Nasdaq, Inc. (NDAQ) Earnings

Management highlights

- Overall Financial Performance * Total Q2 2026 net revenue of $1.5 billion, up 15% YoY; solutions revenue of $1.2 billion, up 17% YoY * Annualized recurring revenue (ARR) grew 12% YoY to $3.3 billion; diluted EPS grew 25% YoY to $1.07, exceeding $1 for the first time in company history * Operating margin hit 57% and EBITDA margin hit 60%, both up 2 percentage points YoY * Generated $477 million in free cash flow in Q2, with 97% conversion over the trailing 12 months; returned $530 million to shareholders via dividends and share repurchases in the quarter - Strategic & Operational Milestones * Index business AUM surpassed $1 trillion for the first time in history, with the largest quarterly net inflows on record * Nasdaq Verifan crossed $13 trillion in combined assets across over 2,800 client financial institutions * Set new records for notional value traded during the June triple witch expiration ($296 billion) and Russell reconstitution ($334 billion, triple the prior year record) * Secured the SpaceX IPO, the largest IPO in history raising $86 billion, and became the world's largest exchange by listed company market capitalization; hosted 7 of the top 10 Q2 IPOs including several other landmark large offerings across semiconductors, quantum computing, and biotech * On track for the projected December 6, 2026 launch of 23-5 trading, with SEC approval for event options and on track for Q4 2026 launch - Innovation & AI Progress * Adopted an AI-first development approach across all business units; agentic AI worker tools for Nasdaq Verifin are used by 750 clients, with two new AI workers launched in beta for AML and ACH fraud triage * Launched the DataLink Model Context Protocol to enable frictionless integration of Nasdaq data into AI-driven applications; 25% of new bookings for analytics are tied to AI use cases * Launched 34 new index products in Q2, 50% outside the U.S., with 38% of trailing 12-month index inflows from products launched in the last 5 years * Completed three market modernization programs including live clearing for BYMA (Argentina Stock Exchange) and trading for the integrated Peru/Chile/Colombia Nuam market; piloted successful tokenized collateral trades on the Canton network with two leading asset managers * Completed two small portfolio transactions: agreed to sell Nasdaq Fund Secondaries to Nasdaq Private Market, and agreed to acquire AI-powered due diligence platform Dacity to integrate into Nasdaq Investment

Guidance

- 2026 non-GAAP operating expense guidance was revised upward to a range of $2.530 billion to $2.570 billion, from the prior range of $2.485 billion to $2.545 billion, driven by higher employee compensation from stronger than expected year-to-date revenue performance, and increased marketing expense tied to the stronger IPO environment - 2026 non-GAAP tax rate guidance is maintained at 22.5% to 24.5% - Capital markets technology will face tougher year-over-year comparables in H2 2026, due to large upfront Calypso revenue booked in Q3 and Q4 2025 - The revenue contribution from large enterprise client signings for Nasdaq Verifin from H2 2025 is expected to start flowing in H2 2026, following the standard ~12 month implementation timeline

Segment performance

1. Capital Access Platforms: Revenue of $621 million, up 18% year-over-year (YoY), with 8% annualized recurring revenue (ARR) growth. This segment contributes 41.4% of total net revenue. Within the segment: - Data and listings: 9% YoY revenue and ARR growth, driven by new sales, upsells, usage, and a strong improving IPO environment. - Index: 35% YoY revenue growth, 8% ARR growth, supported by record $51 billion quarterly net inflows and $1 trillion in end-of-period AUM, plus 33% YoY growth in derivatives contract volumes. - Workflow and insights: 5% YoY revenue growth, 6% ARR growth, driven by double-digit growth in analytics, with Corporate Solutions revenue essentially flat. Excluding a one-time index revenue benefit, the segment's operating margin was 63%, up 4 percentage points YoY. 2. Financial Technology: Revenue of $539 million, up 15% YoY, with 16% ARR growth. This segment contributes 35.9% of total net revenue. Within the segment: - Financial Crime Management Technology (Nasdaq Verifin): 22% YoY revenue growth, 17% ARR growth, with 110% net revenue retention. - Regulatory Technology: 13% YoY revenue growth, 14% ARR growth, with strong performance across surveillance and Axiom SL. - Capital Markets Technology: 14% YoY revenue growth, 17% ARR growth, partially offset by lower professional services revenue. The segment's quarterly operating margin was 46%, flat with the prior year. 3. Market Services: Record quarterly net revenue of $340 million, up 11% YoY. This segment contributes 22.7% of total net revenue. Growth was driven by record industry volumes across U.S. equities and U.S. options, strong volumes in European equities and fixed income, and a 3 percentage point increase in European lit market share to 74%. Index options revenue more than doubled YoY for the fourth consecutive quarter. The segment's operating margin was 64%, up 1 percentage point YoY.

Risks & headwinds

- Foreign exchange fluctuations, acquisition/divestiture impacts, and other unforeseen one-time items can create volatility in reported results - U.S. regulatory approval of new product innovations such as perpetual-style equity derivatives is uncertain and requires joint approval from both the SEC and CFTC - International expansion of Nasdaq Verifin has longer than expected sales cycles due to internal client processes and varying regulatory requirements across jurisdictions - Shifting product mix in index derivatives from higher-priced e-mini contracts to lower-priced micro e-mini contracts partially offsets index revenue growth - Lower capture in U.S. options due to entry of new consolidators into the market partially offsets Market Services revenue growth - AI-driven new forms of financial crime require continuous product updates and development to maintain detection efficacy, creating ongoing investment requirements - Transition to 24/7 or 23.5/7 always-on trading requires major architectural investment from both Nasdaq and its clients, creating near-term uncertainty around adoption timing - The development of tokenized assets and permanent-style derivatives is still in early stages, with unclear future revenue contribution

Analyst Q&A

• Q: How is Nasdaq approaching AI monetization, and is it integrated into existing products or sold as separate paid capabilities?

  A: Nasdaq uses a product-by-product approach. For some AI capabilities like BoardVantage AI tools and Calibration Copilot, AI is integrated into core products, with pricing evaluated over time as value is delivered. For other tools like Verifan's agentic AI workers and the GenAI News Copilot, the company uses a freemium model: a base level of usage is free, and unlimited access is offered via a paid upsell subscription. Client adoption of paid upsells is growing, and monetization remains in the early innings with no specific long-term targets provided yet.

• Q: What is driving the strong performance of trade management services, and how much is tied to AI for trading?

  A: Growth comes from both new clients and increased demand from existing clients for more connectivity, power, and capacity to support multi-asset class trading strategies. It is not primarily driven by generative AI, as algorithmic/AI-based trading has been standard in the industry for a long time. A previously implemented pricing increase for trade management services is also flowing through to results this year. Additionally, making all Nasdaq data assets AI-ready for integration into external AI workflows is driving incremental demand for core data products.

• Q: How does Nasdaq see the opportunity around perpetual-style derivatives, and is there demand to license Nasdaq indexes for overseas perpetual products?

  A: Perpetual derivatives currently exist only outside of regulated U.S. equity markets, and would require joint SEC and CFTC approval to enter the U.S. equity space. Even if approved, Nasdaq estimates any revenue overlap with existing products would be less than 1% of total revenue. Nasdaq sees an opportunity to provide its existing surveillance, trading, and risk management technology to markets that launch perpetual products, supporting growth of its FinTech segment. Discussions around licensing Nasdaq indexes for perpetual products with existing partners like CME are ongoing.

• Q: How would you describe the current IPO pipeline, is it dominated by mega-deals or broadening to a wider range of issuers?

  A: The current IPO market is seeing a real broadening of the pipeline, not just a concentration of large idiosyncratic mega-deals. While there have been several high-profile large offerings including SpaceX, Cerebrus, and SK Hynix, the pipeline is broad-based across multiple high-growth sectors: AI infrastructure and power/capex for compute, healthcare and biotech, defense industry and component suppliers, and consumer companies. This broadening is a durable positive trend for the listings business.