportunities. In closing, we've had a strong second quarter with record level performance in two of our benchmark businesses, the launch of Mobility Global and growing traction in our AI-enabled client solutions. None of this is possible without the talent and dedication of our people. Our mission of Advancing Essential Intelligence continues to be highly relevant for our clients, and I'm confident we remain well positioned to deliver long-term value. Thank you for joining the call today.
That concludes this morning's call. A PDF version of the presenter's slides is available for downloading from investor.spglobal.com. The replays of the entire call will be available in about two hours. The webcast with audio and slides will be maintained on S&P Global's website for one year. The audio-only telephone replay will be maintained for one month. On behalf of S&P Global, we thank you for participating and wish you a good day.