NASDAQ, INC. Q4 FY2025 earnings call

Management Statement and Operational Highlights

• Overview: 2025 was an excellent year for Nasdaq with net revenue surpassing $5 billion and solutions revenue exceeding $4 billion. Key initiatives included integrate (over $160M in cost reductions), innovate (AI-enabled products rolled out), and accelerate (25 cross-sell wins in financial technology).
• Strategic Pillars:
  • Integrate: Exceeded efficiency program net expense target with over $160M in cost reductions, ending the year with gross leverage of 2.9 times.
  • Innovate: Embedded AI across the business, launched new AI-enabled products, and drove industry efforts on digital assets.
  • Accelerate: One Nasdaq strategy delivered 25 cross-sell wins in financial technology, with cross-sells accounting for over 15% of the financial technologies sales pipeline.
• Division Highlights: Capital Asset Platforms had 10% revenue growth, FinTech saw 11% growth, and Market Services achieved 17% growth in annual net revenue.

Segment Performance

• Capital Asset Platforms: Quarterly revenue was $572 million, up 12%, with annual revenue at $2.1 billion, up 10%. Data and Listings revenue increased 7% in the quarter with ARR up 8%. Index revenue saw a 23% increase in the quarter, with net inflows of $99 billion over the last twelve months, including a record $35 billion in the fourth quarter.
• Financial Technology: Q4 revenue was $498 million, up 12%, with annual revenue at $1.85 billion, up 11%. Financial Crime Management Technology grew 24% in the fourth quarter, Regulatory Technology had 10% growth for the year, and Capital Markets Technology saw 9% growth over the year.
• Market Services: Q4 net revenue was $311 million, a quarterly record, reflecting 14% growth. For the year, net revenue was $1.2 billion, an annual record with 17% growth, driven by elevated volumes in US equities and options.

Guidance

• 2026 outlook includes an active new issuance year supported by Fed cuts and a healthy pipeline of late-stage private companies. The index franchise is expected to continue strong performance with record net inflows and ETP AUM. FinTech is positioned for continued growth with organic focus. Operating expenses guidance for 2026 is $2.455 billion to $2.535 billion, and the tax rate is expected to range from 22.5% to 24.5% due to the absence of one-time items.

Risks

• Volatile trading dynamics and sustained geopolitical tension.
• Ever-changing regulatory landscape.
• Variability in revenue from enterprise client implementation timings, particularly with professional services fees.
• Impact of divestitures and foreign exchange fluctuations on financial results.

Q: Recently received SEC approval for expanded options expirations in some MAG seven names. What's the expectation for the options market overall and Nasdaq's benefit?

A: Excited about expanded options expirations, sees potential to drive volumes and participation. Focused on stocks launched and will provide updates as volumes develop.

Q: Strong growth in equity options volumes, is it driven by retail strength and structural shift?

A: Growth in equities and equity options volumes is due to broadening investor base, including retail and institutional, and increased ETF options overlay. Sees structural shift in investor interest in public equities.

Q: Data and listing segment pipeline and pace expectations?

A: Momentum in new issuances built in 2025, with investor interest in public markets. Excited about risk capital available and potential for more companies to join Nasdaq.

Q: Financial Crime Management outlook, tracking mid-twenties growth?

A: Enterprise deals had back-weighted ACV, professional services fees cause quarterly variability. Pipeline of opportunity in 2026 is strong with continued client engagement.

Q: Thoughts on owning an ATS and M&A in off-exchange space?

A: Encouraged by SEC focus on innovation, but exchange rules limit innovation. Will engage with SEC and look for opportunities to get involved in off-exchange space if rules change.

Q: FinTech medium-term growth, acceleration in 2026?

A: Fourth quarter is largest sales quarter for fintech, but pipeline remains strong with client engagement. Excited about ongoing performance and innovation in the business.

Q: Proxy processing and potential role for Nasdaq?

A: Focus on proxy policy reform and modernization, engaging on behalf of listed clients to streamline technology and reduce pain points for public companies.

Q: Tokenization of equity securities, integration with existing infrastructure?

A: Focus on investor protection, issuer choice, and market integrity. Engaging with DTCC and key players to bring tokenization while maintaining market infrastructure.

Q: M&A thoughts broadly, organic growth focus?

A: Really focused on organic growth and innovation, but will evaluate potential bolt-on acquisitions in build versus buy orientation.

Q: Prediction markets and Nasdaq's aspirations?

A: Evaluating prediction markets based on regulatory environment and risk tolerance, considering event options within the options business and technology support through other parts of the business.

Q: Tokenization risks and competition between on-chain and traditional?

A: Concerned about splitting liquidity and competition, but focused on bringing liquidity together, investor protection, and engagement with regulators.

Q: Tokenization benefits in 5 years, impact on Nasdaq?

A: Potential for capital efficiency, 24/5 trading, and increased addressable market. Long-term bet on opening aperture for investors and providing fintech services to clients.