S&P Global · Squad Capital

Investment conclusionWATCH / SELECTIVE ACCUMULATIONConviction: High

The market is right that AI can compress some Capital IQ desktop and document-search economics, but wrong to treat all of S&P Global as a replaceable research interface. Ratings, Indices and Energy generated about 78% of 2025 adjusted segment profit, while Q2 2026 Market Intelligence still delivered 6% revenue growth, 10% adjusted operating-profit growth and margin expansion. At $439.83, approximately 25x the midpoint of 2026 adjusted EPS guidance, the business quality is validated but the base-case return is only about 11%, below a 15% hurdle.

Price used: $439.83
Base-case IRR: ≈11%
Horizon: 3–5 years
Portfolio role: Quality financial-data compounder

Principal risk: Capital IQ seat compression and loss of customer-interface control to AI platforms.

2. Quick metrics

Price (27 Jul 2026)$439.83

Income yield≈0.9% gross

Base-case IRR≈11%

2026 adjusted P/E≈25.0x

2026 adjusted earnings yield≈4.0%

Quality score4.8/5

3. What the company does

Business overview

S&P Global is a post-spin financial-information and market-infrastructure company. Following the July 2026 separation of Mobility Global, the continuing group consists of Ratings, Indices, Energy and Market Intelligence. It earns issuer-paid credit-rating fees, licences benchmark indices, produces commodity price assessments and energy intelligence, and sells financial data, software, workflows and machine-readable delivery to institutions.

How it makes money

Ratings earns transaction fees when debt is issued and recurring non-transaction revenue from surveillance, entity ratings, research and related services. Regulatory recognition and market convention make the rating symbol difficult to replace.
Indices earns asset-linked fees on funds benchmarked to S&P Dow Jones indices, royalties on exchange-traded derivatives and subscription or custom-index revenue. Existing AUM, liquidity and benchmark adoption create powerful network effects.
Energy combines Platts price assessments and benchmarks with CERA research, data and workflow products. Contributor networks, methodology and contractual benchmark use are more defensible than generic research interfaces.
Market Intelligence sells subscriptions, recurring-variable data, enterprise workflows and APIs. AI can reduce the value of manual desktop navigation, but also increases demand for clean, licensed and auditable data inside customer and third-party agents.

4. Core investment thesis

Benchmark franchises are harder to replace than interfaces

Ratings, the S&P index ecosystem and Platts benchmarks derive value from regulatory recognition, institutional adoption, liquidity, methodology and contributor networks. A general-purpose model can analyse information, but it cannot instantly recreate those accepted market standards.

AI changes delivery without necessarily destroying data economics

Customers may consume SPGI content through internal agents, third-party models, APIs and MCP connections rather than a traditional desktop. The investment case requires machine consumption to preserve annual contract value, pricing and margins as the interface shifts.

Current Market Intelligence results contradict an immediate collapse

Q2 2026 Market Intelligence revenue grew 6%, adjusted operating profit rose 10% and margin expanded to 36%. These figures show continuing demand and operating leverage, although they do not disclose seat counts or prove that trial API usage will become durable high-margin revenue.

Premium valuation requires successful migration and cash conversion

At about 25 times 2026 adjusted EPS, the shares already assume durable double-digit compounding. Ratings and Indices are benefiting from strong markets, adjusted earnings exclude recurring acquisition amortisation, and standalone post-spin free cash flow still needs clearer evidence.

5. Main earnings drivers

Each row links an economic variable to the earnings mechanism, the base-case assumption and the indicators that can validate or disprove it.

Driver	How it changes earnings	Current direction	Base-case assumption	Key indicators
Ratings issuance and recurring revenue	Debt issuance produces transaction fees, while surveillance, entity ratings, relationship fees and research provide recurring non-transaction revenue. Segment margin has high operating leverage to issuance volume.	Strong, likely to normalise	Refinancing supports issuance over the cycle, but growth and a 68% quarterly margin normalise from the Q2 level rather than compounding at the current rate.	Ratings transaction revenue Non-transaction revenue Billed issuance by debt category Adjusted operating margin Regulatory and litigation developments
Index-linked assets, flows and derivatives	Asset-linked fees rise with benchmarked AUM, while royalties depend on futures and options activity. Existing liquidity and product adoption reinforce the franchise.	Structurally positive, market-sensitive	Net flows and new products support high-single- to low-double-digit growth through a normal market cycle, without assuming current equity returns persist.	Asset-linked fee growth Assets linked or benchmarked ETF net flows Exchange-traded derivative volume and open interest Subscription and custom-index revenue
Market Intelligence interface-to-machine migration	Desktop seats, renewals and pricing remain important, while APIs and agentic delivery can increase data usage. Economics improve only if machine consumption is incremental or preserves contract value rather than becoming a lower-priced substitute.	Positive current results; long-term model unproven	Market Intelligence sustains about 6%–8% growth and stable-to-rising margin as API revenue offsets gradual seat and interface pressure.	Organic and subscription revenue growth Adjusted operating margin Retention and renewal pricing Capital IQ seat commentary Paying API customers, usage and production conversion AI-customer ACV growth
Energy benchmark and research demand	Platts benchmark adoption and transaction-linked usage are highly defensible, while CERA research, news and some interfaces face more substitution risk. Energy-transition and data-centre infrastructure demand create new datasets and workflows.	Modest current growth	Platts protects pricing and benchmark relevance while the broader division gradually returns toward a 6%–8% medium-term growth range.	Energy subscription growth Transaction and usage royalties Platts benchmark adoption CERA renewal and product commentary Adjusted operating margin
Margin, free cash flow and capital allocation	AI productivity, platform consolidation and scale can expand margin. Buybacks increase EPS but create economic value only when funded by durable free cash flow and completed below intrinsic value.	Margin positive; cash-flow evidence incomplete	Adjusted EPS compounds about 10%–11%, standalone cash conversion remains strong and leverage stays controlled despite more than $7bn of 2026 repurchases.	Enterprise adjusted margin Standalone operating and free cash flow Net debt and interest expense Shares repurchased and average price Acquisition spend and subsequent organic growth

6. Evidence for and against the thesis

Confidence describes the evidence currently available, not the attractiveness of the share price.

Thesis claim	Supporting evidence	Contradictory evidence or unresolved issue	Confidence
Most enterprise profit is protected by benchmark and market-infrastructure characteristics	Ratings, Indices and Energy generated about 78% of FY2025 adjusted segment operating profit Q2 adjusted margins were approximately 68% in Ratings and 72% in Indices Ratings symbols, benchmark indices and Platts assessments are embedded in contracts, mandates and market convention	Ratings and Indices are exposed to issuance and market levels Regulation, methodology failure or reputational damage could weaken institutional acceptance	High
AI demand can increase the value of SPGI data even if desktop use changes	Management is building LLM-ready APIs, MCP connectivity and agentic products Q2 call materials reported rapid API customer and usage growth Institutional AI outputs require licensed, normalized and auditable data	Absolute AI revenue, paying production customers and margins are not disclosed Third-party platforms may control distribution and gain bargaining power Some public-data extraction and document workflows are becoming commoditized	Medium
Market Intelligence is not currently showing AI-driven deterioration	Q2 revenue and subscription revenue grew about 6% Adjusted operating profit rose 10% Adjusted operating margin expanded to 36%	Seat counts, retention, renewal pricing and product-level performance are not disclosed A multi-year contract model can delay visible disruption Platform consolidation and leadership changes acknowledge that the interface requires redesign	Medium–High
The current price offers adequate but not exceptional expected return	The 2026 adjusted EPS guide supports double-digit year-on-year growth The segment mix and buyback support a plausible 10%–11% EPS CAGR Business quality can justify a premium multiple	A roughly 25x forward adjusted P/E leaves little cushion for MI disruption or cyclical normalisation Adjusted earnings exclude substantial amortisation associated with acquisitions A clean standalone free-cash-flow baseline is not yet available	Medium–High

7. Financial and margin profile

Metric	Current	Interpretation
FY2025 standalone revenue	$13.59bn	Pro forma continuing company after the Mobility separation
FY2025 adjusted operating profit	$6.97bn	51.3% adjusted operating margin
FY2025 adjusted EPS	$15.85	GAAP pro forma EPS was lower; acquisition amortisation and other adjustments remain relevant
Q2 2026 standalone revenue	$3.68bn	+11% year on year
Q2 adjusted operating profit	$2.00bn	+15%; 54.3% margin
Q2 / H1 adjusted EPS	$4.83 / $9.27	+23% / +19%; Q2 benefited from tax and a lower share count
2026 adjusted EPS guidance	$17.50–$17.75	Standalone post-Mobility guidance issued with Q2 results

Margins and operating leverage

Q2 adjusted margins were approximately 68% in Ratings, 72% in Indices, 48% in Energy and 36% in Market Intelligence. Ratings and Indices therefore contribute a disproportionate share of enterprise profit.
Group adjusted margin expanded about 200 basis points and Market Intelligence profit grew faster than revenue, which is inconsistent with immediate AI-driven pricing collapse. It does not prove that long-term desktop seat pressure has disappeared.
Headline Q2 adjusted EPS growth of 23% benefited from a lower tax rate and a 3% reduction in diluted shares. Normalized underlying growth was still strong, but should not be extrapolated mechanically.
First-half cash flow still included Mobility through June, so clean standalone free-cash-flow conversion and the economic cost of repeated acquisitions remain unresolved valuation checks.

8. Balance sheet & capital allocation

Q2 adjusted operating profit: $2.00bn
Q2 / H1 adjusted EPS: $4.83 / $9.27
2026 adjusted EPS guidance: $17.50–$17.75

Capital-allocation priorities and catalysts

Disclosure that API and agentic usage converts into incremental annual contract value and production revenue
Sustained 6%–8% Market Intelligence growth with stable or rising margin
Refinancing-driven Ratings issuance and continued non-transaction growth
Execution of more than $7bn of 2026 repurchases and the resulting 2027 share-count benefit
A price decline toward $400 or below without deterioration in the operating thesis

9. Valuation summary

Metric	Current / normalized	Interpretation
2026 adjusted P/E	≈25.0x	At $439.83 and the $17.625 guidance midpoint
2026 adjusted earnings yield	≈4.0%	Requires sustained double-digit EPS growth to justify the premium
Gross dividend yield	≈0.9%	Income is a minor part of expected return
Indicative 15% IRR entry	≈$370–$380	Based on the base EPS path, a 25x exit and dividends after assumed 30% withholding
Preferred framework	Normalized P/E + FCF conversion + segment durability	Cross-check adjusted EPS against post-spin cash flow, debt and acquisition economics

10. Return scenarios (five years)

Scenario	Assumptions	Indicative annual return
Bear	Market Intelligence slows to 3%–4%, API pricing does not offset seat pressure, Ratings normalises sharply, adjusted EPS compounds about 5% and the exit P/E falls to 20x. Includes dividends after an assumed 30% withholding tax.	≈1% annualised
Base	Organic revenue grows 6%–8%, Market Intelligence remains near its medium-term range, margins expand gradually, repurchases support about 10%–11% adjusted EPS growth and the exit P/E is 25x.	≈11% annualised
Bull	Machine consumption becomes incremental high-margin revenue, Ratings and Indices remain strong, EPS compounds about 13% and the market retains a 28x premium multiple.	≈16% annualised

Squad Capital estimates, not company guidance. Refresh when price, normalized earnings or risk changes materially.

11. Key risks

Capital IQ seat compression and loss of customer-interface control to AI platforms
Lower API pricing power or bargaining power ceded to hyperscalers and agent providers
Ratings issuance downturn, regulation, litigation or reputational failure
Index revenue sensitivity to asset values, fund flows and derivatives activity
Expensive repurchases or acquisitions that add adjusted EPS but earn weak cash returns
Adjusted earnings outpacing clean standalone free cash flow

Thesis breakers

Market Intelligence organic growth remains below 4% for several quarters
Seat losses, weaker renewal pricing or vendor consolidation outweigh API and usage revenue
Third-party AI distribution captures the customer relationship and materially compresses SPGI margins
Standalone free cash flow persistently lags adjusted EPS
Management funds high-multiple buybacks or acquisitions while leverage and cash conversion deteriorate

12. Thesis monitoring dashboard

Only indicators capable of changing the forecast, risk assessment or conclusion are included.

Indicator	Current reading	Base-case requirement	Status
Market Intelligence organic growth	Approximately 6% in Q2 2026	Remain around 6%–8% through platform and AI migration	On track
Market Intelligence adjusted margin	Approximately 36% in Q2 2026, up year on year	Stable or rising while funding AI products and customer migrations	On track
AI/API commercial conversion	Call materials show rapid customer trials and usage, but no absolute revenue or production conversion	Meaningful paying production adoption with ACV and margins comparable to legacy delivery	Unproven
Ratings cycle	Q2 revenue +17%; transaction revenue particularly strong	Normalisation rather than a sharp multi-year issuance decline	Watch
Standalone free-cash-flow conversion	H1 cash flow still included Mobility through June, limiting comparability	Cash conversion broadly tracks normalized earnings after separation and repurchases	Unproven
Entry valuation	Approximately 25x midpoint 2026 adjusted EPS at $439.83	Either earnings visibility improves or price approaches the high-$300s for a 15% return hurdle	Price-dependent

13. Primary sources

▣Investor relationsOpen ↗▣Q2 2026 earnings eventOpen ↗▣Quarterly earnings materialsOpen ↗▣Post-Mobility recast filingOpen ↗▣Mobility separation filingOpen ↗▣SEC filingsOpen ↗▣AI and partner data deliveryOpen ↗

14. Revision history

Date	Price	View	What changed
28 Jul 2026	$439.83	Watch / selective accumulation	First current US publication after the Mobility spin and Q2 2026 results. The broad AI-casualty conclusion is rejected, but the roughly 25x forward adjusted P/E leaves an approximately 11% base-case return rather than a 15% margin-of-safety entry.
Earlier chat research	—	Research lead	The prior discussion supplied questions about AI, Capital IQ and valuation. No earlier price, forecast or conclusion was published as current without refreshing the post-spin structure and Q2 2026 evidence.

S&P Global (SPGI)