Cboe Global Markets, Inc. (CBOE) Earnings

Management highlights

### Core Business Performance - All five segments delivered positive YoY net revenue growth, with double-digit growth across every major business category, hitting a company record for Q2 net revenue and adjusted diluted EPS. - Index options drove derivatives strength: SPX options ADV increased 40% YoY, with SPX zero DTE ADV hitting a quarterly record, and mini SPX ADV up more than 80% YoY. Repeal of the Pattern Day Trader Rule immediately boosted retail activity: SPX zero DTE ADV rose 11% month-over-month in June, with retail share of that volume increasing to 57% from 53% in April-May. - Cash and spot markets posted broad-based growth: North American equities delivered record net revenue, Global FX grew 17% YoY, and Europe/APAC delivered 20% YoY net revenue growth. - DataVantage growth was broad-based and internationally focused, with half of Q2 new sales coming from non-U.S. customers. ### New Product and Market Expansion - The firm launched SIBO Predicts, binary options on the mini S&P 500, as the first entry into the event and prediction market space. In July, it filed with the SEC to list company-specific KPI event contracts for 23 large U.S. companies, which remain subject to regulatory approval. - The firm plans to expand cash equities trading to 23/5 (23 hours a day, 5 days a week) by December 2026, pending industry readiness, with a target of 24/7 trading over the longer term. - The firm is building out its own clearing capabilities (CBOE Clear US): it filed for temporary SEC registration as a covered clearing agency (targeting full registration after 18 months, subject to approval), and achieved compliance with CFTC Subpart C rules in June. This is expected to reduce capital requirements for clearing members and enable faster product innovation, while the firm remains committed to its existing partnership with OCC for clearing traditional equity options. - Options Institute education registrations increased 173% quarter-over-quarter, reflecting strong demand for retail investor education as retail participation grows. ### Capital Allocation and Strategic Repositioning - The firm sold non-core assets SIBO Australia (expected to close in Q3 2026) and SIBO Canada (closing timing still pending) to sharpen focus on high-growth core businesses aligned with three key secular trends: the growing dominance of the U.S. equity market, rising global retail investor participation, and the ongoing secular growth of options trading. - In Q2, the firm returned $108 million to shareholders: $33 million via share repurchases and $76 million via dividend payments. Management noted it would have repurchased more shares during the late-June share price decline if not for standard quarter-end trading window restrictions. - The firm maintains a strong balance sheet with $2.3 billion in adjusted cash and a 0.7x leverage ratio, giving it flexibility for organic investment, inorganic growth opportunities, debt repayment, and continued capital return.

Guidance

- Total 2026 organic net revenue growth guidance was raised to mid-to-high teens from the prior guidance of low double-digit to mid-teens. Even after accounting for the expected Q3 sale of SIBO Australia (which contributed $20 million in net revenue through July 2026), total net revenue growth is still expected to land in the mid-to-high teens range. - 2026 organic net revenue growth guidance for DataVantage was raised to low teens from the prior guidance of low double digits. After factoring in the $17 million in DataVantage net revenue contributed by SIBO Australia through July 2026 and its upcoming sale, full-year DataVantage growth is expected to land in the low double-digit range. - Adjusted operating expense guidance is maintained at $838 million to $853 million for 2026: higher incentive compensation, return-to-office costs, and growth investment are offset by an $11 million expense reduction tied to the upcoming sale of SIBO Australia. Some transition costs for SIBO Australia will continue for up to 12 months post-close and are already included in the guidance. - Annualized expense savings from prior strategic realignment actions are still expected to total $40 million to $50 million, with $20 million to $25 million of those savings realized in 2026. - CapEx guidance was increased to $98 million to $108 million from the prior $73 million to $83 million, driven by incremental investment in clearing infrastructure and accelerated hardware purchases to lock in lower prices ahead of expected inflation. - Depreciation and amortization guidance was adjusted to $54 million to $58 million from $56 million to $60 million, reflecting the delayed in-service timing of accelerated hardware purchases. - The full-year 2026 adjusted effective tax rate guidance remains 27.5% to 29.5% under current tax law. Net interest income is expected to contribute a positive $8 million to $9 million in Q3 2026 due to higher cash balances. - No material revenue from the new company-specific KPI event contracts has been included in 2026 guidance, as the product launch is pending regulatory approval and still in early stages.

Segment performance

CBOE Global Markets (SIBO) reported total Q2 2026 net revenue of $732 million, a 25% year-over-year (YoY) increase. The five operating segments performed as follows: 1. **Options**: Record net revenue with 30% YoY growth, driven by a 33% YoY increase in net transaction and clearing fees. Total average daily volume (ADV) climbed 26% YoY, with index options volume up 32% and multi-list options volume up 24%. Revenue per contract rose 6% YoY, accounting for approximately 56.4% of total Q2 net revenue. 2. **North American Equities**: Net revenue increased 17% YoY, with a 37% YoY jump in net transaction and clearing fees driven by strong industry volumes, plus growth in market data, access, and capacity fees. This segment contributed approximately 13% of total Q2 net revenue. 3. **Europe and APAC**: Net revenue rose 20% YoY (18% on a constant currency basis), with net transaction and clearing fees up 31% YoY and combined non-transaction revenues up 9% YoY. This segment accounted for roughly 11% of total Q2 net revenue. 4. **Futures**: Net revenue increased 2% YoY, driven primarily by higher market data fees, while transaction and clearing fees remained steady. This segment contributed approximately 3% of total Q2 net revenue. 5. **Global FX**: Net revenue grew 17% YoY, driven by an 8% YoY increase in average daily notional value and a 6% YoY increase in net capture. This segment accounted for approximately 5% of total Q2 net revenue. 6. **SIBO DataVantage**: Net revenue increased 15% YoY, with 84% of growth coming from new subscription and unit sales (50% of new sales from international customers) and the remainder from pricing changes. All sub-segments (market data and access, SIBO Global Indices, risk and market analytics) posted double-digit YoY growth. This segment contributed approximately 24% of total Q2 net revenue. Adjusted operating expenses for the firm totaled $217 million, up just 2% YoY, while adjusted operating EBITDA grew 37% YoY to $528 million, with an adjusted EBITDA margin of 72.2%, up 6.4 percentage points YoY.

Risks & headwinds

- Forward-looking statements, including new product launch timing and regulatory approvals, are not guarantees of future performance and involve risks and uncertainties that could cause actual results to differ materially from expectations. - New event and prediction market products, including company-specific KPI contracts, remain subject to SEC regulatory approval, with no guarantee of approval timing or final approval. - The sale of SIBO Canada remains subject to closing conditions and regulatory approval, with no finalized closing timeline as of the Q2 call. - While the firm maintains strong balance sheet flexibility, it faces a $650 million debt tranche maturing in Q1 2027 that it plans to repay with cash on hand, which could reduce capacity for share repurchases or other capital deployment. - Ongoing market structure changes, including proposed rescission of SEC Rule 611 and potential shifts to semi-annual corporate reporting, create uncertainty for future equity and options trading activity.

Analyst Q&A

• Q: How do perpetual futures (perps) differ from SIBO's options products, what potential overlap exists, and what is the current mix of sophisticated vs. less sophisticated retail traders? /

  A: Perps originated in crypto to provide leveraged spot exposure without the friction of rolling traditional futures contracts, meeting fundamentally different investor needs than options. Options offer defined maximum upfront loss, support strategies (volatility trading, income generation, hedging) that cannot be replicated with futures, and over 95% of SIBO zero DTE trades are defined-risk strategies. Management views perps as complementary to options, not a direct substitute, and notes that SIBO can tap into a much larger retail customer base across equity derivatives markets than the existing futures ecosystem.

• Q: What is the status of the proposed company-specific KPI event contracts, including demand outlook, end users, regulatory process, and pricing? /

  A: The product is a natural extension of SIBO's derivatives business, allowing investors to trade on granular company performance metrics (e.g., Nvidia data center revenue) that drive overall stock valuation. Early engagement with market participants is strong, with Schwab set to offer the contracts to retail clients, and management expects initial adoption to be led by retail, followed by institutional participation as liquidity and historical data grow. The filing is open for public comment, the SEC is reviewing the application, and the firm expects a launch in September-October 2026 pending approval. Pricing will be competitive, aligned with other event prediction contracts, and lower than traditional SIBO proprietary options given the smaller notional size of the KPI contracts.

• Q: How will expanded internal clearing capabilities enable innovation, and are inorganic acquisitions on the table to build out clearing capabilities? /

  A: In-house clearing is an enabling capability that allows SIBO to launch new products (such as KPI event contracts and extended-hours cash equities trading) that may not fit the existing risk or operational profile of the current OCC clearing model. It will also support exploration of new areas like tokenization and on-chain transactions. Management confirms it is open to both organic and inorganic opportunities to expand clearing capabilities across a range of potential use cases, including crypto market infrastructure, but has no specific transactions to announce at this time.

• Q: What are the key drivers of SIBO DataVantage's strong growth, and how sustainable is that growth? /

  A: DataVantage generated $178 million in Q2 net revenue (up 15% YoY), with two-thirds of growth coming from higher access-related revenue driven by growing options volumes that have increased demand for connectivity to SIBO's exchanges. The remaining one-third of growth comes from broad-based demand for market data, with 50% of new data sales coming from international clients (driven by growing Asian investor demand for U.S. market exposure). Management confirmed it will provide 2027 guidance for DataVantage at the end of 2026.