S&P Global's AI Transition Faces Q3 Moment of Truth Oct. 27: Kensho APIs and $11T Refinancing Wall Need to Outrun Sales Bottlenecks

S&P Global is set to release its third-quarter financial results on October 27, marking its first complete quarter after the recent corporate restructuring. The performance of the company will hinge on the contrasting trends between the increasing usage of its Kensho APIs and the stagnation of renewals in its Market Intelligence segment. This will be crucial in assessing whether the company's advancements in artificial intelligence are translating into substantial revenue.

In the previous quarter, S&P Global reported revenues of $4.146 billion, surpassing analyst expectations. However, its adjusted earnings per share (EPS) of $4.83 fell short of the consensus estimate of $5.0027, resulting in a 3.52% drop in share price on that day. Despite these challenges, the company's Ratings division achieved record revenue, boosted by a 17% increase driven by a 25% rise in transaction revenue, while its Indices segment saw a growth of 20%. In contrast, Market Intelligence only managed a modest growth rate of 6%.

Following this performance, S&P Global raised its guidance for Ratings and Indices and increased its share buyback target for 2026 to over $7 billion. The company also completed the spin-off of its Mobility division on July 1. Over the last month, shares have risen by 10.78%, reaching $450.21, although they are still down by 8.84% for the year.

The financial outlook is complicated by the fact that the previous year's figures included Mobility, which obscures the true extent of recent declines. As S&P Global approaches its Q3 report, the key factors will be the growth in Kensho usage and the timing of renewal cycles for its services.

There has been significant momentum in AI adoption, with the number of customers utilizing the company’s large language model (LLM)-ready APIs surpassing 500, a 70% increase from the previous quarter. Additionally, the volume of API calls has surged to more than five times the levels seen in the first quarter. S&P Global has also expanded its AI Data Portal to include Credit Ratings and Visible Alpha data. However, the challenge lies in converting this increased usage into revenue. While Kensho Data is growing at a healthy single-digit to low double-digit rate, revenue from Platforms is only growing in the low single digits.

A critical constraint is emerging in the sales process, as larger clients are extending their renewal timelines while they negotiate terms related to AI utilization and intellectual property protection. Martina Cheung, a company executive, has indicated that this is a temporary phenomenon, but it poses risks to the company’s projected Market Intelligence growth rate of 5.5% to 7%.

Despite these hurdles, the Ratings division remains a primary revenue driver for S&P Global. Management anticipates that approximately $11 trillion in rated debt will require refinancing over the next four and a half years, with expectations of $250 billion to $300 billion in issuance from hyperscalers this year. However, the company has cautioned that comparisons in the second half of the year will become more challenging. Observing whether billed issuance can maintain mid- to high single-digit growth for the full year will be essential.

For the full year, S&P Global has set its adjusted EPS guidance in the range of $17.50 to $17.75. The stock has historically reacted negatively to earnings misses, with two recent misses resulting in an average decline of 6.61% on the day of the announcements. If management can demonstrate that increased Kensho usage is generating new revenue and that the delays in renewals are beginning to ease, the narrative of the company post-spin could remain intact. Conversely, if Market Intelligence experiences further slowdowns, Ratings may have to shoulder the burden of the company's overall performance.

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