Morningstar, Inc. — Third Quarter 2026 Earnings Summary

Financial Performance:

• Reported revenue increased 8.9% year-over-year to $672.1 million for the quarter; organic revenue grew 6.8% (7.8% excluding sunsetting products).
• Year-to-date reported revenue increased 9.7% to $2.0 billion; organic revenue grew 7.0% (8.3% excluding sunsetting products).
• Reported operating income rose 31.0% to $167.4 million in Q3 and 31.9% to $483.9 million year-to-date.
• Adjusted operating income increased 26.1% to $189.9 million in Q3 and 26.8% to $544.4 million year-to-date.
• Diluted net income per share increased 41.0% to $3.06 in Q3 and 41.6% to $8.61 year-to-date.
• Adjusted diluted net income per share increased 36.5% to $3.48 in Q3 and 35.9% to $9.76 year-to-date.
• Operating margin was 24.9% in Q3 (up from 20.7%); adjusted operating margin was 28.3% (up from 24.4%).
• Cash provided by operating activities decreased 2.6% to $190.7 million in Q3 but increased 13.5% to $437.9 million year-to-date.
• Free cash flow decreased 2.9% to $155.4 million in Q3 but increased 17.8% to $331.5 million year-to-date.
• Effective tax rate decreased to 25.0% in Q3 from 25.5% in the prior-year period.
• Deferred revenue was $600.3 million as of September 30, 2026, compared to $586.1 million as of December 31, 2025.
• Total debt was $1.7 billion as of September 30, 2026, compared to $1.1 billion as of December 31, 2025.

Guidance and Future Outlook:

• No specific forward financial guidance or future growth targets were provided in the press release.
• Management highlighted continued investment in AI initiatives and cloud infrastructure migration as key drivers for future cost structures.
• The company noted strong adoption of MCP offerings, with cumulative tool calls through the PitchBook Data Premium Connector surpassing 13 million in October.

Business Segments and Product Lines:

• Morningstar Direct Platform: Revenue increased 5.4% to $222.5 million (6.2% organic); adjusted operating income rose 11.2% to $104.2 million with a margin of 46.8%. Growth driven by Morningstar Data and Direct.
• PitchBook: Revenue increased 3.9% to $175.6 million (4.0% organic); adjusted operating income decreased 1.1% to $52.3 million with a margin of 29.8%. Growth in direct data was offset by softness in corporate and venture capital segments.
• Morningstar Credit: Revenue surged 18.3% to $107.8 million (19.1% organic); adjusted operating income increased 44.5% to $40.6 million with a margin of 37.7%. Strength in corporates and US asset-backed securities.
• Morningstar Wealth: Revenue decreased 4.3% to $59.4 million (6.0% organic); excluding sunsetting Morningstar Office, organic revenue would have increased 2.1%. Adjusted operating income increased 138.7% to $7.4 million with a margin of 12.5%.
• Morningstar Retirement: Revenue increased 21.3% to $41.5 million; adjusted operating income rose 40.2% to $23.7 million with a margin of 57.1%.
• Corporate and All Other: Revenue increased 30.9% to $65.3 million (1.8% organic); Morningstar Indexes revenue grew driven by the CRSP acquisition, while Morningstar Sustainalytics revenue declined due to sunsetting products.
• New Product Launches: Launched "Direct AI" featuring agentic workflows backed by trusted data and research.
• Sunsetting Products: Excluded impact of sunsetting Morningstar Office (Wealth) and second-party opinions product (Sustainalytics) from organic growth calculations.

Market and Competitive Landscape:

• Morningstar serves investors and financial professionals across the ecosystem, with over $3.6 trillion in assets linked to Morningstar indexes.
• Investment management services subsidiaries held approximately $398.7 billion in AUMA as of September 30, 2026.
• Combined Morningstar Model Portfolios and International Wealth Platform AUMA increased 12.1% to $56.5 billion.
• Morningstar Retirement AUMA increased 12.1% to $333.9 billion.
• PitchBook licensed users grew 4.6% in the quarter.
• Morningstar Credit saw robust issuance supporting growth across geographies and asset classes.

Risks and Challenges:

• Operating expenses increased 3.0% in Q3, driven by higher technology infrastructure costs (cloud migration, AI initiatives) and advertising/marketing expenses.
• Compensation costs declined overall due to lower bonus expenses, partially offset by a $6.9 million increase in severance costs.
• PitchBook experienced higher churn in corporate and venture capital client segments.
• Morningstar Wealth AUMA decreased 8.5% to $64.8 billion, primarily due to the loss of an Asset Allocation Services client in Japan.
• Free cash flow in Q3 was negatively impacted by less favorable working capital movements compared to the prior year.

Management Commentary and Tone:

• CEO Kunal Kapoor stated the company is "putting important product enhancements in the hands of our clients while delivering profitable growth."
• Management expressed confidence in the adoption of AI-driven workflows and MCP offerings.
• The tone was positive regarding revenue growth and margin expansion, particularly in Morningstar Credit and Retirement segments.

Other Key Points:

• Share Repurchases: The company repurchased 486,573 shares for $100.0 million in Q3 and 2,777,829 shares for $500.0 million year-to-date.
• Dividends: The company paid $18.7 million in dividends during the quarter.
• Debt Activity: The company reduced debt by $34.7 million, net, during the quarter.
• Acquisitions: The CRSP acquisition was accretive to adjusted operating margin in the quarter and drove growth in Morningstar Indexes revenue.
• Investor Communication: Morningstar encourages written questions from investors and securities analysts to investors@morningstar.com.