What is an income statement waterfall?

An income statement waterfall is a bar chart that walks from total revenue down to net income, with each step showing how much a cost or tax line removes (or adds). Subtotals — gross profit, operating income, pre-tax income — are anchored to zero so the cascade reconciles exactly to the bottom line.

How much of Moody's (MCO) revenue becomes net income?

For TTM through Q2 2026, Moody's turned $8.16B of revenue into $2.8B of net income — a net margin of 34.3%. The waterfall shows where the rest goes: cost of revenue, operating expenses, non-operating items, and taxes.

What are Moody's (MCO) gross, operating, and net margins?

For TTM through Q2 2026, Moody's reported a gross margin of 71.9%, an operating margin of 45.1%, and a net margin of 34.3%. Each subtotal in the waterfall corresponds to one of these margins.

Why does Moody's (MCO) have such a high (or low) gross margin?

Gross margin (gross profit ÷ revenue) reflects how much of each revenue dollar remains after direct production costs. Capital-light software and platform businesses often show gross margins above 60–80% because their cost of revenue is mainly hosting and support. Hardware, retail, and commodity businesses show lower gross margins because raw materials and manufacturing costs are significant. The waterfall makes this visible at a glance — the size of the "Cost of Revenue" bar relative to Revenue is the gross margin complement.

What is the difference between gross, operating, and net margin?

Gross margin = (Revenue − Cost of Revenue) ÷ Revenue. It measures production efficiency. Operating margin = Operating Income ÷ Revenue. It adds operating expenses (R&D, S&M, G&A) and measures the profitability of core operations. Net margin = Net Income ÷ Revenue. It also includes interest, other income/expense, and taxes, and represents the shareholder take after everything.

Moody's (MCO) Income Statement Waterfall

Revenue

$8.16B

Gross Margin

+71.9%

Operating Margin

+45.1%

Net Margin

+34.3%

Income statement waterfall for Moody's (MCO) — TTM through Q2 2026

Net income: $2.8B

Margin breakdown for Moody's (MCO) — TTM through Q2 2026

Line item	Amount	Running total
Revenue	$8.16B	$8.16B
Cost of Revenue	-$2.29B	$5.87B
Gross Profit	$5.87B	$5.87B
Operating Expenses	-$2.19B	$3.68B
Operating Income	$3.68B	$3.68B
Other Income / Expense	-$85M	$3.6B
Pre-tax Income	$3.6B	$3.6B
Income Tax	-$797M	$2.8B
Net Income	$2.8B	$2.8B

Revenue$8.16B
Cost of Revenue-$2.29B
Gross Profit$5.87B
Operating Expenses-$2.19B
Operating Income$3.68B
Other Income / Expense-$85M
Pre-tax Income$3.6B
Income Tax-$797M
Net Income$2.8B

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