Q1 2026 Earnings Call Transcript

Good morning, and welcome to S&P Global's First Quarter 2026 Earnings Conference Call. I'd like to inform you that this call is being recorded for broadcast. [Operator Instructions] To access the webcast and slides, go to investor.spglobal.com. [Operator Instructions] 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 First 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 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 are 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. The financial metrics we'll be discussing today refer to non-GAAP adjusted metrics unless explicitly noted otherwise.

As noted in the press release and slide, financial guidance provided today assumes contributions from Mobility for the full year and excludes any impact from anticipated stranded costs. The company expects to update adjusted guidance to exclude Mobility and institute GAAP guidance upon completion of the spin. I would also like to call your attention to certain European regulations. Any investor who has or expects to obtain ownership of 5% or more of S&P Global should contact Investor Relations to better understand the potential impact of this legislation on the investor and the company.

At this time, I would like to turn the call over to Martina Cheung. Martina?

Thank you, Mark. We are pleased with the results that we achieved in the first quarter. Revenue increased 10% year-over-year or 9% on an organic constant currency basis. Revenue from our subscription products increased 6% year-over-year.

We saw even stronger growth in our market-driven businesses this quarter with Ratings and Indices both showing remarkable resilience. On a trailing 12-month basis, we delivered 140 basis points of margin expansion, and increased adjusted diluted EPS by 14% year-over-year in the quarter. We demonstrated a continued commitment to disciplined capital allocation returning $1 billion to shareholders through share repurchases in addition to our cash dividends in the quarter. We delivered these results in an incredibly volatile and dynamic operating environment, making clear progress in each of the 3 pillars of the strategic vision we outlined at our Investor Day.

While we're pleased with the innovation, execution and results that we delivered in the first quarter, we acknowledge the macro uncertainty that has increased in recent months. Even if conflicts are resolved quickly from this point, we expect it to take some time for supply chains to return to normal. In recent months, the geopolitical and economic backdrop has shifted and become substantially more challenging for many of our customers. The conflict in Iran has shocked energy markets and supply chains. This has led to much higher energy and commodity prices while also elevating volatility.

The longer the duration of this conflict, the broader and more severe the impact on global supply chains and markets across sectors. This quarter, we also saw private credit navigate increased scrutiny, wider spreads and elevated redemptions. We expect strong growth in private markets over the medium term, but this growth will require increased transparency from data and benchmarks, which is an important area of focus for S&P Global. Throughout all of this, the pace of technology innovation has only accelerated.

Clearly, the markets are reacting quite aggressively to new AI frontier model headlines, shifts in diplomatic initiatives and the unpredictability of the current environment. That manifests in volatility across the global markets. We've seen broad dispersion in the performance of different sectors of the equity markets, elevated volatility in equity and commodity markets and shifting expectations for central bank actions. Despite the turmoil in the macro environment, issuance was resilient.

Billed issuance increased 14% year-over-year in the first quarter, primarily driven by strength in investment grade. Investment grade benefited from hyperscaler investments in AI infrastructure. Notably, even without the hyperscaler issuance, investment grade delivered healthy growth in part benefiting from several large M&A transactions. Growth was partly offset by a high-teen decline in bank loan volumes as we lapped a very difficult compare in the first quarter of 2025. We saw spreads widen slightly in the quarter as a reaction to uncertainty around AI, private credit and geopolitical conflicts.

Over spreads are still below historical norms. While first quarter billed issuance was above our initial expectations, Much of the outperformance was driven by hyperscaler issuance that our original guidance assumed would be spread more throughout the year. Our full year expectations for the debt markets are largely unchanged. Everything we see reinforces our vision for the company, and our priority remains on executing our strategy.

We are committed to our mission to advance essential intelligence by advancing our market leadership, expanding into high-growth adjacencies and amplifying enterprise capabilities and AI. Customers are coming to S&P Global with increased urgency for our differentiated data and benchmarks. Insights and tools to make timely and informed decisions in this rapidly evolving operating end market environment. For instance, we saw record revenue and attendance at CERAWeek, the premier global conference addressing the intersection of energy, finance, technology and geopolitics. This year's conference hosted a record 11,000 attendees and more than 2,300 companies from over 90 countries.

We are helping our clients make sense of and manage the spike in volatility. We posted record-setting revenue in Global Trading Services and Energy and record quarterly average daily volumes for the S&P 500 Indices. We are also advancing our leadership as we help our customers unlock the potential of AI. As we discussed at our Investor Day, we are deploying AI native solutions and tools like ChatAI and Document Intelligence for those seeking speed and scale on our platform.

For those who want to build their own AI-enabled or Agentic solutions, we are increasingly making our data accessible via standard protocols like MCP. We've seen meaningful enhancement to the value that our products are creating for customers. More than 1/3 of our CapIQ Pro users engage with the AI features we've launched, including ChatIQ and Document Intelligence. We also saw tremendous growth in the usage of S&P Global data in the quarter.

In March, we shared that nearly 150 customers across the Market Intelligence and Energy divisions, were interacting with our data through AI applications like Claude and Copilot. We now have more than 300 customers under contract or in trial periods for Kensho-LLM-ready APIs. In addition to the rapid growth in customers, we are seeing large increases in the volume of data that's consumed directly via API calls from customers and through these platforms. For instance, in the first quarter, the volume of API calls made by our customers was more than 5x the volume that we saw just 1 quarter ago.

Volumes doubled month-over-month just from February to March. We can see early indications of this translating into economic benefits. ACV growth among customers who use our AI solutions is outpacing growth from other customers by a wide margin. Growth in Market Intelligence is 30% higher among AI customers compared to others and growth among AI customers and Energy is double the growth rate among other customers.

Chief Client Office customers are also actively seeking the deep expertise of our in-house Kensho team. 25% of these clients are engaged with our Kensho Labs Technologies to explore opportunities to leverage our technology and data to help solve their most challenging problems. All in, our approach to leveraging AI in S&P Global Products and S&P Global data in AI platforms is resonating with customers in a meaningful way. While it will take some time to see exactly how this manifests in our financial results, we are confident that the value we create for our customers is increasing and the economics will reflect that over time.

At our Investor Day, we provided a breakdown of the revenue that S&P Global generates based on different categories of our data, benchmarks and workflow tools. We noted that less than 5% of total revenue comes from undifferentiated data. Even within Market Intelligence, undifferentiated data contributes only 12% of revenue, but we wanted to share the full breakdown of the division here. Advisory, Consulting and Events constitute about 11% of Market Intelligence revenue and our workflow tools, which include a portion of Capital IQ and all of Enterprise Solutions constitute about 37%.

Our proprietary and curated data includes proprietary data based on our intellectual property as well as curated contributory and reference data. For our curated data, perhaps the biggest challenge in replicating some of these data sets like Compustat and SNL is the means by which we aggregated these data sets to begin with. Often, employees would have to physically scan and paper documents in local offices. While some of that data may be publicly available, many of these types of data sets are only available in digital formats from S&P Global.

Importantly, Market Intelligence is also the distribution platform for our Ratings content through RatingsDirect on Capital IQ Pro and RatingsXpress. Contributory data sets include products and data like Visible Alpha and With Intelligence. We also have reference data in this bucket, which is based on intellectual property owned or co-owned by S&P Global like the Global Industry Classification Standard, or GICS, and LoanXID or LXIDs. We also generate unique proprietary data from our events, including our private market events. With Intelligence team collects insights through engagement with LPs that help GPs target more accurately based on fund, strategy, sector and regional capital commitments.

This unique insight is available through our intentions and preferences data set. One important point is that we have attributed the revenue from Capital IQ across 3 categories: benchmarks, workflow tools and undifferentiated data. While many of our customers would likely attribute less value to the undifferentiated data, we wanted to take a conservative approach to this analysis. That breakdown is important because it highlights the multifaceted value proposition for Capital IQ Pro.

When we talk about Capital IQ Pro, many investors often focus on our core platform or desktop offering. However, CapIQ Pro's value to our customers extends far beyond the desktop to the data, business logic and tools that are housed within the platform. As I mentioned earlier, we are deploying AI native solutions and tools for those seeking speed and scale on CapIQ Pro, including ChatIQ and Chart Explainer. These features are already driving customer engagement, and we expect many of our customers will continue to consume our content and data primarily through an integrated desktop solution.

Other customers will have an interest in interacting with our content in their own AI environments and in third-party productivity tools like Claude and ChatGPT. Much of our data is accessible via model context protocol or MCP, and other standard protocols to customers in these environments. Our branded custom business logic and calculation engines as well as many of the tools that exist in Cap IQ Pro will integrate with platforms like Copilot and Claude. Our customers are on their own AI journeys, and adopting these new platforms in different ways, depending on urgency, comfort level and regulatory sensitivity.

We will continue to invest in new ways to create value for our customers, including delivery through MCP and agent agent protocol, to ensure that customers can access our data and tools where they need it. And as usage increases and use cases expand, we expect to align the economics with the value we create through price. In the first quarter, we saw a great deal of innovation, including new products, new features and new services for our customers. Within Market Intelligence, we continue to make progress in the private markets with our partnership with Cambridge Associates and Mercer.

In our Energy division, we just wrapped up the best CERAweek we've ever had. We unveiled our new AI native Upstream product for data and insights called CERA Titan. As we've discussed with you previously, we are in the process of completely revamping the Upstream business within our Energy division. 70 customers were able to demo the new platform and feedback was overwhelmingly positive. We immediately saw an increase in leads and sales pipeline for Upstream Data & Insights.

And one large strategic customer was so pleased with the new platform that we were able to close a large renewal with a meaningful increase in contract value. In addition to improving our Data & Insights solutions, we also announced in a separate press release that we have signed an agreement to divest the software portfolio in our Upstream business, and we expect that to close in the second half of 2026 or early 2027. This allows us to more tightly focus our efforts on the proprietary Data & Insights within Upstream, and we believe this will allow us to make faster progress towards returning Upstream to sustained positive growth.

We continue to innovate within S&P Dow Jones Indices with the launch of iBoxx U.S. Treasuries Index, as the first major index available as a native digital asset on a blockchain. We also launched an additional tokenized S&P 500 Index on blockchain in partnership with Centrifuge, and we launched S&P Link in U.S. and Europe senior debt indices. We continue to focus on decentralized finance and fixed income as strategic initiatives and are excited about the slate of new products coming to In Ratings, we raised the first esoteric ABS issuance backed by Bitcoin as we continue the innovation leadership in digital asset finance that we started in 2018. As we continue to execute our strategy, we are pleased with the results we're delivering for our shareholders with strong revenue growth and margin expansion in every division.

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 16. We delivered strong first quarter financial results with 10% reported revenue growth, 9% organic constant currency revenue growth and 14% growth in adjusted diluted EPS. This performance underscores the durability and resilience of our business even amid a period of elevated geopolitical and economic disruption. Reported revenue growth of 10% includes the acquisition of With Intelligence, which closed in the fourth quarter, offset by the divestitures of EDM and thinkFolio in January as well as modest tailwind from FX. Adjusted expenses increased 8%.

As Martina mentioned, we began to see volatility in macro risk increase in late February and continue through March. We reacted quickly to make sure we were measuring expenses effectively allowing for better first quarter margins in every division than we had anticipated when we gave initial guidance. Strong growth and disciplined expense management combined to deliver 100 basis points of year-on-year margin expansion to 51.8% and 12% growth in adjusted operating profit. Excluding OSTTRA from the prior year period, our first quarter 2026 margin expansion would have been 160 basis points.

Turning to our divisions on Slide 17. Market Intelligence revenue grew 8% and organic constant currency revenue grew 6% in the first quarter. Subscription revenue increased a solid 6%, both on a reported and organic basis, driven by strong renewals and net sales across the franchise. Subscription growth included a 50 basis point headwind from the timing of revenue recognition that we expect to reverse in the back half of the year. Onetime revenue and volume-driven revenue grew 18% in aggregate in the quarter.

This was partly driven by the acquisition of With Intelligence and partly by the rebound of volume-driven activity. Data Analytics & Insights reported revenue increased by 11%, driven by our first full quarter of revenue from the With Intelligence acquisition worth 6 percentage points as well as solid 5% organic growth driven by market data and valuations, Cap IQ Pro and Visible Alpha. Enterprise Solutions reported revenue grew 3%, reflecting the divestiture of EDM and thinkFolio in mid-January. The business has delivered very strong organic growth of 14%, with double-digit growth across all major product lines.

We've also included an additional slide in our supplemental deck to provide a breakdown of the workflow tools in our Enterprise Solutions segment, most of which benefit heavily from S&P Global data and strong external networks. Credit and Risk Solutions revenue grew 6%, driven by strong subscription sales of RatingsXpress and RatingsDirect. Market Intelligence's adjusted expenses increased 7% year-over-year driven by a full quarter of expenses from the With Intelligence acquisition as well as an unfavorable FX impact, higher compensation expense and long-term strategic investments, partially offset by the impact from the recent divestitures, including the sale of EDM and thinkFolio.

Market Intelligence delivered 80 basis points of operating margin expansion to 33.6% in the quarter. Now turning to Ratings on Slide 18. Ratings revenue increased 13% year-over-year, exceeding our internal expectations for the quarter. Growth was strong across both transactional and non-transactional revenue streams. Transactional revenue increased 15%, driven by strength in investment grade, supported by a number of large hyperscaler or M&A transactions in the first quarter.

Transaction revenue from governance, high-yield and structured finance also grew in the quarter but was more than offset by the weakness in bank loans due to a high teens decline in billed issuance. Private markets revenues were up over 25%. Non-transactional revenue grew 11%, driven primarily by higher annual fee revenue. We were also pleased by our growth in issuer credit ratings or ICRs, and Rating Evaluation Services or RES in the quarter. adjusted expenses rose 8%, reflecting higher compensation costs and continued strategic investments in our people, technology and product development.

This contributed to the division's 160 basis points of margin expansion to 67.8%. Now turning to S&P Global Energy on Slide 19. The conflict in Iran has brought considerable volatility and uncertainty to the Energy markets that has persisted into the second quarter. Some of the Energy customers in the Middle East have experienced a direct impact to their facilities and many are facing supply chain and/or distribution disruptions. Even in this environment, Energy revenue grew 7% this quarter as we benefited from very strong events revenue, and we saw a spike in value-driven transactional activity.

At the same time, the conflict weighed on other parts of our Energy division, including our subscription revenue. Sanctions continue to be a headwind as well as we've called out in recent quarters, but the conflict in the Middle East is pressuring clients and could lead to slower growth in the coming quarters. As Martina noted earlier, amid this uncertainty, our customers are turning to S&P Global for Data & Insights only we can provide. CERAWeek in Houston hit new records and online, the number of user queries in our Energy platforms, ChatAI feature more than doubled quarter-over-quarter.

Energy & Resources, Data & Insights and Price Assessments grew 7% and 6%, respectively, driven by strength in petroleum gas, power and renewables. The sanctions we discussed last year drove a 100 basis point headwind to Energy & Resources and 140 basis points headwind to Price Assessments. Advisory & Transactional Services revenue increased 15%, driven by strong growth in conference and training revenue as CERAweek delivered record-setting attendance and revenue. We also posted close to 30% growth in Global Trading Services or GTS amid elevated energy market volatility.

Upstream Data and Insights revenue declined 5% in the quarter. driven by the absence of a prior year onetime fee. We continue to streamline this business line and refocus on the areas of proprietary Data & Insights, as Martina mentioned. Our transformation is on track, including the realignment of the sales teams and the debut of our upgraded client platform at CERAWeek, which already has sparked strong customer interest. We're pleased with the team's progress, but given heightened Energy market volatility and uncertainty, we still think it could take several quarters before these management actions drive growth in Upstream.

Adjusted expenses grew 4%. Our teams in Energy did a particularly good job moving quickly to keep expense growth low to preserve margins during a volatile period. The expense growth we did see was driven by higher compensation costs and unfavorable FX impact as well as ongoing investments in growth initiatives. First quarter margin expanded by 120 basis points to 49.3%.

Now turning to S&P Dow Jones Indices on Slide 20. Revenue grew by 17% with double-digit growth across all business lines. Revenue associated with asset-linked fees grew 18% in the first quarter. This was driven by year-over-year equity market appreciation and net inflows into products based on S&P Dow Jones Indices. As we've noted before, in periods of heightened volatility, we often see slower flows and higher priced indices like sector, factor and thematics and higher flows in lower price indices like the S&P 500. That was the case in the first quarter as well, and that mix shift drove a modest decline in average realized price year-over-year in our asset-linked fees business.

Exchange-Traded Derivatives revenue was up 18%, driven by strong volumes, particularly in SPX, which continues to demonstrate the natural hedge we have in this business during times of geopolitical and macroeconomic disruptions. Data and custom subscriptions continued to benefit from our focused commercial efforts over the last several quarters posting its third consecutive quarter of double-digit growth. Revenue increased 12%, largely driven by new business growth and end-of-day contracts. Adjusted expenses were up 13% year-over-year, driven by higher compensation costs and investments in growth initiatives.

Indices operating profit grew 18% and and operating margin expanded 90 basis points to 73.8%. Now turning to Mobility on Slide 21. Revenue grew 8% in the first quarter, underscoring the mission-critical nature of the division's products with high single-digit growth in both dealer and financials and other and a modest tailwind from FX. Customers continue to rely on CARFAX's unique data and solutions, driving strong subscription growth despite a complicated environment for automotive OEMs. Dealer revenue increased 9%, benefiting from momentum in new customer growth at CARFAX and automotiveMastermind.

Manufacturing revenue grew 5%, driven by subscription growth and increased discretionary spending. Growth was partially offset by softness in recalls and OEM marketing related products. Financials & Other grew 8% as the business line continues to benefit from underwriting volumes and commercial momentum. Adjusted expenses grew 5%, driven by advertising and promotional investments.

Mobility's operating margin expanded 150 basis points year-over-year to 40%. Looking forward, we remain on track for our planned separation of the Mobility business, including completion of the spin mid-2026. We will file our Form 10 publicly this quarter, and the Mobility Global team is excited to be hosting their Investor Day in New York City on May 12, ahead of the launch of its equity roadshow. We also plan to launch a public debt offering for Mobility at some point this quarter, targeting an investment-grade rating. As a reminder, from a financial reporting and guidance perspective, S&P Global will continue to fully consolidate Mobility Global in our financial statements and 2026 guidance until the separation is complete.

Upon completion of the spin, we intend to provide recast financials for the 4 quarters of 2025 and any 2026 periods reported adjusted to exclude Mobility's contributions along with other relevant adjustments as outlined at our Investor Day. We also expect to issue updated 2026 guidance at that time, excluding Mobility. Now shifting to our outlook, starting with Slide 22. I'd like to review the key macroeconomic assumptions that underpin our guidance, which takes into account the current geopolitical environment. The conflict in Iran has led to the largest energy shock since the 1970s and counterbalance what was previously a broadly favorable economic environment for business.

Our current outlook assumes the situation stabilizes by the end of the second quarter, but we acknowledge the risk of a protracted conflict. We assume 3.2% global GDP growth, including 2.2% growth in the U.S. We also assumed 3.2% CPI growth in the U.S. We expect near-term energy client demand to remain suppressed given our expectation for ongoing market uncertainty.

Should the conflict persist longer or escalate, we could see more significant direct headwinds, particularly in our Energy business and significant indirect headwinds in our market-sensitive businesses depending on equity market reaction and credit market conditions. We continue to see favorable market conditions for issuance in 2026 even though we now only expect 1 rate cut in the U.S. We also entered the year with encouraging maturity walls as we discussed on our fourth quarter call, and we are encouraged by the growth of announced M&A. As Martina mentioned, some of the strength in issuance in the first quarter was driven by front-end loading of hyperscaler issuance relative to our initial expectations. Given both the outperformance in the first quarter and the more modest expectations for Q2, we do not expect to see acceleration in Ratings revenue growth in the second quarter.

We continue to expect Ratings growth to moderate in the third quarter before turning negative in the fourth quarter as we lap prior year highs. This leads us to our updated guidance for the Enterprise on Slide 23. At the consolidated level, we are reiterating our guidance for organic constant currency revenue growth in the range of 6% to 8%. We're also reiterating our guidance for 50 to 75 basis points of margin expansion in 2026 excluding the impact of OSTTRA. Our adjusted EPS guidance is also unchanged at slightly higher expected interest expenses offset by lower share count due to the additional repurchases we now expect.

As you can see on Slide 24, our division guidance is also unchanged with the exception of our Energy division. Given the external environment, particularly the impact of the Iran conflict and the energy disruption on both the demand and supply side, we currently expect to deliver organic constant currency revenue growth in the range of 4.5% to 6%, 1 percentage point lower than the previous guidance. Importantly, our guidance assumes that the current elevated level of disruption in the energy market persists through the second quarter. The supply chain disruptions would not fully be resolved until later this year.

For our Indices business, our full year guidance is unchanged. However, the underlying assumptions have been adjusted to reflect the current market dynamic. Our guidance now assumes equity markets roughly flat from current levels and low double-digit growth year-over-year in ETD volumes. We also wanted to provide some directional color for the second quarter.

In Market Intelligence, we expect some acceleration in subscription revenue, given what we're seeing in customer traction and sales pipeline. We expect that to be offset somewhat as growth in nonsubscription revenue normalizes. In Ratings, we will be lapping the disruption caused after Liberation Day last year, which creates a favorable compare. We expect growth to remain strong, but we do not expect acceleration in 2Q. We do expect investment grade to continue to represent a higher mix of issuance compared to historical averages, particularly if we continue to see elevated hyperscale CapEx driving large volumes in the second quarter.

For Energy, the macro disruption has a concentrated impact in the second quarter, and we have already seen that impacting our near-term sales pipeline. We expect revenue growth in the second quarter to fall slightly below the guidance range for the full year before reaccelerating in the second half. We will be monitoring the sales motion, customer health and macro environment closely and managing expenses throughout the year to ensure we are preserving margin. For Indices, we expect continued robust growth in the second quarter before growth decelerates in the second half given the tougher compares in 3Q and 4Q.

For Mobility, we expect growth to accelerate slightly from the first quarter levels with stronger growth expected in the second half. On second quarter margins, we expect margin expansion to be above the enterprise full year range for Ratings and Indices, slightly below the range for Mobility and Energy and within the range for Market Intelligence. This is largely due to the timing and quarterly phasing of expense recognition as we were very disciplined in our approach in the first quarter. Our full year expectations in each of these divisions are unchanged.

Lastly, we want to provide an update on our capital plans for the rest of the year. As you know, we have a target gross leverage range of 2 to 2.5x trailing 12-month EBITDA. Given the expected loss of Mobility EBITDA, our current leverage of 2.3x will naturally increase to 2.4x at the end of the year. However, we expect to issue approximately $2 billion in debt at Mobility in conjunction with the spin. Proceeds are expected to fund a cash payment to S&P Global, which we would expect to use for a combination of incremental share repurchases and some debt reduction. Given the strength and resilience of our business and our confidence in its long-term profitable growth, we believe the current share price reflects an attractive opportunity to increase our repurchases from the expected 85% of adjusted free cash flow to at least 100% or to roughly $4.5 billion for the year.

With that, let me turn the call back over to Mark for your questions.

Thank you, Eric. [Operator Instructions] Operator, we'll now take the first question.

Our first question comes from Toni Kaplan with Morgan Stanley.

Martina, thanks for the color on what you're doing with regard to the AI distribution channels. I was hoping that you could expand on how you're thinking about the partnership strategy with the large AI players? Are you building SMP, MCP apps on the platforms? Or you just plan to continue to provide the data through the MCP integrations and the APIs?

And maybe if you could just talk about the monetization model and directional economics between the different distribution channels.

Toni, thanks for the question. And the quick answer to the first part of that around MCP applications is, yes, that is our intention. I think we're going to be very thoughtful around how we build those applications and for what, particularly. This is one of the reasons why we wanted to highlight the value that exists in the workflows in Cap IQ Pro today, for example, it's not just the data.

It is the standards, the business logic as well as the tools and all 3 of those will be part of that strategy. The first step to doing that has actually been the announcement of the S&P Global plug-in, which was announced in line with the Claude for Financial Services announcement in the first quarter. And that's essentially a series of agents that teach AI agents within the platform, how to actually conduct specific tasks for data, AI-ready data that the client might be licensed to. So maybe to give you an example, one of our buy-side clients working with Kensho was looking at our financial data via at AI-ready API and Kensho helped them to understand how to use the plug-in to perform tasks like creating tearsheets or creating earnings calls previews.

And as a result, the clients liked it so much that they actually canceled their existing provider and went with our data and plug-in even though it was about 20% more expensive. Now look, it's early days. Obviously, we just launched that in Q1, but I think it's an interesting signal for how clients are testing the value of our IP, whether it's our logic, our standards as well as our data in the context of these providers. Now the point I would make on monetization is that we are really thinking about monetization through the lens of enterprise value.

So as you know, we don't do seat-based licensing. We don't do usage only. We track usage, channels, the value we create and a number of other metrics as part of the discussions that we have with our clients on value and price accordingly. And that's going to be true for plug-in.

It's going to be true for MCP. It's going to be true for AI-ready data as well. And we're seeing clients who are quite interested in the value that we bring through all of that. Perhaps maybe one other example I would provide is in the quarter two financial clients who are just subscribing to our data at renewal, were opting to get that data available in an AI-ready format. And were willing to pay in the range of 35% to 45% on the renewal increase to get the AI access.

So again, early days, but some very strong signal here around the monetization from an enterprise value standpoint. Thanks for the question.

Our next question comes from Faiza Alwy with Deutsche Bank.

Martina, I wanted to follow up on the same topic. On Slide 11, where you talk about Market Intelligence data differentiation. I'm curious how would you -- when we look at workflow solutions, how would you attribute sort of the value of the proprietary data versus sort of the software component of the workflow tools here.

Thanks for the question. So with regards to workflow, you'll see a lot of these products embedded in our Enterprise Solutions business. And there, we operate many mission-critical software and workflows for our customers. These would be workflows that are scaled, require robust controls, risk management, and compliance layers and really require a lot of intervention through our managed services to make sure that they're continuing to deliver.

And so there's very much a mission-critical nature to many of these. There are several of them that actually function as networks for industry groups, not just for an individual client. And so there, we would see perhaps the Wall Street office, for example, or ClearPar in that category, and again, serving not just a client, but the benefit of it being derived because it is actually informing a whole ecosystem. And in many cases, the value that our clients get from these tools is a function of some of the proprietary content that we embed in the tools.

A good example there would be the loan reference data that is provided through Wall Street Office. And so we think of it more as the value that we are bringing to the clients through the workflow tools and the importance and criticality of those systems to clients very, very critical processes. And that's one of the reasons why we continue to see good growth in these tools across Enterprise Solutions as well. Thanks for the question.

Our next question comes from Ashish Sabadra with RBC Capital Markets.

In regards to MI, the subscription growth is expected to accelerate in 2Q. I was just wondering if you could unpack that some more what's driving it? How much of it is driven by AI products, key client office or any other color that you've been providing? .

Ashish, it's Eric. We've seen very good performance in the first quarter as we've started the year in MI. And we just expect that to continue to build. Subscription revenue growth was in the 6% range.

We feel good that, that will continue to build. But we had very good performance that augurs well for the coming couple of quarters. Net renewal rates are up 100 basis points or so. Pipeline has been building January to February to March.

Our average deal size is up, our net sales are up. So we see good underlying indicators across that franchise in a number of ways. And we think that will just build during the course of 2Q, 3Q and 4Q and deliver the full year guidance that we expect in a nice way. Thank you for the question.

Our next question comes from Scott Wurtzel with Wolfe Research.

On the Market Intelligence margin, just wondering if you can maybe help contextualize how much of the margin expansion that you're seeing is being driven by efficiency gains associated with AI.

Scott, it's Eric. Margin expansion has come in nicely in MI in particular, in first quarter. We were careful with the external environment. Starting late February, we -- the Iran conflict started.

We're careful about our discretionary spending. And so you saw particularly strong performance in MI as well as our other 4 divisions as we just carefully thought about pacing expenses through the year. More broadly, if you think about margin expansion in MI and other divisions, it's really a combination of factors. There's certainly a set of AI benefits that we're getting as we think about our data operations, which is a big part of MI.

We see emerging progress or I think I'd say good progress in software development activities that are AI-driven with all the new tools available to it. And then we see the continued kind of classic productivity tools being effectuated in MI as the team there is really driving a combination of top line and bottom line. So we're feeling comfortable about the margin expansion for the full year. We feel like we got off to a good start.

And we just see with AI, a set of tools that become stronger and stronger and more and more valuable to us as we continue to deliver margin and earnings growth quarter after quarter.

Our next question comes from Curtis Nagle with Bank of America. .

Just a really quick one for me. Just if we go through, I guess, how to think about the balance of transaction, non-transaction growth within the Ratings business for the rest of the year? And I guess just for the first quarter, what drove a pretty notable spike in the non-transaction numbers. You have to get answer that.

Curtis, maybe I'll start on nontransaction. We had good growth in annual fees as the franchise continues to to be viewed very favorably by our clients around the world. And then our CRISIL revenues, which are booked there, which have a mix of different factors, performed very, very well in the first quarter, which we were pleased with. So a couple of good tailwinds, and we expect some of that to to generally moderate in the coming quarters, but we think it will help contribute to our full year revenue guide.

And Curtis, I would maybe just add that we -- you may recall when we gave our guidance back in February that we mentioned we had prudent and moderate expectations for hyperscaler issuance within the year. And a good part of that was that we didn't assume that all of the announced CapEx was going to be debt financed. And as we looked at the amount of hyperscale issuance in Q1, we believe that there was some pull forward there relative to our expectations for hyperscale issuance. And this is one of the reasons why we are continuing to maintain our expectations for billed issuance for the full year.

Thanks for the question.

Our next question comes from Manav Patnaik with Barclays.

I was hoping just going back to the workflow conversation, you could help us just appreciate the strategy in Energy where you're selling the workflow businesses and focusing in data, like how would those workflow brands different than the ones you were talking about in MI? And as a quick follow-up, just I think there were like 7 or 8 different brands, I think you're selling in Energy. I was just hoping you could help us size that for our models? Like how much are you getting selling to SLB.

Manav, thanks for the question. Maybe to start, the size of that is about 25% of Upstream revenues. And that software portfolio, as you mentioned, is actually quite varied and quite distinct. And so one of the reasons that really informed our decision there is that we think SLB is a very good partner on that.

And as part of that decision to divest, we also have a new distribution partnership with SLB that we are quite excited about as we close that. And so what I would focus on maybe is the 75%, which is highly differentiated and unique proprietary content. Maybe just to give you a sense for what is here we cover from basin to reservoir subsurface and geoscience data, including seismic surveys as well as in logs and spatial data. Some of the stuff that is particularly useful for our clients is Vantage asset valuation data that covers over 17,000 global upstream and gas assets.

And we also have very, very unique benchmarking performance content that is based on contributory data and it allows operators to actually do peer-to-peer performance data, and is highly valued. This data actually goes back over 30 years, covering about 80,000 wells globally. There's a lot more to that. And one of the things that we're super excited about is actually creating Titan that we talked about in the prepared remarks that sits on top of all of that data and provides the workflow for our clients to really interact with that data more seamlessly.

This is something that our clients have been asking us for, for many years. And the overwhelmingly positive feedback that we got when we use CERAWeek for that soft launch was just really very encouraging. And we were able to close one client already just on the demo of the new tool because those clients are very, very aware that our data is the highest quality and most unique out there. And so Upstream more broadly, I would say, we look to our broader revenue transformation there.

We look to the full hard launch of Titan later this year. and are very excited about the progress that we're making there as well. Thanks for the question.

Our next question comes from Alex Kramm with UBS.

Just I think -- I don't know if I missed this, but one of the things you changed in your guidance was also the I guess, acquisition and divestiture contribution on Market Intelligence. It's a small change, but just wondering if I missed it, what changed there? And maybe related to that, With Intelligence, now that you've owned the business for a little over a full quarter. Just wondering what kind of underlying growth rates you're seeing and any on how that asset is performing?

Alex, it's Eric. Let me just summarize. As you noticed, the organic versus reported revenue contribution really has 5 deals, 3 of which are quite large, both divestitures and acquisitions. You've got EDM and thinkFolio being sold, you got With Intelligence coming in and 2 other small ones.

And so what we just did was updated the contribution from the net effect of those 5. It's primarily driven by a modest change in revenue recognition. But as we step back, we're quite pleased in particular With Intelligence. As we said in our last call, we closed that early and even more quickly than we had thought. The team has really been digging in deeply and beginning to focus on all the synergies, both expenses and revenue in particular.

And as we've said when we announced the deal, we expect high teens revenue growth in With Intelligence with some upside as we go 1 year to the next just because there are so many opportunities to redistribute that content across our franchise and really leverage the depth of the proprietary and the contributory data that Martina referenced earlier. Thanks for the question.

Our next question comes from Owen Lau with Clear Street.

So following up on the AI Upstream data platform Titan, it's still in beta testing version. But could you please talk about your go-to-market strategy and the revenue model of this product? Is it going to be a subscription-based model or consumption-based or a combination of the two?

Owen, it's Martina. Thanks so much for the question. It's going to be a subscription-based model. And in terms of the broader go-to-market strategy, I think the team was able to really effectively leverage CERAWeek because we have so many clients in town to be able to do our launch and get this into the minds of so many of our customers.

And so we're excited about this. And the official hard launch for the product is going to be a little bit later this year. And as I mentioned, just to say again, the experience there is very comprehensive, bringing together so many of these unique data sets that we have, and it's powerful enough that one of our clients renewed with a very large uptick just on seeing the demo.

Our next question comes from Jeff Silber with BMO Capital Markets.

You highlighted the wars impact on the energy sector. I'm just curious, hopefully, this war is going to end soon. What do you think the impact would be on the other businesses? When should we start to see a rebound there?

Jeff, it's Eric. The impacts on the energy business, as we described, are quite direct, right, because customers are affected that slows down decision-making. And obviously, we need to help customers focus on their core business. In the other divisions, it's really a question about how expectations around the conflict evolve, what sort of macroeconomic and, I'll say, economic disruption we see globally and also region by region because that's going to affect equity price levels, which have an impact on our asset under our asset-linked fees.

It's going to affect potentially credit markets and the flow of issuances in different market segments. So I think the indirect effects for the time being has been relatively small. The question is, does the conflict resolve itself in the coming months? Or does it drag on?

Because the longer drags, it create more uncertainty and a wider range of outcomes. So in general, there's a range of factors. We're trying to be careful and prudent. You saw some of that in our patterning of our expense spend that we feathered in carefully in the first quarter to create some additional margin expansion.

And we're just being vigilant about the effects and staying close with our clients and making sure we support them across our various divisions.

Our next question comes from Andrew Steinerman with JPMorgan.

Eric, it's Andrew. What was the organic ACV growth in the first quarter for MI? And then also remind us on the Ratings side, if S&P includes bank loan repricing transaction and billed issuance or not and how it impacted first quarter.

Andrew, it's Eric. Thanks for the question. On MI, we saw good ACV growth in the first quarter. It was right around the level of subscription growth, which we showed at 6%. And I think in line with the last couple of quarters. And then in terms of repricing for bank loans, that's not included in that line.

Our next question comes from George Tong with Goldman Sachs.

Can you talk a little bit more about the latest trends you're seeing in the private credit markets and how much S&P Ratings revenue you expect to come from private credit?

George, it's Martina. Thanks for the question. Well, this is an area that we've seen very strong growth in over several years now. And in fact, we ended full year 2025 at the enterprise level was north of $600 million in revenues in private markets.

As I mentioned in my own prepared remarks, Ratings Private Credit grew 25% off a decently substantial base. Remember, we've been investing in this area for several years, and we made sure that we have the analytical capacity expertise and the appropriate methodologies here. So it's an area that we are, I would say, cautiously optimistic about over the very immediate time frame just given some of the stresses on the sector that we mentioned. But we started this year with those potential stresses in mind.

We didn't necessarily assume there was going to be huge growth in middle market CLOs, for example, we assumed that there would be some softness in BDCs. And so far, we're seeing the trends play out as expected. And then, of course, if you take a step back and you look at what we're doing in the broader Market Intelligence and Index strategies around private markets, all of what we're doing is geared towards giving LPs and GPs performance data and benchmarks and data and analytics to assess how these investments are trending as well as how LPs are thinking about shifting allocations, et cetera. And we are seeing a lot of demand for that data.

Maybe just to give you two additional examples. During the quarter, we launched one of the first -- we launched the first tranche of the data from our Cambridge Associates and Mercer partnership focused on private credit and infrastructure. And there's a lot of interest in that data because of its contributory nature. And we also integrated With Intelligence, the first tranche of With Intelligence documents into Cap IQ Pro, which again has stimulated quite a bit of interest because it enables GPs to really look at and target LPs based on their allocation strategies.

So overall, I think, look, at this point, whether it's our Ratings, our performance data at the fund level, deal level, et cetera, and the analytics, there is a really big need and a lot of interest in what we're providing here. Thanks for the question.

Our next question comes from Craig Huber with Huber Research Partners.

I wanted to ask about AI efficiencies at your company. To the extent that you can give us some more examples of how AI internally is helping you guys be more efficient across your various sectors, including outside of the MI division? And also, Eric, I wanted to ask your 50 to 75 basis points expected improvement, excluding OSTTRA, how much ballpark do you think AI efficiencies is actually helping that number?

Craig, thanks for the question. Let me start, and then I'll hand over to Eric. I would say that we have been tackling AI by looking at some of our largest strategic processes across the company. And so at our IR Day, for example, we mentioned four particular areas that we were focused on, including our Ratings analytic workflows, our research workflows in Energy and in Market Intelligence as well as our technology and data workflows.

And these comprise roughly around half of the resources that we have at the company. And so if you want to think about areas outside of maybe some of the more obvious areas like the data organization, we can see tremendous capacity expansion within Ratings, for example, where they have been a very early adopter of AI as part of augmenting analytical capacity and making sure that our analysts can do more high-value things like thought leadership and additional research. And so we're really leaning into this. We have announced you will see the joining of Firdaus Bhathena as our Chief Technology and Transformation Officer.

And Firdaus really as part of that is looking at how we will scale AI and other technologies like quantum and blockchain so that we can actually get the full benefit around the Enterprise. And he will also look at this transformation program that has started with these four strategic processes and make sure we're scaling it out to the rest of the organization over time. Eric, I'll hand over to you.

Craig, I'd just add, AI is just beginning to have some positive impact on margin. I'd say beginning because, remember, AI is just a continuation of machine learning tools and a wide range of capabilities that we've used and leveraged across our processes. I've talked at length about the enterprise data office and what we do in data operations. And so I'll say the predicate to the the new LLM tools have aided the margin expansion over the last year, some into this year.

But I think the upside from the broad adoption of Frontier models is just beginning. And really will have an impact in '27, '28 and in the future years as they get expanded into a wide range of these strategic and important processes that we operate and will be helpful in that regard. Thanks for the question.

Our next question comes from David Motemaden with Evercore.

Just a quick one on how clients are accessing your content maybe a little bit to Slide 12. You talked about usage through your own solutions like ChatIQ and then also through the Frontier large language models. Are you seeing any meaningful differences in usage patterns or engagement with your data across those two broad channels today? And I guess I'm wondering, as adoption scales, where do you see the balance between direct delivery through your own solutions and third-party large language models ultimately settling out?

David, it's Martina. Let me start, and then I'll hand over to Eric as well. This is something, obviously, that we're spending quite a bit of time thinking about. And I would start with our customers and what they're telling us and basically the types of deals that we are signing with our customers.

So if we start from that perspective, there's a spectrum, if you like, along the very large number of users of our products in this area in Capital IQ Pro. It ranges from customers who will persist in using the integrated desktop over a period of time. And this is for a variety of reasons. It can be because they prefer to have us do the hard work for them in terms of integrating the AI capabilities and it can also be because they may look over time at the cost of adopting some of these models and prefer to have us manage that for them at scale, which can provide efficiencies rather than having them do that bespoke work themselves.

We will also have clients who will do both. And so we see that already. We have one large global bank that signed an extended contract with us in the first quarter. It included expanding the usage of the Desktop Capital IQ Pro to additional users around the organization.

And it also included increasing licensing for AI use of several of our data sets. And the bank actually made our data sets the standard on their own internal LLM, and so this is an example of where Capital IQ Pro will continue to be used alongside LLM model consumption within our clients. And I would say that, that is the majority of the conversations that we are having. Now will clients look to just use their in-house LLMs?

That's potentially a scenario that we could see play out over a period of time. We're ready for that. And in that case, we think our data becomes even more valuable because our data is required to really get the full benefit of using these channels. As I mentioned earlier, we will use the plug-in option, and we will also use MCP applications to make sure that we can continue to improve the user experience for clients that want to use these third parties.

And all of this really is very consistent with how we have thought about partnering with third-party channels for many years now, and it's why we talked a lot about flexible distribution back in our IR Day. Maybe Eric, do you want to talk a little bit about how we're seeing the usage evolves?

Yes. Let me just give you some examples. On the direct usage side, right, where clients are using our platforms and within our platforms, usage continues to build very substantially. I described in our Energy core platform, AI queries are up 2x in iLEVEL, the automated data ingestion through AI is up 2x.

And so seeing very significant increases, which we're monitoring in our minds, that's the way clients are gaining value. At the same time, in the -- through the LM channels, the frontier models, the models that our clients have. As we said earlier, call volume is up very significantly, literally 2x from February to March, 5x from December to March. And so again, we're seeing the value that clients are seeking in our data and proprietary offerings that they're looking for.

And then what we find is where there's more usage, there's more value over time, that will create economic benefits and opportunities for us. In the clients that have been using our AI tools and availing themselves of those in MI, we're seeing a couple of hundred basis points higher retention rates. In Energy, over 500 basis points of higher retention rates because, again, usage is value for clients. They get more benefits, and that helps us drive the overall economics of each of our businesses across the range of channels that we provide.

Our next question comes from Jason Haas with Wells Fargo.

Can you just clarify on the ACV growth? I think you said that it was 6% in the quarter. I believe the past couple of quarters is 6.5% to 7%. So did it decelerate? And if so, what drove that? Because the commentary on revenue side optimistic for the rest of the year. So I just wanted to follow up on the ACV point.

Jason, it's Eric. I said the ACV growth was in line with subscription revenue growth, which was around 6%. I think we've quoted over the last 5 quarters, 6% to 6.5%, 6.5% to upper 6s percent. So it's in the range.

There's always going to be a little bit of volatility. But what we see is that the underlying drivers are moving in the right direction. We're feeling good about net sales, net renewals and so forth across MI. And so we see this as a good outcome for the first quarter and expect that to build momentum into 2Q, 3Q and 4Q.

Our next question comes from Shlomo Rosenbaum with Stifel.

I just want to get a better sense as to how you are thinking about the Ratings revenue through the year? I know you gave the cadence, but in aggregate, from the change in the geopolitical environment, like is there an aggregate any change over -- in the way that you're thinking about Ratings revenue for the year? Or is there would you say there's more risk to what you're -- what you've been assessing. And then also, if you don't mind just quantifying the Ratings evaluation services, what was the growth you said it was healthy.

I think you quantified it somewhat before in other quarters in. Has that changed at all in terms of the growth rate of that business, it's usually a precursor to additional issuance?

It's Martina. I'll take the question here. I think the -- ultimately, as you know, obviously, we didn't change our guidance for the full year for billed issuance and for Ratings. And I think the -- look, the thing that we're watching is this kind of end-of-2Q resolution, right?

So we haven't necessarily seen any direct impact on Ratings revenue. But if we were to see GDP growth coming down, much broader sector shocks around the world, that's a scenario where we could see some weakness in the environment. And I think maybe to your question on RES, we had a good quarter in RES. A lot of that was driven by M&A assessments from issuers, but strong performance there overall.

Thanks for the question.

We will now take our final question with Jeff Meuler from Baird.

Just looking out past the Iranian conflict thinking about your Energy business, how do you expect it to be impacted by the energy complex build-out associated with the data center and AI infrastructure build-out. Just any specific products that you'd expect to benefit any new customer type opportunities. That's it.

Jeff, thanks so much for the question. I think this goes back to 1 of the things that we really highlighted at our Investor Day around Energy expansion. There's a tremendous amount of additional growth that will be projected in demand for energy as well as demand for critical minerals. And our data is really quite unique across these various different areas and gives us a true opportunity to work with clients around the world to help them understand forecasts for renewables, forecast for hydrocarbons, the trade-offs between both as demand increases, et cetera.

And so we're seeing great opportunities, not just in the -- some of the ones that we've been talking about within Ratings, for example, on data center issuances, but we also saw increased issuances from utilities. In the power sector in Ratings. We see demand for additional scenario planning around power and utilities in the Energy team, and we've seen particular demand in the Energy team's unique insights and data on critical minerals. And so these are all areas where we would expect to see additional demand over time.

Thanks for that question. And in closing, I'd like to thank our people for delivering such a strong quarter. Our mission of advancing essential intelligence is now more relevant than ever as we help our clients navigate the uncertainties in this environment. And we're making really great progress against our strategy and are exceptionally well positioned and excited about our opportunity to drive value this year and beyond.

We really appreciate you joining the call today. Thank you.

That concludes this morning's call. A PDF version of the presenter slides is available for downloading from investor.spglobal.com. The replays of the entire call will be available in about 2 hours. The webcast with audio and slides will be maintained on S&P Global's website for 1 year.

The audio-only telephone replay will be maintained for 1 month. On behalf of S&P Global, we thank you for participating and wish you a good day.