NASDAQ, INC. Q3 FY2025 earnings call

Management Statement and Operational Highlights

• Overall Performance: Nasdaq achieved $1.3 billion in net revenue, a 11% year-over-year increase. Solutions quarterly revenues exceeded $1 billion for the first time, up 10% YOY. ARR grew 9% to $3 billion. Operating income was $732 million, up 16%, and diluted EPS grew 19%.
• Division Performances: Capital Access Platforms had 8% revenue growth and 6% ARR growth; Financial Technology saw 13% revenue growth and 12% ARR growth; Market Services delivered 13% net revenue growth.
• Business Highlights: Strong data and listings with U.S. and European listings activity; data business growth with enterprise license signings; index franchise growth with record net inflows and ETP AUM; Workflow and Insights developments including eVestment partnerships; Financial Technology strong growth across subdivisions like Financial Crime Management and Regulatory Technology; Market Services elevated volumes in U.S. options and equities.
• Innovations: Submitted a filing to the SEC to enable tokenized equity trading; AI implementation in solutions with over 800 clients using Boardvantage AI tools and Verafin's Agentic AI; partnerships such as with the CFTC for market surveillance and with BioCatch for anti-financial crime.

Segment Performance

• Capital Access Platforms: Generated $546 million in revenue, a year-over-year increase of 8%, with annualized recurring revenue (ARR) growing 6%. Data and Listings revenue was up 6% with ARR up 7%. Index revenue rose 13% in the quarter. Workflow and Insights had revenue up 5% with ARR growth of 4%.
• Financial Technology: Delivered $457 million in revenue, a year-over-year increase of 13%, with ARR growth of 12%. Financial Crime Management Technology saw revenue grow 22% with ARR growth of 18%. Regulatory Technology had 9% revenue growth and 11% ARR growth. Capital Markets Technology experienced 12% revenue growth with ARR up 10%.
• Market Services: Reported net revenue of $303 million, reflecting a 13% growth driven by elevated market-wide equities volumes, record U.S. option industry volumes, and increased volumes in index options trading.

Guidance

• Financials: Net revenue for Q3 was $1.3 billion, up 11% YOY. Solutions revenue exceeded $1 billion for the first time, up 10% YOY. ARR reached $3 billion, up 9% YOY.
• Expenses: Operating expense updated to a range of $2.305 billion to $2.335 billion. Tax guide lowered to 22.5% to 23.5% due to discrete items. Free cash flow strong, with $516 million in Q3 and $2.1 billion over 12 months.
• Division Outlook: Capital Access Platforms expected at or slightly above the high end of the range; Financial Technology business expected to end the year just below the range.

Risks

• Macroeconomic: Global uncertainty impacting IPO timelines and some sectors.
• Implementation: Delays in enterprise solutions implementation affecting financial technology growth.
• Regulatory/Market: Regulatory dynamics and market conditions affecting digital asset and crypto initiatives, as well as variability in enterprise solution ARR growth due to implementation cycles.

Question and Answer

• Q: Michael Cho from JPMorgan asked about Nasdaq's presence in digital assets and crypto.

A: Adena Friedman mentioned fintech solutions, trade surveillance technology, collateral management POCs, and index products with crypto assets, emphasizing the broad-based opportunity across the franchise.

• Q: Michael Cyprys from Morgan Stanley inquired about tokenization.

A: Adena Friedman explained the proposal to allow tokenized securities trading, with an order-by-order flag for tokenized settlement, collaboration with DTCC, and benefits like collateral mobility and capital efficiencies.

• Q: Benjamin Budish from Barclays asked about OpEx pace.

A: Sarah Youngwood and Adena Friedman stated the trajectory is consistent with medium-term outlook, with investments in technology and product roadmaps factored in, and efficiency program aiding funding.

• Q: Alex Kramm from UBS asked about Fin crime business.

A: Adena Friedman discussed SMB growth, enterprise implementation variability, and the BioCatch partnership, noting strong SMB sales and upcoming AI capabilities driving future growth.

• Q: Daniel Fannon from Jefferies asked about Capital Markets Technology.

A: Adena Friedman highlighted strong demand for connectivity services, Calypso demand, and growth in Latin America, with robust sales momentum.

• Q: Alexander Blostein from Goldman Sachs asked about AI risks and opportunities.

A: Adena Friedman spoke about AI focus on product development, client experience, data differentiation, and Agentic AI delivering ROI to clients across platforms.

• Q: Brian Bedell from Deutsche Bank asked about AI solutions and revenue synergy.

A: Adena Friedman mentioned 30 cross-sells since Adenza deal, 15% pipeline from cross-sells, and AI aiding cross-sell efforts and upsells.

• Q: Ashish Sabadra from RBC Capital Markets asked about BioCatch partnership.

A: Adena Friedman explained BioCatch's pre-transaction signals integration, Verafin as a platform, and partnership expanding capabilities for bank clients.

• Q: Owen Lau from Clear Street asked about tokenization.

A: Adena Friedman reaffirmed U.S. equities market strength, tokenization as a choice for investors, and partnership with DTC for post-trade efficiency.

• Q: Jeffrey Schmitt from William Blair asked about Axiom to Calypso cross-selling.

A: Adena Friedman discussed pre-existing data connector between Axiom and Calypso, holistic client conversations, and expanding cross-sell opportunities across solutions.