Good morning, and welcome to S&P Global's Second Quarter 2026 Earnings Conference Call. I'd like to inform you that this call is being recorded for broadcast. To access the webcast and slides, go to investor.spglobal.com.
I would now like to introduce Mr. Mark Grant, Senior Vice President of Investor Relations and Treasurer for S&P Global. Sir, you may begin.
Good morning, and thank you for joining today's S&P Global Second Quarter 2026 Earnings Call. Presenting on today's call are Martina Cheung, President and Chief Executive Officer; and Eric Aboaf, Chief Financial Officer. We issued a press release with our results earlier today.
In addition, we have posted a supplemental slide deck with additional information on our results and guidance. If you need a copy of the release and financial schedules or the supplemental deck, they can be downloaded at investor.spglobal.com. The matters discussed in today's conference call may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including projections, estimates and descriptions of future events.
Any such statements are based on current expectations and current economic conditions and are subject to risks and uncertainties that may cause actual results to differ materially from results anticipated in these forward-looking statements. Additional information concerning these risks and uncertainties can be found in our Forms 10-K and 10-Q filed with the U.S. Securities and Exchange Commission. In today's earnings release and during the conference call, we're providing non-GAAP adjusted financial information.
This information is provided to enable investors to make meaningful comparisons of the company's operating performance between periods and to view the company's business from the same perspective as management. The earnings release contains financial measures calculated in accordance with GAAP that corresponds to the non-GAAP measures we are providing, and the press release and the supplemental deck contain reconciliations of such GAAP and non-GAAP measures. For today's discussion, references to revenue are to GAAP pro forma revenue on a consolidated basis, GAAP revenue for our Ratings and Indices segments and adjusted as recast revenue for our Energy and Market Intelligence segments.
Other financial metrics discussed on today's call are presented on an adjusted basis and refer to pro forma non-GAAP adjusted measures. In a press release dated July 6, 2026, the company provided recast financial information, excluding contributions from Mobility for the 4 quarters of 2025, full year 2025 and the first quarter of 2026. That release can also be found at investor.spglobal.com.
At this time, I would like to turn the call over to Martina Cheung. Martina?
Martina Cheung
President And CEO
Thank you, Mark, and thank you to everyone joining the call this morning. I'm excited to host our first earnings call since completing the Mobility spin, and I'm excited to be able to discuss the progress and the vision of our 4 divisions. We had very strong performance in the second quarter with 11% total revenue growth, outperforming our expectations on both a reported and an organic constant currency basis.
Recurring revenue was up 8% year-over-year as well. The strength of our benchmark business has really shone through in the second quarter as well, with revenue increasing 15% year-over-year. With high incremental margins in our benchmark products and disciplined expense management across the business, we were able to deliver 200 basis points of margin expansion, leading to EPS growth of 23%.
On capital return, we have decided to increase our target share repurchase for 2026 by nearly $3 billion to more than $7 billion for the full year. As Eric will walk through shortly, our strong cash flow and healthy balance sheet will allow us to repurchase the equivalent of more than 5% of our current market capitalization. In the last few months, we've seen the end result of a great deal of exceptional work from teams across the entire organization.
On July 1, we finalized the spin of our former Mobility division into an independent publicly traded company, which immediately creates meaningful shareholder value. We announced the consolidation of our supply chain efforts into our Energy division as well as new leadership and a new operating model for Market Intelligence. We'll provide some additional insights on those points in a moment.
We've also seen continued rapid adoption of our AI solutions, including our Kensho LLM-ready APIs, and we've continued to explore different monetization methods with our large, sophisticated customers. We also announced an agreement to purchase datacenterHawk and the majority stake in Agusto & Company. DatacenterHawk will combine with our 451 Research and energy forecasting assets to extend our leadership in the data center space.
Agusto & Company is a leading credit rating agency with operations in Nigeria, Kenya, Rwanda and Ghana. All of these milestones are evidence of the progress we are making in executing the strategy we announced at our Investor Day last year. With the completion of the Mobility spin and the division realignment, we are well positioned to deliver on the strategic objectives we have laid out.
We will continue to invest to advance our market leadership and benchmarks across the debt, equity and commodity markets. In Market Intelligence, we will make focused investments in the fastest growth areas while improving the profitability of more mature platforms. That will help us optimize the Market Intelligence business to meet the evolving data and AI needs of our customers.
We are also integrating our data to create new opportunities and expand our addressable markets through Kensho Data. Now that we have simplified the business down to 4 core divisions, it's more clear than ever how these divisions can create a powerful platform to help our customers navigate volatile markets and turbulent macroeconomic conditions. As I've shared with you before, we are primarily a benchmark business.
Benchmarks include our Ratings division, our Indices division, the Platts business within our Energy division and the distribution of our Ratings content through Market Intelligence. These benchmark businesses account for nearly 2/3 of our revenue and now comprise more than 80% of our operating profits. Given this is the first earnings call since we completed the Mobility spin and realigned 2 of our 4 divisions, I wanted to discuss each division's growth drivers and strategic priorities before handing off to Eric to discuss financials and guidance.
Beginning with Ratings, which is now our largest division by revenue. The market appears to be pricing in slightly higher rates than were expected at this point last year, though credit spreads remain very tight. Billed issuance increased 25% year-over-year in the second quarter, with strength across the risk spectrum.
Investment-grade issuance was again bolstered by large issuance associated with AI infrastructure and data center CapEx as well as M&A. We also continue to drive innovation in fast-growing areas of credit with DeFi. Issuance from the hyperscaler infrastructure companies slowed in the second quarter as we expected, but remains quite strong and is pacing well ahead of our initial expectations for the year. In the first half, we saw approximately $169 billion in billed issuance from the hyperscalers while our initial outlook for the year assumed approximately $200 billion for the full year.
Our updated financial guidance assumes billed issuance growth in the mid- to high single-digit range. We are now assuming $250 billion to $300 billion in hyperscaler issuance for the full year and double-digit growth in M&A-related issuance. As we look at our midyear refinancing study, we continue to see robust maturity walls for several years, reinforcing our expectation for strong average annual growth.
Over the last 12 months, we have seen billed issuance grow at an average of roughly 20%. Despite that very strong issuance and our outperformance in the first half of 2026, the near term and multiyear maturity walls remain quite strong. This is a powerful indicator that the strength we are seeing this year in Ratings is not coming at the expense of future refinancing activity.
In the next 4.5 years, we expect to see approximately $11 trillion in rated debt come up for refinancing, which bodes well for the multiyear growth opportunities in Ratings. Now turning to Indices. We continue to extend our leadership as the world's largest provider of indices by AUM.
ETF AUM for S&P Dow Jones Indices ended the quarter at $6.35 trillion. We continue to see an even greater amount of AUM tied to our indices when we include mutual funds, OTC derivatives and insurance products. We have built an incredible index franchise founded on trust, transparency and disciplined methodology, while still being responsive to an ever-evolving market environment.
Our results demonstrate the strength of that franchise as S&P Dow Jones Indices was the #1 index provider yet again in terms of flow capture. Year-over-year, we have seen more than $600 billion in net inflows. June marked a significant milestone for the global markets as well as we saw the first-ever ETF surpass $1 trillion in AUM.
We're incredibly proud to be part of that story as that ETF was based on the storied S&P 500. We also continue to invest to drive new innovative solutions in DeFi. Just last week, we launched the S&P Pantera Digital Asset Index, which uses a rules-based approach that focuses heavily on fundamentals versus focusing strictly on price momentum or market cap.
That innovation is driving real economic value and competitive wins as well. In the second quarter, we saw multiple asset managers switch to S&P, bringing tens of billions of dollars in additional AUM now benchmarked against S&P Dow Jones Indices. Now turning to our Energy franchise.
As we outlined back at Investor Day, we will be reporting Energy in 2 business lines going forward. The Platts benchmark business includes our price assessments, global trading services and other offerings associated with our Energy and Commodity benchmarks. The CERA business line includes the proprietary data, content, research and events, including the holistic supply chain suite that previously was spread across Energy and Market Intelligence.
When we think about the performance of the Energy business, not just in the quarter but longer term, there are a number of factors impacting growth with long-term positive factors offset somewhat by near term headwinds. We are confident that the secular tailwinds in this business remain intact. Energy expansion continues to be one of those tailwinds and informs much of our strategic focus.
Our price benchmarks remain the gold standard across Energy and Commodities markets, and we will continue to invest to launch and scale new benchmarks. As supply chains diversify and evolve, we continue to make investments in regions of the world like North Africa that are poised to play a more important role in Global Energy and Commodity markets. We expect to see strong economic growth in these regions and look to work together with local partners to help deliver that growth.
Global supply chains aren't just raw materials and manufacturing. They include technology supply chains involving data centers and power and represent a meaningful opportunity for our Energy business. That opportunity is exactly why you saw us acquire datacenterHawk.
We're confident that as the demand for AI increases, the need for our data and insights will increase as well. We've also made great progress with CERA Titan and remain on track to officially launch our new AI native platform for upstream data later this year. Despite the many long-term tailwinds in Energy, there are some factors that pressured results in the quarter, though not unexpectedly.
Importantly, the Iran conflict has complicated contract renewals among some very large customers, and we have intentionally chosen to be flexible on price increases and other terms for affected customers during such a challenging time. Eric will walk through what that means for 2026 in a moment, but we remain confident that the headwinds are cyclical while the tailwinds are secular. Now turning to Market Intelligence.
As we announced on July 6, we have created a new business structure for Market Intelligence with new leadership already on the ground running. We continue to see rapid changes in the technology landscape and in the ways our customers want to interact with our data. So we are refining our strategy and go-to-market motion to make sure we're best positioned for the future.
Within Market Intelligence, we'll be reporting 2 business lines: Kensho Data & Platforms and Enterprise Solutions. Kensho Data consists of our data feeds, Kensho LLM-ready APIs, RatingsXpress and our vast estate of proprietary data. The Kensho Data component is roughly half the size of platforms by revenue, but is growing in the high single-digit to low double-digit range on an organic basis.
The Platforms component includes Cap IQ, Consulting, Issuer Solutions, RatingsDirect, Visible Alpha and With Intelligence. Platforms is the larger component of the business line and in aggregate is growing low single digits on an organic basis. Our strategic focus in Kensho Data will be to deliver our differentiated and proprietary data in a channel-agnostic way, accelerating revenue growth at strong incremental margins.
Our focus in Platforms will be to consolidate redundant platforms, leverage a more unified technology infrastructure across products and simplify operations while still growing revenue. We will maintain a high standard for innovation and customer value, but increase our efforts to leverage AI and traditional productivity measures to improve profitability. The other business line in Market Intelligence is Enterprise Solutions.
Enterprise Solutions includes our entire Lending Solutions suite, ClearPar, Debtdomain, Pricing and Reference Data, Notice Manager and WSO. The Lending Solutions suite benefits from deeply connected data flows as well as strong network effects. Enterprise Solutions also includes iLEVEL, bookbuilding software for fixed income and equity origination and valuation services.
These are important market-leading franchises that the markets depend on in order to function. In Market Intelligence, we have an incredible library of proprietary data and powerful workflow tools. We will emphasize those areas where S&P Global has a clear right to win.
We are seeing customer buying behavior mature and evolve. Vendor consolidation continues to be a tailwind for our business, and we are beginning to see customers more rigorously evaluating AI budgets to prioritize those solutions that truly create positive ROI. Across the board, we want to align our priorities with those of our customers.
We will be focused on the highest quality assets in MI and on the highest growth opportunities. We will make more and more of our global data estate AI-ready by scaling our enterprise data fabric. We will look to fund these investments primarily out of productivity and AI-driven cost savings to ensure meaningful margin expansion.
From a capital standpoint, small carve-outs are possible in the near term, but there remains no real appetite for transformational M&A. The simplified structure and clear objectives we've discussed today will better position Market Intelligence to serve customers in the future and drive long-term profitable growth. Now let me turn to the exciting progress we're making in artificial intelligence. As we shared with you last quarter, our customers leveraging our AI solutions are growing much faster than average.
That gap widened in the second quarter for both Market Intelligence and Energy. ACV growth in MI is now 60% faster in MI for AI customers and is approximately 3x in Energy. The demand signal from customers is incredibly strong.
We continue to rapidly add customers to our LLM-ready APIs and MCP-connected solutions, with that number now sitting above 500 and increasing more than 70% quarter-over-quarter. API call volume continues to grow rapidly as well, showing that our customers are finding real value in these powerful solutions. Call volume for our LLM-ready API in the second quarter was more than 5x the volume we saw in the first quarter.
Internally, the EDO has achieved nearly 60% of its targeted $100 million in annualized cost savings through a combination of AI-driven efficiencies and traditional productivity initiatives. We are on track to deliver the full $100 million or roughly 20% of the EDO cost base before the end of 2027. Even as our AI solutions are seeing great demand, we are hearing more and more from customers that they are paying more attention to token costs and the overall expense of their own AI investments.
Customers are looking for ways to minimize or manage token expenses, including building solutions in-house. Those customers want to build with S&P Global and with Kensho Labs. Over time, we believe that our AI offerings will create meaningful value for our customers without creating exorbitant costs.
Overall, we are pleased with the performance of the business in the second quarter. We once again demonstrated the power and resilience of our benchmarks businesses while making meaningful progress on strategic growth initiatives across the board. We are energized by the opportunities and new leadership in Market Intelligence, and look forward to delivering a strong second half.
With that, I'll hand it over to Eric to walk through the quarter's financial results and the guidance.
Thank you, Martina, and good morning, everyone. Starting with Slide 15, we delivered another quarter of strong financial results, including 11% revenue growth and 23% growth in adjusted diluted EPS. Our second quarter performance underscores the power of our benchmark businesses, which grew revenues 15% year-over-year on the back of excellent performance in Ratings and Indices.
Revenue grew 11% on both an organic constant currency and all-in basis as M&A and FX had only modest net impacts. Adjusted expenses increased 6%. We tightened our spending with the start of the Iran conflict amid heightened volatility and macroeconomic risk.
This discipline, along with our ongoing productivity savings carried through into the second quarter and enabled us to deliver 200 basis points of year-on-year margin expansion to 54.3% and a 15% growth in adjusted operating profit. Excluding OSTTRA from the prior year period, our second quarter 2026 margin expansion would have been 270 basis points. Finally, adjusted operating profit was up 15%, and our robust return of capital to shareholders through buybacks helped drive EPS further up 23%.
Turning to our divisions with Slide 16. This quarter, Ratings reported a record quarter by revenue, which increased 17% year-over-year. We exceeded our internal expectations for both the quarter and for the first half of the year.
Issuance in the quarter benefited from tighter spreads and favorable market conditions, though growth was also elevated due to a fairly soft compare in the year ago period, driven by last year's tariff uncertainty. Transaction revenue increased 25%, partly driven by high 20% growth in investment grade, supported by tech infrastructure and hyperscaler issuance and M&A transactions in the second quarter. We also benefited from double-digit revenue growth in bank loans, high-yield and structured finance.
Private Markets Ratings revenue increased 60% year-over-year. Non-transaction revenue grew 8%, driven primarily by higher annual fee revenue, very strong growth in Ratings Evaluation Services, or RES, and CRISIL revenue. Adjusted expenses increased by 6%, reflecting higher compensation costs and continued strategic investments in our people, technology and product development, partially offset by productivity.
With a high fixed cost, low variable cost model that we have in Ratings, top line outperformance continues to benefit margins, evidenced by the division's 310 basis points of expansion to 68.5%. Now turning to S&P Dow Jones Indices on Slide 17. Indices reported its 13th consecutive record quarter for revenue and the division surpassed $2 billion of revenue on a trailing 12-month basis.
Revenue in the quarter grew 20%, with excellent growth in both asset-linked fees and exchange-traded derivatives. Revenues associated with asset-linked fees had their fourth consecutive record quarter. We delivered 22% growth year-over-year, driven by equity market appreciation and net inflows into products based on S&P Dow Jones Indices.
Notably, we have our best quarter of net inflows on record. S&P Dow Jones Indices operates the world's largest index business by AUM. And as Martina mentioned, we have built a franchise on trust and discipline.
That reputation was recognized again this quarter, and we're pleased to see that 4 of the 5 ETFs selected by the U.S. Treasury for inclusion in Trump accounts were linked to S&P Dow Jones Indices. Exchange-traded derivatives revenue grew 22%, driven by strong volumes, particularly in SPX. Data & custom subscriptions increased 9%, primarily driven by new business growth in end-of-day contracts.
Adjusted expenses were up 16% year-over-year, driven by investments in growth initiatives and higher compensation costs. Indices operating profit grew 21% and operating margin expanded 90 basis points to 71.5%. Now turning to S&P Global Energy on Slide 18.
Energy revenue grew 3% amid pressure from the challenging environment as well as the sanctions we have called out in recent quarters. The conflict in the Middle East led to continued volatility and uncertainty in the quarter. While the business remains resilient, the Iran conflict, tariffs and extreme volatility have put some strain on Energy subscription renewals, onetime sales and Global Trading Services, or GTS, as Martina mentioned.
We believe these headwinds are transitory, however, and we expect growth to normalize after this year, back to the 6% to 8% average range we outlined at our Investor Day. As we discussed last quarter, we continue to see our customers turn to S&P Global for the data and insights that only we can provide, with our best-in-class data and the recent consolidation of our supply chain assets into Energy, we are in an excellent position to equip our customers with the data and intelligence they need to adjust and remap their supply chains. CERA grew 1% due to strong growth in market insights and analytics, largely offset by declines in upstream and conference and training revenue.
Conference revenue was pressured by headwinds from the lower event attendance due to the Middle East conflict. We are pleased by continued progress on the various aspects of our upstream data transformation. Platts revenue grew 4% in the quarter, driven by strong growth in price assessments as demand for our benchmarks remain resilient.
This was partially offset by declines in GTS. While higher volatility is usually a positive for GTS revenue growth, extreme Energy volatility like we saw in the second quarter, can actually have a dampening effect on the market. We saw this dynamic in the second quarter.
The sanctions we discussed last year had 120 basis points negative impact to Platts and a 30 basis point negative impact to CERA growth in the second quarter. Adjusted expenses grew by only 1%. Our teams remained disciplined through the quarter to support profitable growth during a volatile time period.
The 1% expense growth we realized was driven by higher compensation costs and ongoing investments in growth initiatives, almost fully offset by productivity programs and careful expense management. Second quarter margins still expanded by 70 basis points to 47.5% even in this environment. Turning to Market Intelligence on Slide 19.
On both the reported and organic constant currency basis, revenue grew 6% in the second quarter. We continue to deliver solid growth in Market Intelligence, supported by the ongoing vendor consolidation trend, momentum in key strategic areas, particularly our AI solutions and Kensho LLM-ready APIs and improving capital markets activity. As Martina noted, this has been partially offset by some softness in pockets of Market Intelligence as well as longer renewal cycles with some of our larger, more sophisticated clients.
In Market Intelligence, we have some mature platforms that have a strong customer base with stable growth and potential for meaningful margin expansion. We also have high-growth products like Visible Alpha and our data feeds business that continue to benefit from favorable market positions and their proprietary nature. We've also identified a few smaller products that are facing headwinds and negatively impacting the growth of the division.
As Martina mentioned, we will be prioritizing our investments going forward in favor of our highest growth opportunities, ultimately striving to maximize long-term shareholder value. In the second quarter, subscription revenue increased a solid 6% on both a reported and organic basis, benefiting from growth across the subscription franchises and benefiting from some upfront revenue from a 10-year renewal in the quarter. Volume-driven revenue increased by 9% with growth in market-linked revenue in Corporate Actions and the Primary Markets Group as well as usage-based revenue in ClearPar.
Onetime revenue declined 2% in the quarter, primarily due to declines in the Consulting and Sustainable1 revenue. Kensho Data & Platform revenue increased by 8%, driven by Kensho Data and the With Intelligence acquisition as well as 4% organic growth driven by Data Management Solutions, RatingsXpress, Capital IQ Pro and Visible Alpha. Enterprise Solutions revenue grew 3%, reflecting the divestiture of EDM and thinkFolio.
The business grew 10% organically, driven by data valuations and risk analytics, including Financial Risk Analytics, Lending Solutions and the Primary Markets Group. Market Intelligence's adjusted expenses increased 4% year-over-year, driven by expenses from the With Intelligence acquisition as well as compensation expense and long-term strategic investments, partially offset by the impact from recent divestitures and productivity programs. Market Intelligence delivered 120 basis points of operating margin expansion to 36% in the quarter.
Now shifting to our outlook, starting with Slide 20. With our spin of Mobility Global completed on July 1, we are introducing our guidance for GAAP results. As a reminder, when we report the third quarter as well as the fourth quarter and full year, Mobility will have moved to discontinued operations.
As such, our full year guidance on both a GAAP and adjusted basis now excludes the contributions from Mobility for the whole year. Slide 20 outlines our GAAP guidance. Slide 21 shows our adjusted guidance.
For the reasons I just mentioned, the consolidated guidance we are giving today is not directly comparable to the adjusted guidance we had issued previously, which assumed a full year contribution from Mobility. For all material purposes, however, our division guidance is still comparable to prior guidance. On a consolidated basis, we expect organic constant currency revenue growth in the range of 6% to 8%.
And our prior guidance, including Mobility, also called for 6% to 8% growth, but we have offsetting items. As you will recall, our Mobility business has historically had a higher revenue growth than the business overall, but with modestly lower margins. As such, excluding that revenue causes the overall revenue growth of the business to come down slightly, all else equal, but margins to improve.
The outperformance of Ratings and Indices this year is enough to offset that impact, so we expect our overall growth to be in the same range. Ratings and Indices also have the highest incremental margin across our 4 divisions. We are reinvesting some of that upside in the second half, but we do expect margins to expand more than we had originally anticipated this year.
We now expect consolidated margin ex OSTTRA to expand 75 to 100 basis points this year. Strong revenue growth, additional margin expansion and the additional buybacks, I'll discuss in a moment, allow us to deliver faster EPS growth as well. We expect adjusted EPS in the range of $17.50 to $17.75, representing double-digit growth across the entire guidance range.
For adjusted free cash flow, the Mobility spin creates some nuance. In the first half of the year, including Mobility, the company generated $2.4 billion in adjusted free cash flow. In the second half of the year, excluding Mobility, we expect to generate adjusted free cash flow in the range of $2.9 billion to $3.1 billion.
Seasonality typically drives higher free cash flow in the second half of the year. Now turning to our division guidance on Slide 22. Guidance is based on recast financials, which reflect the movement of 451 Research and Maritime & Trade from Market Intelligence to Energy in all periods.
These products are fairly small in aggregate, so our division revenue growth guidance is comparable to prior guidance for all material purposes. For Ratings, we now expect revenue growth in the range of 5% to 8%, up 1 percentage point from the prior guide. Indices is expected to grow revenue in the range of 12% to 14%, up 2 percentage points from the prior guide.
Our guidance for Market Intelligence and Energy is unchanged from the prior guidance with Market Intelligence expected to grow in the range of 5.5% to 7% and Energy in the range of 4.5% to 6%. Lastly, as Martina mentioned, we are once again increasing the expected share repurchase for the year. As you may have seen, we received approximately $2 billion in a dividend from Mobility Global upon the completion of the spin.
These proceeds will be used primarily for the repurchase of shares with about $500 million for some debt retirement. In the second half, we expect to issue approximately $2 billion in additional debt to fund further buybacks with timing dependent on market conditions. We expect to end 2026 with gross leverage of approximately 2.7 to 2.8x EBITDA, modestly above our target leverage range of 2.0 to 2.5x.
We expect natural deleveraging over the course of 2027 as our EBITDA continues to grow and would expect to be back in the target leverage range by the end of next year. In aggregate, this means we expect to repurchase over $7 billion in shares this year, representing more than 5% of our total market capitalization at the current share price. With that, let me turn the call back over to Mark for your questions.
Thank you, Eric. Operator, we will now take the first question.
Our first question comes from Faiza Alwy with Deutsche Bank.
I wanted to ask about the Kensho Data & Platforms business. I guess as you focus more on the Kensho Data side of the business and maybe lose the distribution and interface layer in some cases, give us some context on how your thoughts have evolved around future pricing and AI monetization, especially if your clients are able to approach data acquisition in a more modular way and kind of limit some of the data sources.
Martina Cheung
President And CEO
Faiza, it's Martina here. Thanks much for the question. Maybe I would start with just one thing that didn't change about our organization announcement, and that is that we maintain the direct relationships with the customers.
So our contracts are directly with customers. And then consistent with our flexible delivery strategy, we will continue to distribute our contents, whether it is through our own platforms, through third parties and through our traditional feeds distribution channels. Maybe one point I would make about the role of Kensho coming into Market Intelligence is that it is an acceleration and an amplification of what Kensho has been doing so brilliantly when it wasn't aligned with Market Intelligence.
So for example, the team will continue to work with the MI team even more closely on development of very innovative capabilities. We have great building blocks here. We started with the LLM-ready APIs.
We moved on to the adaptive retrieval that you saw us announce this week, and we are making great progress with the MCP applications. And so we'll continue that. The team will work closely as well with the Platform team to continue to implement those great capabilities on the Desktop as well.
And I would say that the other thing that's really great about having the teams together is that Kensho Labs, which we launched last year, has really gotten tremendous momentum and traction and has been a true differentiator for us as we've been having these AI use case conversations and bringing that really close together with the business, being very close to the MI commercial team. These are ways in which we think we can really scale the impact of Kensho Labs. Eric, do you want to talk about monetization?
Faiza, the monetization approach is multifaceted. First, what we've continued to see is just a dramatic uptick in data usage by our clients through their AI calls. The MCP Connectors are up to 500 clients.
Data usage is up 5x relative to the prior quarter and the prior quarter was up 5x prior to that. And so there's a series of ongoing discussions that we have with clients to how do we economically share in that. They get enormous benefits.
And really, it's a mix of some consumption pricing, some additional data set pricing. And we feel quite comfortable that the revenues are beginning to come through and along with higher retention, higher sales and so forth, bode well for our businesses.
Our next question comes from Manav Patnaik with Barclays.
Martina, thank you for rehashing kind of the strategy upfront in the call. Clearly, it sounds like, especially in MI and Energy, you're still refining the strategy in kind of how you want the segments to look. So I'm just curious, usually, in that situation, we get more disclosure by segment as opposed to kind of consolidating some of the stuff that you did.
So does that imply that you're still trying to reevaluate exactly how those businesses might look with all the different components? I was just curious on your thoughts there.
Martina Cheung
President And CEO
Manav, thanks for the question. I would say that what we're aiming for here is simplification in MI and in Energy. The strategies for both divisions have not changed.
This is really about how I think about it as basically wrapping ourselves more closely around our customers as well as giving the teams who are operating very similar platforms, for example, in MI, an opportunity to move more quickly and grow more profitably by being able to sort of develop the capability once and use it many times. And so this is really about stronger and more efficient execution against the strategy. In Energy, for example, look, we just see such a tremendous opportunity in Energy in the trillions of dollars that are being spent in AI infrastructure, in the power grids that are required to support that AI infrastructure.
And we are executing the changes that we have to enable our clients to get more clarity on the supply chains they need to develop that infrastructure as well as the forecasting models, whether it's supply chains or even with data centers that we'll be able to offer. And so no change in strategy, but I would say more closely wrapping ourselves around the clients as we move forward. Thanks for the question.
Our next question comes from Surinder Thind with Jefferies.
Eric, Martina, I guess when we think about the margin expansions that we're seeing at this point, how are you thinking about balancing that against the opportunity to maybe accelerate investment and the trade-off? Like can you do a lot more? Or are you kind of at the level that you see reasonable for what you can kind of, I guess, absorb or what clients can absorb in the current environment?
Surinder, it's Eric. We see quite a bit of opportunity with our clients. We have our core clients in the financial institutions area.
We continue to expand to across corporate clients. Part of the alignment of our supply chain businesses are for that effect to kind of widen the base of clients that we serve and continue to develop new and refreshed and updated and in some cases, leading-edge products for them. All that is consistently and relatively easily funded by productivity.
You've seen us describe productivity in the EDO. We've got productivity programs that I referenced in MI, in Energy and Ratings and Indices. And every one of those frees up resources, whether they're people or technology or otherwise to reinvest and build those new products and services.
And so it's quite a virtuous circle and cycle and allows us to continue to grow as we'd like to do.
Our next question comes from Toni Kaplan with Morgan Stanley.
I wanted to go back to MI to talk about -- a little more about the reorganization. Should we expect any disruption from the realignment? And you talked about some parts of the portfolio facing headwinds.
Are you able to cumulatively size them? And would we expect that you look to sell those or divest those? Or are you going to try to fix those areas?
Martina Cheung
President And CEO
Toni, it's Martina. Thanks for the question. From an MI perspective, I don't expect disruption.
If anything, I expect greater simplicity and continuity in how we're doing things. So I'll give you a couple of examples. We moved the Pricing and Reference Data into Enterprise Solutions, and that really simplifies our go-to-market around Private Markets.
The Pricing and Reference Data is very closely aligned with the lending suite that we have there as is the valuations service that we offer. Another example would be the great progress that we've made with Kensho Labs that was really in partnership with the CCO, and we see such an opportunity here to extend that to more of the clients. And so that's one major part of the rationale for bringing the Kensho team that we've selected into the Market Intelligence division and having the Kensho Data vertical stood up essentially.
And that really brings that innovation from the Kensho team very, very close, in fact, much closer to the customers also. So I think I would look at this as coming from a position of strength and allowing ourselves to really unlock the full value of our product and our data. The other point to make here is with respect to the softer products.
These are smaller products, subscale, some consulting services, for example, some of the sustainability products. We're not talking about our strategic products like WSO or ClearPar, for example. And where there are cases where we may see cyclical impacts and growth could come back in those products, we're going to watch that very closely.
And there may be opportunities otherwise if we don't see growth coming back, and we may think that we have to invest a little bit more, we may make some strategic choices there. But overall, this is coming from a position of strength and in a way that allows us to operate much more effectively around the customer. Thanks for the question.
Our next question comes from Curt Nagle with Bank of America.
Great. Just one quick one for me. I think, Martina, you mentioned that you're seeing some elongated sales cycles than your largest -- larger clients.
Maybe just unpack that, what's driving it? Maybe what changed? Is it budget environment?
Or just what's behind that comment?
Martina Cheung
President And CEO
Curt, thanks much for the question. Look, we view it actually as a positive because it means that our clients want to do more with us. And as we've been going through these renewal cycles, we're having quite substantial conversations around use of AI and use of our IP and data for AI.
And the conversations are getting a little bit complex in some cases, and that's because we are absolutely intent and focused on protecting our IP over the long term. And so we've seen some elongation as a result of that. I look at it as more of a sort of a baselining with our customers around the terms and conditions that we're putting forward.
And this is something that's more of a sort of a near term impact, not something that's going to impact us over the medium or long term. Thanks for the question.
Our next question comes from Alex Kramm with UBS.
I actually want to ask about the Index business, and this may be a little bit in the weeds and detail, so bear with me. But you have that licensing HEG relationship with CBOE. And by my numbers, this is definitely more than $200 million a year.
And there's been more investor concerns around more from their side about that renewal that's coming up in a few years. Now just wondering what your latest thoughts are on this? Because again, if you look at that relationship, some people would suggest that you can probably double those fees.
So that could be nicely material and accretive to your business. So just wondering how do you think about that relationship? Other exchanges have actually wondered about getting that license from you.
So maybe talk about if you could give it to multiple exchanges or maybe shop it around because, again, it could actually be nicely accretive to your bottom line.
Martina Cheung
President And CEO
Alex, it's Martina. Thanks for the question. Look, we don't comment on our partners or the conversations that we would have with any of our partners.
But thank you for the question.
Our next question comes from Scott Wurtzel with Wolfe Research.
Just wondering if you can talk about just the overall ACV bookings growth within Market Intelligence during the quarter. And then building off of that, how you feel about the trajectory of [ OCC, subscription growth ] heading into the back half of the year?
Scott, it's Eric. We feel like we delivered solid revenue growth in MI this quarter, 6% OCC revenue growth, 6% subscription revenue growth. ACV was also in that 6% range.
And so we continue to do well. We had a good first quarter, a good second quarter and we have every intention delivering on our guide for the full year and continue to build from there.
Our next question comes from George Tong with Goldman Sachs.
Can you elaborate on trends that you're seeing in private markets across the company? And how much private markets contributed to revenue growth in both Ratings and Market Intelligence?
George, it's Eric. We've had quite a bit of success in private markets as you've seen in the underlying numbers in our prepared remarks. In Ratings, we described it as 60% up, which is quite strong and continues an area of strength and something that we expect to continue in the coming quarters and coming years.
And then in MI, we're particularly well positioned. As we integrate With Intelligence, we've seen very strong growth across the board, both in the acquisition and in our core business and expect that to continue. And so this is really an area that we've built around, and we expect to continue to grow organically and really lead the industry in.
Martina Cheung
President And CEO
And George, I would just add two points to that. The first is that we still see really good momentum in AUM inflows into private market funds. And that demonstrates a continued appetite from investors for exposure to the asset class.
And then maybe the second point that I would make is that notwithstanding all of the noise that we've heard in the media and otherwise around private markets, our view and in fact, our experience and what we're seeing is that this actually increases the demand for transparency, whether it's through benchmarks or data and analytics. Thanks for the question.
Our next question comes from Ashish Sabadra with RBC Capital Markets.
I was just wondering if you could talk about the puts and takes on issuances in the back half of the year? Any thoughts around how do we think about issuance in 3Q versus 4Q and the same thing on the Ratings revenues?
Ashish, it's Eric. It's really a continuation of some of what we've seen in the first half of the year. We've seen M&A activity pick up, and that's been a tailwind.
We've seen hyperscaler issuance. You've seen us book a very significant billed issuance in the first half. We expect a good amount in the second half.
We've seen some refinancings come through, notwithstanding the change in the rate environment, and we expect that to continue. All that said, we just see very strong refinancing walls in the coming years. And we see a strong trajectory in the business.
The one thing I will note is that the year-on-year compares in the individual quarters in the second half of this year will be lower just because last year started low and ended high. So you'll just have a patterning there, but the sheer volume of issuances and revenues on a per quarter basis continue to move along strongly during the year.
Our next question comes from Jeffrey Silber with BMO Capital Markets.
Just to continue the thought from the last question, let me just play devil's advocate here. The market seems to be pushing back on some of the hyperscalers in terms of the amount of cap spending that they might be doing. Are you expecting any potential slowdown from debt issuance because of that?
And also, if we do see interest rates going up, would you be expecting the same thing?
Martina Cheung
President And CEO
Jeff, it's Martina. Let me take that question. So maybe a couple of things.
The first is when we came to you earlier this year with the full year assessment, we said, look, we look at the announced CapEx, and we discount that for what we think will get debt financed and then we make assumptions around that as well. And so we are already tracking well ahead of where we thought we would be for the full year through the first half. But we've also said to you that our range is about $250 billion to $300 billion for the full year, which basically says not too much more hyperscale issuance relative to the first half and the back half of the year.
Now that being said, we are always prudent and thoughtful about how we think about the issuance in areas like this. And from our perspective, we've seen that the market continues to absorb these types of deals. And we've also seen the hyperscalers do many different types of structures, including issuing outside of the U.S. as well, where there may be additional appetite.
So all in all, I would say we have taken a very prudent look at the rest of the year for hyperscale issuance.
Jeff, it's Eric. I'd just add that we obviously have a guidance range for the full year, and it's got some width to it, and that's because of some of the factors you mentioned, the global economy, the conflicts in the Middle East, interest rate levels may move, credit spreads may widen or stay where they are. And so there's a range there, and I just want to, I think, absolutely be conscious of that.
Notwithstanding that, we continue to focus on execution and managing and working on what we can control.
Our next question comes from Craig Huber with Huber Research Partners.
Just wanted to focus, if you could, please, on how AI is benefiting you on the efficiency side, the cost side of your business within Market Intelligence. Can you quantify a little bit further just within that division, how much it might be helping you on an annualized basis and how that may help you long term to increase margins in that division?
Craig, it's Eric. There's actually a wide range of positive productivity effects and programs that we've had in MI, but we've also had them in -- across the various divisions. I think the earliest one was around our EDO, our Enterprise Data Office, which is a primary provider of data through MI.
And there, we're on track to deliver 20% productivity gains on a base of $0.5 billion. So you can just see the kind of scale at which we operate. More recently, we've begun to roll out programs around software development life cycles, moving into product development life cycles that we see as quite an opportunity in the -- in Energy, we've focused on researchers and the researching process.
And we've actually found that, that actually has parallel benefits in MI and then actually in Ratings with the analytical groups. And so there's quite a bit of areas and tooling that we've been able to put in place. And so that's why we see the margin guidance being as it is, why we expanded it, to be honest, this year because we've accelerated some of those efforts.
And we expect that, that productivity gain from AI and more broadly from our other programs will continue to build in the coming years, lead to more reinvestment and thus deliver on the growth that we'd like to deliver on.
Our next question comes from Andrew Steinerman with JPMorgan.
Eric, on GTS in Energy, I feel like we don't hear that much about it. You obviously mentioned it today because of end market volatility. So just tell us a little bit more about how GTS revenues are impacted by volatility.
And then this is a very small technical point. I thought I heard you say that the -- again, within Energy, the upstream software business, the divestiture is now in your guide. Is that the case?
And is that new?
Andrew, it's Eric. Thanks for the questions. On GTS, the Global Transaction Services business, is really one that monetizes revenues as energy prices and trading activity accelerates or decelerates as we find what you typically see as volatility increases, you get more trading.
And then at some point, if there's heightened volatility, folks pull back and sit on the sidelines and tend to not trade as much. And that's what it -- how that plays out. In terms of upstream, we now have -- we can see the likely close of the upstream software division in the -- during the third quarter.
And so at this point, we've tried to give you the -- we've updated the guide on an OCC basis with that in mind, just that you could track our performance and allow us at the same time to focus on organic constant currency growth, which really is what -- which really is our focus. Thanks very much.
Our next question comes from David Motemaden with Evercore ISI.
Just had a question on the Market Intelligence subscription revenue growth. Eric, I believe you called out some upfront revenue from a 10-year renewal that benefited this quarter. I was wondering if you could size how much that helped the MI subscription revenue growth?
And then just how you're feeling on that building from that level throughout the rest of the year?
Subscription revenue growth, and saw a good performance in the 6% range the first 2 quarters in a row in MI. And obviously, we track that in our other divisions as well, with -- growth would have been slightly lower had it not been for that software renewal. But if you remember, there's always going to be lumpiness in software renewals.
And what's particularly striking in this case is we have a client who wanted to sign a 10-year contract, right, not a 3-year, not a 5-year, but a 10-year contract. And it gives you a sense of how valuable and institutionally important our software products are for our clients and bodes well for our progress. And then in terms of the full year, I think our guide is in a good place.
We feel comfortable with it. We felt comfortable with it at the beginning of the year. We're now midyear, we feel comfortable with it, and we'll continue to plan on executing against that.
Our next question comes from Jeff Meuler with Baird.
I'd be curious on your views on how MCP adoption will impact the trend toward vendor consolidation. You're describing it as an ongoing trend. I think you're well positioned with proprietary content either way.
But I would think clients having an AI interface on their end may make it easier to leverage data feeds for multiple vendors. So just if you could help me with that.
Martina Cheung
President And CEO
Jeff, it's Martina. Maybe just to start on this one. Look, I would say this is very much for us, one of the reasons why we laid out our strategy as being one of flexible distribution.
Firstly, we benefit tremendously from the demand for our proprietary content and our data, which, in aggregate, is quite unique relative to any other player in the market. And for that reason, we are in a great position to take advantage of vendor consolidation opportunities. Maybe a couple of deals that I would highlight in the quarter.
One was a very large strategic deal where we did a renewal for Desktop feeds, Visible Alpha and AI-ready data. And that actually resulted in an over 20% uptick over several years. And so we were incredibly pleased with that because the positioning of our products was really alongside that large firm's own internal AI systems that they had developed as well as third parties that they are using.
So that's one example. I would say also, look, the MCP applications, the MCP servers, these are all building blocks that help us with additional opportunities for increasing revenues in our data areas. So think about the building blocks, starting with the LLM-ready APIs that allows our customers to do more structured Q&A or prompting against our data, one data set at a time.
The latest Adaptive Retrieval product that we launched was previously known as Kensho Grounding. And that allows our customers to really ask very complex questions and set multistep tasks with the grounding agent and allows our customers to do a whole lot more across a multitude of our data sets. And then with our MCP applications, we decompose parts of our Desktop and allow our clients to basically render those capabilities within their own systems or third-party systems.
And we're getting incredible feedback on all of these. I think what's really encouraging with this is that we're seeing net new licensing opportunities with our existing clients, but we're also seeing new clients come to us. So about 15% of the clients that are licensed for our LLM-ready APIs, for example, are actually net new clients or clients that are returning to S&P that had previously been clients with us.
So we see this as an incredible opportunity across the board, whether it's clients who want us to invest further in our traditional areas or want to do more business with us and buy more data sets with us through MCPs and other new distribution channels. Thanks for the question.
Our next question comes from Christian Bolu with Autonomous Research.
I had a question really on AI infrastructure. It's clearly a major theme across capital markets. So can you talk through your long-term strategy for compute and data center infrastructure as an asset class?
And as you think about commercializing compute benchmarks, how are you thinking through building that through the S&P Dow Jones JV, where you already have CME as a partner and they've been an early mover in compute futures?
Martina Cheung
President And CEO
Christian, it's Martina. Thanks much for the question. I think part of this, we addressed a little earlier in the call with the questions around hyperscale issuance, for example, with data centers and AI infrastructure as an asset class in Ratings.
And there, as we've said, we don't have heroic assumptions for the balance of the year around that. And you're right, there probably are some really interesting opportunities for us in aggregate with compute and data center from an index or a benchmark perspective. This indeed is one of the reasons why we announced the acquisition of datacenterHawk.
Today, for example, that combines, on the datacenterHawk side, very specific proprietary data center intelligence, including pricing, supply chain site selection and details like that with the world-leading forecasting models that we have in 451 Research. And so, look, we will be paying attention to how demand is evolving for benchmarks in this area. It's very nascent, and it's something that we feel we can add some value to for investors.
Thanks for the question.
Our next question comes from Jason Haas with Wells Fargo.
On the 1Q call, you said that you were expecting an acceleration in MI subscription growth, and it doesn't look like it showed up this quarter. So I'm just curious what was the reason why? And are you expecting that MI subscription growth to accelerate in future quarters?
Jason, it's Eric. As we covered in some of our prepared remarks, we've had solid performance in MI. We did have a couple of smaller products that are lagging, consulting, sustainability that we called out.
And so those tend to have some impact on results. I think in general, we're pleased with what we've seen in terms of execution, whether it's OCC revenue growth in MI was at 6%. Subscription was at 6%.
Net retention rates are continuing to tick up. And then with all that, we've seen very good expense discipline and productivity programs, which has helped us deliver double-digit earnings growth through the first half of the year. And so we just see this strong execution performance delivering.
And then as we continue to refine with Kensho Data & Platforms and so forth, that over time will help support and deliver on the growth. But for now, we're comfortable with our guide for the year that we started with and are on track to deliver on that.
Martina Cheung
President And CEO
And Jason, maybe just a final point for me on that. Look, you've seen us be very disciplined stewards of the portfolio in the past in MI, and we're going to continue to do that going forward as well. This is going to be something that we'll consider if we see opportunities where subscale products will create greater value outside of our portfolio.
Thanks for the question.
Our next question comes from Sean Kennedy with Mizuho.
So in Ratings, for your M&A-related issuance outlook, I believe you said up double digits for the year. I was wondering how M&A-related issuance has progressed so far this year and how you're thinking about its growth in the second half and any visibility there?
Martina Cheung
President And CEO
Sean, thanks for the question. We've seen quite a healthy pipeline from an M&A perspective. And obviously, there have been some very large deals announced in the market.
But the M&A we've seen actually really spans across multiple sectors. It's not necessarily focused in one sector. And we think thematically, that continues through the year, which is why we have mentioned double-digit growth expectation for the full year.
Thanks for the question.
We will now take our final question from Owen Lau with Clear Street.
I want to go back to private market. Could you please add more color on like new products and potential catalysts in this area? I mean, if you look at company valuation, it's not low.
And you also mentioned AUM flowing into private markets also go up. It doesn't look like the activity actually slowed down there, but it just appears that it's hard to find a good way to monetize it or expand the revenue contribution more. What does it take to change that trajectory?
Martina Cheung
President And CEO
Owen, it's Martina. Thanks for the question. We mentioned that last year, we saw a base of about $600 million in private markets revenues across the organization.
So for us, it's quite a healthy base. And we've seen very strong growth across the organization in private markets driven by Ratings. And so maybe a couple of points I would make.
First, in addition to the inflows, what that essentially does is create a greater appetite for transparency, for information, for benchmarks. So we've seen lots of product launches within Index, for example. The team has launched with Lincoln some private credit indices as well as broader private markets indices covering the S&P top 50 private stocks, for example.
We've also seen incredible innovation across the Market Intelligence teams, including the partnership that we have with Cambridge Associates and Mercer, where the teams have launched several data sets into the market, mapped to the new taxonomy as well as mapped to our market-leading LoanX IDs. And so these are just some examples of how we're monetizing and growing in this space, and we continue to be very constructive about private markets opportunities going forward. Thanks for the question.
Well, in closing, we've had a strong second quarter with record level performance in 2 of our benchmark businesses, the launch of Mobility Global and really growing traction in our AI-enabled client solutions. None of this will be possible, of course, without the talent and dedication of our people. Our mission of Advancing Essential Intelligence continues to be highly relevant for our clients, and I'm confident we remain well positioned to deliver long-term value.
Thank you for joining the call today.
That concludes this morning's call. A PDF version of the presenter's slides is available for downloading from investor.spglobal.com. The replays of the entire call will be available in about 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.
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