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    NDAQ
    Earnings call· Mar 2025(Q1 FY25)

    NASDAQ, INC. NDAQ

    Apr 24, 2025 Source

    Executive summary

    Nasdaq Q1 FY25 — Double-Digit Growth Across All Divisions and Expanded Efficiency Program

    Nasdaq delivered a strong Q1 FY25 with double-digit growth across all divisions, driven by diversified solutions and robust market services performance amid volatility. The company expanded its efficiency program and made significant progress on deleveraging and capital returns, while acknowledging macro uncertainty is causing some client decision delays in Financial Technology. An enhanced AWS partnership aims to modernize global financial infrastructure.

    Highlights

    5

    • Net revenues of $1.2 billion, up 12.5% year-over-year.

    • Solutions revenues of $947 million, up 11% year-over-year.

    • Annualized Recurring Revenue (ARR) rose to $2.8 billion, up 9% year-over-year.

    • Operating income rose 17% and diluted EPS grew 24% to $0.79.

    • Record free cash flow of $674 million in the first quarter.

    Concerns

    3

    • Increased uncertainty driven by changing trade policies and heightened geopolitical tensions.

    • Macro and regulatory environment causing delays in larger decisions and client readiness, likely impacting Q2 revenue and ARR growth in Financial Technology.

    • Revenue headwind from delistings and lower amortization of prior period initial listing fees in Data and Listings.

    Guidance & targets

    10
    CategoryTargetConfidence
    Efficiency program target
    $140 million
    high materiality
    High
    Cross-sells run rate revenue
    Surpass $100 million
    medium materiality
    High
    Capital Access Platforms revenue growth
    5% to 8%
    high materiality
    High
    Financial Technology revenue growth
    Within medium-term outlook range
    high materiality
    High
    Non-GAAP expense
    $2.265 billion to $2.325 billion
    high materiality
    High
    Full year 2025 expense growth benefit from efficiency program
    2 percentage points
    medium materiality
    High
    Q2 expense growth
    Slightly higher than Q1
    low materiality
    Medium
    Non-GAAP tax rate
    22.5% to 24.5%
    medium materiality
    High
    Gross leverage ratio
    3.3x
    high materiality
    High
    Dividend per share
    $0.27
    medium materiality
    High

    Segment performance

    3
    SegmentRevenueYoYQoQMargin
    Capital Access Platforms
    Revenue growth primarily driven by data (new sales, higher usage, pricing) and the index business. Listing benefit from new listings and pricing was offset by delistings and lower amortization of prior period initial listing fees.
    ARR growth: 5%Data and Listings revenue growth: 4%Data and Listings ARR growth: 6%Index revenue growth: 26%Workflow and Insights revenue growth: 4%Workflow and Insights ARR growth: 4%
    		$515 million11%—60% operating margin (up 2pp)
    Financial Technology
    The difference between quarterly revenue growth and ARR growth is driven by the impact of lower Calypso on-prem subscription revenue due to a tough comp in Q1 2024. Cross-sales represent over 15% of the division's pipeline.
    ARR growth: 12%SaaS revenue growth: 14%SaaS as % of ARR: 37% (up 2pp YoY)New clients: 40Upsells: 92Cross-sells: 2Financial Crime Management Technology revenue growth: 21%Financial Crime Management Technology ARR growth: 21%Regulatory Technology revenue growth: 10%Regulatory Technology ARR growth: 11%Capital Markets Technology revenue growth: 7%Capital Markets Technology ARR growth: 9%
    		$432 million10%—46% operating margin (flat YoY)
    Market Services
    Growth was primarily driven by the increase in market-wide volumes across all asset classes, as well as higher capture and market share. The division demonstrated strong operating leverage.
    Record net revenues in U.S. options (including index options)Record net revenues in U.S. cash equitiesIncreased on-exchange market share in U.S. cash equitiesHigher capture in U.S. cash equities and European equity derivativesHigher U.S. state plan revenue
    		$281 million19%—62% operating margin (up 5pp)

    Operational metrics

    45
    Net revenues
    $1.2 billionup 12.5% YoY
    Q1 FY25

    Double-digit growth across all three divisions.

    Solutions revenues
    $947 millionup 11% YoY
    Q1 FY25

    Part of overall net revenues.

    Annualized Recurring Revenue (ARR)
    $2.8 billionup 9% YoY
    Q1 FY25

    Highest year-over-year increase since Q1 2022.

    Operating income growth
    17%
    Q1 FY25

    Benefiting from strong revenue performance and expense management.

    Diluted EPS
    $0.79up 24% YoY
    Q1 FY25

    Benefiting from strong revenue performance and expense management.

    Operating margin
    55%up 2pp
    Q1 FY25

    Reflects strong operating leverage.

    EBITDA margin
    58%up 2pp
    Q1 FY25

    Reflects strong operating leverage.

    Alpha contribution to net revenue growth
    9.5 percentage points
    Q1 FY25

    Driven by new and existing clients, product innovation, and market services execution.

    Beta contribution to net revenue growth
    3 percentage points
    Q1 FY25

    Driven by higher valuation in NASDAQ indices and higher overall volumes.

    Financial Technology ARR growth
    12%
    Q1 FY25

    Strong ARR growth within the division.

    SaaS revenue growth
    14%
    Q1 FY25

    Strong growth in SaaS revenue.

    SaaS as percentage of ARR
    37%up 2pp YoY
    Q1 FY25

    Increasing mix of SaaS in ARR.

    Data and Listings ARR growth
    6%
    Q1 FY25

    Part of Capital Access Platforms.

    Index revenue growth
    26%
    Q1 FY25

    Record quarter for the index business.

    Average ETP AUM
    $662 billion
    Q1 FY25

    Record average ETP AUM, with strong net inflows despite Nasdaq 100 market performance down 8% in Q1.

    Derivatives contract volumes growth
    28%
    Q1 FY25

    Record derivatives contract volumes, contributing to index revenue growth.

    Workflow and Insights revenue growth
    4%
    Q1 FY25

    Solid growth driven primarily by analytics.

    Workflow and Insights ARR growth
    4%
    Q1 FY25

    Solid growth driven primarily by analytics.

    Financial Crime Management Technology revenue growth
    21%
    Q1 FY25

    Robust demand for Nasdaq Verafin.

    Financial Crime Management Technology ARR growth
    21%
    Q1 FY25

    Robust demand for Nasdaq Verafin.

    Financial Crime Management Technology new SMB clients
    35up 25% YoY
    Q1 FY25

    Acceleration of sales to SMB clientele.

    Financial Crime Management Technology net revenue retention
    113%
    Q1 FY25

    Reflecting strong client engagement.

    Gen AI-powered Entity Research Copilot client usage increase
    20%QoQ
    Q1 FY25

    Showcasing value and efficiencies for clients.

    Gen AI-powered Entity Research Copilot clients leveraging
    1,200
    current

    Clients leveraging the copilot to expedite alert reviews.

    Regulatory Technology revenue growth
    10%
    Q1 FY25

    Strong growth in regulatory technology.

    Regulatory Technology ARR growth
    11%
    Q1 FY25

    Strong growth in regulatory technology.

    Capital Markets Technology revenue growth
    7%
    Q1 FY25

    Continued advancement of international strategy.

    Capital Markets Technology ARR growth
    9%
    Q1 FY25

    Continued advancement of international strategy.

    Operating expenses
    $555 millionup 7% YoY
    Q1 FY25

    Driven by investments in technology and people, employee-related costs, and inflation.

    Dividend per share
    $0.24
    Q1 FY25

    Paid in Q1.

    Annualized dividend payout ratio
    32%
    Q1 FY25

    Based on Q1 dividend.

    Debt repurchased (notional value)
    $279 million
    Q1 FY25

    Part of continued deleveraging.

    Debt repurchased (net cash purchase price)
    $257 million
    Q1 FY25

    Part of continued deleveraging.

    Gross leverage ratio
    3.4xdown from 3.6x at end of 2024
    end of Q1 FY25

    Achieved through focused deleveraging.

    Shares repurchased
    1.6 million
    Q1 FY25

    To offset dilution from employee vesting.

    IPO win rate for Nasdaq eligible operating companies
    82%
    Q1 FY25

    Featuring 3 of the top 5 largest IPOs.

    Listing transfers combined market value
    $3 trillion
    since 2005

    Crossed this threshold in Q1, reinforcing Nasdaq's role as premier venue.

    IPOs on Nasdaq
    45
    Q1 FY25

    More than double the number of IPOs compared to Q1 last year.

    Financial Crime Management Technology data consortium assets
    $10 trillion
    current

    Total assets held by clients in the data consortium.

    Financial Crime Management Technology upsell sales cycle reduction
    50%
    Q1 FY25

    Reduced to 6 months when compared to the original contract for an existing Tier 2 client.

    Market Services North America message traffic record
    430 billion
    Q1 FY25

    Reached on the second day in Q1, compared to around 200 billion messages per day referenced at Investor Day.

    Nasdaq most active day message traffic
    550 billion
    April 7

    Exceeded 550 billion messages, Nasdaq's most active day ever.

    U.S. cash equities highest trading days
    5 of 6
    start of Q2 FY25

    Experienced in the industry history at the start of Q2.

    U.S. options highest trading days
    4 of 6
    start of Q2 FY25

    Experienced in the industry history at the start of Q2.

    European cash equity highest message traffic days
    7
    first 2 weeks of April

    Highest message traffic days on record.

    Product announcements

    3
    ProductTypeDetails
    Gen AI-powered Entity Research Copilot new featurelaunch
    Agentic AI capabilitiesroadmap
    New index productslaunch

    Deals & partnerships

    3
    AWSEnhanced partnership to modernize the global financial ecosystem.

    Leveraging Nasdaq's own successful cloud migration. The partnership will progress in phases, starting with market operators, and aims to create a more interwoven market ecosystem over the long term.

    Johannesburg Exchange and BMV (Mexico)Engaging with Nasdaq and AWS to install and implement new infrastructure.

    These are the first two clients engaging with the enhanced AWS partnership offering for market modernization.

    nuam (Peru, Chile, Colombia)Cross-sell for two additional solutions.

    Consolidation of marketplaces. Demonstrates Nasdaq's role as a trusted partner, having signed on for two additional solutions since its initial signing in 2023.

    Risks & headwinds

    3
    Increased uncertainty due to changing trade policies and heightened geopolitical tensionsEntering Q2 FY25

    Modest impacts on the timing of corporate decision-making, although without a meaningful change in overall demand.

    Mitigation: Nasdaq's diversified platform, mission-critical solutions, and trusted client relationships position it for resilient growth.

    Macro and regulatory environment causing delays in client decision-makingQ2 FY25

    Likely to have some effect on revenue and ARR growth in Q2 for Financial Technology.

    Mitigation: Diversification of the fintech business, breadth of clients, and the strategic nature of Nasdaq's solutions provide stability. Clients continue to engage due to the mission-critical nature of solutions.

    Revenue headwind from delistings and lower amortization of prior period initial listing feesQ1 FY25

    Consistent with previous comments.

    Mitigation: Offset by the benefit of new listings and pricing in the Data and Listings segment.

    What to watch in Q2 FY25

    4

    Financial Technology revenue and ARR growth

    Q2 FY25
    CurrentRevenue up 10%, ARR up 12% in Q1 FY25
    TargetWithin medium-term outlook range for FY25, with specific subdivisions at low end/well within range

    Why it matters

    Management noted macro/regulatory delays could impact Q2 growth, but maintained full-year guidance. Verification of this impact is key to assessing the division's trajectory.

    The uncertainty in the global macro and regulatory environment is causing some delays in larger decisions and client readiness. These delays will likely have some effect on revenue and ARR growth in Q2.

    Q&A highlights

    6

    How has the index business's structural drivers and diversification changed since the 2022 market downturn, and how does this impact its current resilience?

    Adena noted that in 2022, the index business grew 6% despite a 33% decline in Nasdaq 100 values. Current resilience is enhanced by diversification into new products beyond the Nasdaq 100, international clientele, and institutional expansion, with 50% of Q1's $27 billion inflows coming from non-Nasdaq 100 products. Multiple drivers, including market values, new product launches, derivatives volumes, and data revenue, contribute to its robust performance.

    “50% of the inflows in the quarter, the $27 billion of inflows in the quarter were from non-Nasdaq 100 products. So -- or I should say we're into non-Nasdaq 100 products. And I think that shows that we're really continued to diversify the business.”

    asked by Simon Alistair Clinch · answered by Adena Friedman

    2 min read6 chapters

    Detailed Narrative

    01

    Strategic Efficiency & Capital Allocation

    Nasdaq expanded its efficiency program to target $140 million in annualized savings by year-end 2025, with over $100 million already actioned in Q1. This initiative supports continued deleveraging, achieving a gross leverage ratio of 3.4x, down from 3.6x at year-end 2024. The company also increased its quarterly dividend by 13% to $0.27 per share and repurchased $115 million in shares to offset dilution, demonstrating commitment to shareholder returns.

    02

    Index Business Diversification and Growth

    The index business delivered 26% revenue growth, driven by a record average ETP AUM of $662 billion and robust net inflows. Notably, 50% of the $27 billion Q1 inflows came from non-Nasdaq 100 products, highlighting successful diversification beyond its flagship index. This, coupled with 30 new index product launches (including 10 international and 7 insurance annuity vehicles), enhances the business's resilience against market value fluctuations and expands its global reach.

    03

    Financial Technology Momentum and AI Adoption

    The Financial Technology division achieved 10% revenue growth and 12% ARR growth, securing 40 new clients, 92 upsells, and 2 cross-sells. Financial Crime Management Technology saw 21% growth and a 25% increase in new SMB client signings. Its Gen AI-powered Entity Research Copilot experienced a 20% increase in client usage quarter-over-quarter, with over 1,200 clients leveraging it, showcasing the value and efficiency gains from AI integration.

    04

    Market Services Resilience Amid Volatility

    Market Services reported record net revenue of $281 million, up 19%, reflecting record U.S. options and cash equities revenues. The division demonstrated exceptional operational resilience during periods of significant market activity, managing over 550 billion messages on its most active day (April 7). This performance underscores the strength of Nasdaq's systems and consistent investments in modernizing and scaling its trading infrastructure.

    05

    Enhanced AWS Partnership for Market Modernization

    Nasdaq announced an enhanced partnership with AWS to modernize global financial infrastructure. This collaboration will offer market operators packaged public and hybrid cloud solutions, leveraging Nasdaq's own successful cloud migration experience. The initiative aims to provide increased scalability, efficiency, and resilience for clients, with initial engagements already underway with Johannesburg Exchange and BMV in Mexico, and Nasdaq's Nordic markets slated for migration.

    06

    Capital Access Platforms Leadership

    Capital Access Platforms generated 11% revenue growth and 5% ARR growth. Nasdaq welcomed 45 operating companies raising $5 billion and achieved an 82% win rate for eligible IPOs. Listing transfers continued strong, crossing $3 trillion in combined market value since 2005, reinforced by marquee switches like Shopify and Thomson Reuters. The company also launched a new advocacy program to promote capital formation and enhance the U.S. public company model.

    AI-generated summary of the company’s earnings call. Not investment advice.