Tradeweb Markets Inc. (TW) Earnings

Management highlights

### Overall Business Performance - Q2 2026 delivered the second highest quarterly revenue in company history, with 9% YoY reported growth. First half 2026 revenue reached nearly $1.2 billion, nearly matching full-year 2022 total revenue. June 2026 revenue grew more than 20% YoY, reflecting accelerating growth through the quarter. - Growth is driven by durable, broad-based client engagement and accelerating electronification of financial markets, not isolated elevated volatility. International growth is broad-based across all four asset classes. ### Strategic Positioning and AI Initiatives - Management views AI as accelerating market electronification by improving liquidity discovery, decision-making, and operational efficiency. TradeWeb's large global network and proprietary data create a durable competitive advantage in AI-powered trading tools. - 45% of all institutional trades on TradeWeb now flow through AIX, the company's intelligent automation platform. AI is evolving from rules-based automation to augmented decision-making for complex trading questions. - Newly launched AI-powered tools: Snap+ (predictive analytics for credit liquidity matching) and Terra (AI trading assistant that transforms market data into actionable trading intelligence) delivered strong early client feedback. ### Market Share Gains - U.S. Treasuries overall market share increased 100 bps YoY to 22.5% in Q2. Average daily volume for traditionally voice-traded basis and multi-leg Treasury trades grew over 40% YoY. - Global credit block and institutional RFQ market share reached new quarterly records in Q2. ### Geographic and Strategic Growth Initiatives - Primary issuance activity is healthy across the U.S., Asia, Australia, Middle East, and South America, with Europe seeing encouraging renewed activity. - Continued strategic investment in expansion across Europe, APAC, and emerging markets, with early positive traction. Only ~30% of the global swaps market is currently electronic, leaving substantial room for future growth; EM swaps are a standout growth area. - Mortgage specified pools (only 20-25% electronically traded today) are a key growth focus: institutional specified pool revenue is up over 40% YoY YTD, with higher fee per million than more liquid TBA mortgages. ### Capital Management - End-of-quarter cash and cash equivalents totaled $2.1 billion, trailing 12-month free cash flow exceeded $1 billion, up 13% YoY. - Quarterly dividend increased 16.7% YoY to 14 cents per share. The company repurchased 1.9 million shares for $189 million in Q2, with $334 million of repurchase authorization remaining as of June 30.

Guidance

- Management maintains 2026 adjusted expense guidance, with expenses expected to trend toward the top half of the initial $1.1 billion to $1.16 billion range. - Adjusted EBITDA and operating margin expansion is expected compared to 2025 across the entire guidance range, though incremental margin expansion will be more muted as the company prioritizes balancing growth investment with margin expansion. - Incremental investment is directed toward AI development, data infrastructure, international/emerging market expansion, electronification initiatives in Asia, and digital/frontier market opportunities. - Full year adjusted expense growth is expected to be between 11% and 14%, with slower expense growth in the second half of 2026 compared to first half year-over-year comparisons. - Early July 2026 average daily revenue is up low teens YoY, with preliminary double-digit revenue growth across rates, credit, and equities.

Segment performance

Overall Q2 2026 revenue was $559 million, up 9% year-over-year (8.3% constant currency). International revenue contributed 44% of total revenue, grew 14% YoY and accounted for 65% of overall revenue growth. Adjusted EBITDA margin was 54.4%, up 43 basis points compared to 2025 full year margins. Total trading revenue increased 8% YoY, with variable trading revenue up 9% and fixed trading revenue up 5%. Other revenue was $7.9 million, up 1% YoY. - Rates: Second highest historical quarterly revenue, with mid single-digit YoY growth outpacing industry volume growth by ~300 basis points. Institutional U.S. Treasuries revenue up nearly 15% YoY, 50%+ share in electronic institutional U.S. Treasuries for 9 consecutive quarters; wholesale U.S. Treasuries revenue down 1% YoY. Global Swaps (part of Rates) revenue up 13% YoY (second highest historical quarterly revenue), core risk market share rose 207 bps YoY to 24.1%. - Credit: Low single-digit YoY revenue growth, with double-digit growth in international credit and U.S. institutional credit offset by 22% YoY revenue decline in municipal bonds and retail credit. U.S. credit block market share up 115 bps YoY to a record, institutional RFQ average daily volume (ADV) up 15% YoY, portfolio trading ADV up over 30% YoY, all-to-all ADV up over 25% YoY, DRFQ ADV up nearly 30% YoY. Emerging markets credit revenue up 20% YoY. Average fees per million for cash credit down 11.4% due to product mix shift. - Equities: Record quarterly revenue, ETF revenue up over 10% YoY; institutional equity derivative revenue up 20% YoY. AIX average daily trades up over 45% YoY, with triple-digit growth in U.S. ETFs and double-digit growth in European ETFs. - Market Data: Revenue up over 20% YoY, driven by the LSEG market data contract and proprietary data products. - Money Markets: Revenue growth led by global repos and ICD.

Risks & headwinds

- Uncertainty remains around the future path of monetary policy, the overall global economic outlook, and regulatory developments, which could impact market activity levels. - Intense competition exists across business segments, particularly in wholesale U.S. Treasuries and the electronic credit trading space, following industry consolidation. - Unrealized gains/losses on strategic investments in emerging areas (digital assets, tokenization, prediction markets) will cause quarterly GAAP result volatility. - New AI tools require clients to update compliance frameworks, which could slow adoption timelines. - Regulatory clarity for emerging frontier markets (crypto, prediction markets) remains incomplete, creating uncertainty around large-scale expansion. - Revenue and expense can be impacted by foreign exchange rate fluctuations, given 30% of revenue is non-U.S. dollar denominated.

Analyst Q&A

• Q: How does the ICE acquisition of Market Access impact TradeWeb's competitive position in credit and rates, and what opportunities/risks does it create? /

  A: Management views the acquisition as validation of the growth opportunity in electronic credit trading, and welcomes rational commercial competition. TradeWeb is confident in its value proposition built on data, client relationships, and balanced support for both non-bank liquidity providers and large traditional bank counterparties, which is a key competitive advantage. Management notes the electronification trend in credit is accelerating, and the company is well positioned to take market share as the market evolves toward more data-driven, automated trading.

• Q: What are early engagement levels for newly launched Terra AI and the dedicated Kalshi pricing page, and what is your go-to-market strategy for these tools? /

  A: Both initiatives are early stage, but early client engagement has been encouraging. Terra solves the problem of synthesizing fragmented market data for credit traders, and while clients are updating compliance rules for the new agentic AI tool, adoption is on track, with plans to expand to other product lines over time. The Kalshi viewer puts real-time prediction market event probabilities alongside core fixed income products, with strong early client feedback and returning users already personalizing workflows. The strategy prioritizes client value and engagement first, with monetization expected to follow as adoption scales.

• Q: Where is incremental 2026 expense investment directed, and how much expense flexibility does the company have if revenue growth slows? /

  A: Incremental investment is split into two buckets: long-term innovation (data infrastructure for AI readiness, AI client-facing tools like Terra and Snap+, and digital/frontier market initiatives including tokenization and prediction markets) and near-term high traction growth (swaps and emerging markets expansion in Asia). Approximately 45% of the expense base remains variable and discretionary, giving the company significant flexibility to slow investment if market conditions weaken. Even with stepped-up investment, the company still delivered margin expansion in the first half of 2026, and expects slower expense growth in the second half.

• Q: What are the biggest barriers to further electronification of global swaps, and where is progress fastest? /

  A: The largest barrier is behavioral: shifting long-held voice trading workflows for large risk positions requires trust and adoption of new processes, rather than technological limitations. Progress is fastest in emerging market swaps, where TradeWeb has driven electronification to roughly 20% of the market and continues to see strong growth. The next key frontier is wholesale swaps, where the company is building out electronic liquidity pools to match its successful institutional offering, as dealers increasingly seek more efficient tools to manage and recycle risk.