Nasdaq Third Quarter 2026 Results - NASDAQ INC

Explicit Guidance:

• FY2026 Non-GAAP Expenses: Updated guidance raised to $2.55 billion–$2.58 billion (previously $2.53B–$2.77B), driven by acquisition costs and strong revenue performance.
• FY2026 Non-GAAP Tax Rate: Maintained at 22.5%–24.5%.
• Q4 2026 Revenue Contribution: Acquisition of Level Markets expected to contribute $7–8 million in revenue; expenses included in updated guidance.
• ASR Program: Variable notional Accelerated Share Repurchase (ASR) of $315–$385 million scheduled for completion in Q4 2026.
• Dividends: Maintained quarterly dividend of $0.31 per share (30% annualized payout ratio).
• Free Cash Flow (12-month): Generated $2.3 billion with a 98% conversion ratio.
• Share Repurchases: $1.2 billion repurchased YTD 2026 (nearly double the full-year 2025 amount of $616 million).

Business-Segment Outlook:

• Data & Listings: Expect durable growth from "always-on markets" and AI use cases; listings pipeline remains robust despite recent IPO softening, with a 74% YTD win rate and expectation of Hilton listing in early November 2026.
• Index Franchise: Strong momentum driven by passive investing and retail ownership; record $141 billion net inflows over the last 12 months; 23.5 trading and NASDAQ 100 franchise expected to amplify demand for derivatives and options.
• Workflow & Insights (CAP): 25% of new investment bookings related to AI use cases YTD; investment data coverage expanded to 95,000+ private funds.
• Financial Technology: Continued strong demand for cloud solutions (85% of bookings cloud-based); FinTech ARR growth expected to sustain high single-digit to low-double-digit growth; agentic AI workforce expected to expand with new "freemium" models in Calypso and surveillance.
• Market Services: 23.5 trading on NASDAQ Stock Market scheduled to launch on December 6, 2026; digital liquidity networks (unifying tokenization and always-on markets) to drive long-term growth in share capture.
• Capital Markets Technology: Pricing increases effective Jan 1, 2026 driving lift; Calypso expanding into exchange-traded derivatives clearing; AI and "always-on" markets expected to drive convergence of asset classes and global risk management needs.

Market and Competitive Outlook:

• AI Adoption: Management views AI as a foundational trend reshaping capital allocation and risk management; aggressive expansion of "agentic AI" capabilities across Verifin, Calypso, and surveillance.
• Tokenization: Anticipated structural shift toward tokenized collateral (treasuries, money markets, repos) and tokenized equities; NASDAQ Equity Token launch targeted for the first half of 2027.
• Market Structure: Continued evolution toward 24/7/5 trading (always-on markets); growing shift in order flow to consolidators and off-exchange venues (Level Markets) to maintain liquidity and share capture.
• Regulatory Landscape: Active engagement on SEC Innovation Exemptions; NASDAQ positioning tokenization via regulated venues (TSV exclusion) rather than sidecar experimentation; strong demand for modernization of AML/Fraud solutions due to AI-amplified criminal networks.
• Futures/E-mini: Expect sustained growth in NASDAQ 100 micro futures driven by retail accessibility; potential future expansion of options hours to match futures trading windows.

Macro / Industry Outlook:

• Economic Environment: U.S. economy viewed as constructive and resilient, supporting corporate earnings, consumer spending, and AI/digital infrastructure investment.
• Inflation/Rates: Acknowledges management through inflation and elevated interest rates, noting resilience in capital markets.
• Volatility: Expect continued mixed volatility environment; portfolio diversified to benefit from capture share in low volatility and volume in higher volatility.
• Infrastructure Demand: Elevated demand for data center services, connectivity, and cloud migration as clients modernize.

Strategic Initiatives:

• M&A & Integrations: Successfully closed acquisition of Level Markets (3rd largest U.S. ATS) on Oct 15, 2026; integrated into Digital Liquidity Networks strategy to enable off-exchange liquidity and global connectivity.
• Product Launches: Launch of NASDAQ Equity Token (H1 2027) in partnership with Kraken and DTCC for real-time settlement; launch of agentic AI in Calypso and surveillance.
• Portfolio Optimization: Wind-down of sustainability advisory business; sale of Nasdaq Material to Ossapiens (closed Aug 2026); acquisition of Dacity closed Q3 2026.
• Partnerships: Expanded AI/Innovation suite with BlackRock, State Street, Invesco, and Juniper Square; new partnership with Robinhood for agentic trading data; ongoing work with DTCC on tokenization services.
• Infrastructure: Building Digital Liquidity Networks to unify tokenization and always-on market capabilities; expanding cloud capabilities for managed services.

Risks and Headwinds to Outlook:

• IPO Environment: Modest softening in IPO timing for some sectors/sectors in recent weeks.
• Regulatory Uncertainty: SEC Innovation Exemption framework creates potential for "sidecar" trading venues outside Reg MS; NASDAQ actively opposing these constructs to protect market integrity.
• One-Time Items: Q4 2026 CapTech growth faces a tough comparison due to Q4 2025 upfront Calypso revenue recognition.
• Technology Transition: Execution risks associated with cloud migrations and long contract renewal cycles (3–10 years); "freemium" AI model monetization requires proving ROI to clients.
• Market Volatility: Potential for revenue pressure in options capture if volatility remains low or shifts in order flow composition to consolidators.
• Adoption Pace: Market readiness for instant settlement and netting elimination remains uncertain; industry prefers batching/netting currently.

Management Tone on the Future:

• Confidence: Extremely confident in opportunities; described Q3 results as demonstrating "durable strategy" and "strong position."
• Strategic Focus: Aggressive pivoting toward AI and tokenization; views these as "enduring trends" in early stages of impact.
• Capital Allocation: Prioritizing organic growth, share buybacks (accelerated pace), and strategic bolt-ons; leverage target maintained at 2.5x.
• Growth Expectation: Anticipates solutions businesses growing faster than market services long-term; expects tokenization and always-on markets to drive liquidity and capture uplift.

Miscellaneous:

• Hilton Listing: Confirmed transfer to NASDAQ expected in early November 2026.
• Product Innovation: 32 new index products launched in Q3 2026; 50% launched outside the U.S.
• Enterprise Wins: FinTech signed 12 enterprise deals YTD 2026 (vs. 9 in all of 2025); Regulatory Tech signed a G-SIB for Basel III implementation.
• Leverage: Gross leverage at 2.5x following Q3 results and ASR execution.
• Cloud Transition: Cloud bookings now represent 85% of FinTech bookings; SaaS revenue creeping up to 38% of total ARR.