S&P Global grades the world's debt and owns the index everyone tracks

The company that grades the world's debt

Every time a corporation borrows money, a government issues bonds, or a bank packages a pool of mortgages, someone needs to rate the creditworthiness of that debt. In most cases, the rater is one of three firms. S&P Global is one of them, and it runs the largest credit ratings business in the world.

The Ratings division alone generated $1.15 billion in revenue last quarter, with an operating margin of 61%. Those are the economics of a business where the product is an opinion, the raw material is data, and the customers have no real choice but to participate.

What the business looks like

S&P Global reported $3.8 billion in total revenue in Q1 2025, up 8% from the year before. For the full year 2025, revenue grew 8% and earnings per share rose 19%. The company operates five segments, each with distinct economics but a common thread: they all sell data, analytics, and benchmarks that financial markets need to function.

Ratings ($1.15B quarterly revenue, 61% margin) is the crown jewel. The business model is simple: issuers pay S&P Global to rate their debt, because investors demand rated securities. Only three firms (S&P, Moody's, and Fitch) hold the regulatory designation that matters. New entrants face a barrier that is partly regulatory, partly reputational, and partly self-reinforcing. Nobody wants to be the first issuer rated by an unknown agency.

S&P Dow Jones Indices ($445M quarterly revenue, 66% margin) is the second remarkable business. S&P Global owns the S&P 500 index, along with thousands of other benchmarks. Every ETF and index fund that tracks the S&P 500 pays a licensing fee. As passive investing has grown, so has this revenue stream. It grows when markets go up (because asset-linked fees rise with asset values) and when investors allocate more to index products (which they have been doing for two decades).

Market Intelligence ($1.2B quarterly revenue, 19% margin) provides data and analytics to financial institutions. Commodity Insights ($612M, 38% margin) serves energy and commodity markets. Mobility ($420M, 16% margin) provides automotive data. These are good businesses but less exceptional than Ratings and Indices.

Across the company, 75% of revenue is recurring, coming from subscriptions and asset-linked fees. That gives the business a level of predictability that most companies envy.

The economics of a data monopoly

The interesting thing about S&P Global is that its costs do not scale with its revenue. Rating an additional bond issue costs almost nothing once the infrastructure is in place. Adding another ETF to the S&P 500 license roster requires no new employees. The marginal cost of the next dollar of revenue is close to zero in the highest-margin segments.

This produces operating margins that would seem implausible in most industries. The Indices business runs at 66% operating margin. Ratings runs at 61%. These are not temporary peaks. They have been at or near these levels for years. When a business can grow revenue at high single digits while maintaining margins above 60%, the compounding of earnings becomes almost mechanical.

The adjusted operating margin for the company as a whole was 51% through the first nine months of 2025. That includes the lower-margin businesses. Strip those out, and the core Ratings and Indices segments produce economics closer to software companies, but without the competitive intensity that software markets often face.

Capital allocation

In 2025, S&P Global returned 113% of adjusted free cash flow to shareholders through buybacks and dividends. The company repurchased more than $5 billion in stock during the year, steadily reducing the share count. When a company with growing earnings buys back shares, the per-share compounding accelerates. That is exactly what has happened here: EPS grew 19% in 2025, substantially faster than revenue grew.

The dividend is not the main story, but it has been paid and increased for decades. S&P Global's capital needs are modest. The business does not require factories, warehouses, or heavy equipment. What it requires is data, people, and regulatory standing, and all three are already in place.

The 2022 merger with IHS Markit, valued at $44 billion, was the largest acquisition in the company's history. The integration added the Energy, Mobility, and expanded data analytics capabilities. Cross-selling between the legacy S&P Global and IHS Markit businesses is gradually lifting growth in the lower-margin segments. Whether the full value of that deal is realized will become clearer over the next several years.

What could go wrong

Regulation is the most obvious risk. The credit ratings industry came under intense scrutiny after the 2008 financial crisis, when highly rated mortgage securities turned out to be worthless. Congress passed new oversight rules, and regulators periodically revisit whether the issuer-pays model creates conflicts of interest. So far, the regulatory framework has remained stable, but a future crisis could trigger stricter rules.

A prolonged downturn in debt issuance would hurt the Ratings business. When companies stop borrowing, rating activity declines. This happened briefly in 2022 when rising interest rates slowed issuance. The Ratings division has meaningful exposure to cycles in the credit markets, even if the floor is higher than most investors expect (because existing ratings need to be maintained).

Competition from alternative data providers is a longer-term risk for Market Intelligence. Bloomberg, Refinitiv (now part of the London Stock Exchange Group), and newer fintech platforms compete for the same financial data customers. This segment's lower margin reflects that competitive pressure.

A major stock market decline would reduce Index revenue, since asset-linked fees are tied to the market value of funds tracking S&P's benchmarks. This revenue stream goes up in good markets and down in bad ones, though the structural shift toward passive investing provides a floor.

The owner's arithmetic

At a market cap of $126 billion and trailing net income around $4.5 billion, the stock trades at roughly 28 times earnings. For a company growing EPS at close to 20%, with recurring revenue, 51% operating margins, and minimal capital requirements, that multiple is defensible.

If EPS growth moderates to 12% to 15% over the next decade (as the IHS Markit cost synergies fade and the rate environment normalizes), and the multiple compresses slightly, total returns in the range of 10% to 13% annually are a reasonable expectation. That includes a modest dividend yield of about 0.8%.

S&P Global is not the kind of business that makes headlines. It does not launch consumer products. It does not go viral. It quietly operates at the center of global financial infrastructure, collecting fees on transactions and data that market participants cannot avoid. That kind of quiet necessity, paired with high margins and steady compounding, is exactly what long-term owners should look for.