10-Q: Cboe Global Markets Reports Strong Q2 Earnings Growth Amidst Strategic Shifts and Regulatory Challenges

Cboe Global Markets delivered robust financial results for the second quarter and first half of 2025, driven by significant volume increases in its Options and European equities markets, while navigating key management transitions and ongoing regulatory litigation.

Summary

• Total revenues for the second quarter of 2025 increased by 20% to $1,173.5 million, and for the first half of 2025, they rose by 23% to $2,368.5 million, compared to the same periods in 2024.
• Net income for Q2 2025 surged by 67% to $235.1 million, and for the first half of 2025, it increased by 39% to $485.7 million.
• Diluted earnings per share (EPS) for Q2 2025 grew by 68% to $2.23, and for the first half of 2025, it increased by 40% to $4.60.
• Adjusted diluted EPS for Q2 2025 was $2.46, up 14%, and for the first half of 2025, it was $4.96, up 15%.
• Operating income for Q2 2025 increased by 61% to $339.1 million, and for the first half of 2025, it rose by 41% to $693.0 million.
• Revenues less cost of revenues increased by 14% to $587.3 million in Q2 2025 and by 13% to $1,152.5 million in the first half of 2025.
• Total operating expenses decreased by 18% in Q2 2025 and by 12% in the first half of 2025, primarily due to a non-recurring impairment charge in the prior year, partially offset by a new impairment charge related to Cboe Japan in Q2 2025.
• The Options segment saw revenues less cost of revenues increase by 19% in Q2 2025 and 17% in H1 2025, driven by a 22% increase in multi-listed options ADV and a 17% increase in index options ADV in Q2.
• The Europe and Asia Pacific segment's revenues less cost of revenues increased by 30% in Q2 2025 and 24% in H1 2025, primarily due to a 43% increase in Cboe European equities matched ADNV and a 19% increase in Cboe Clear Europe net settlement volumes in Q2.
• The Global FX segment reported a 19% increase in revenues less cost of revenues in Q2 2025 and 18% in H1 2025, with ADNV up 17% in Q2.
• The Futures segment experienced a 14% decrease in revenues less cost of revenues in Q2 2025 and a 4% decrease in H1 2025, primarily due to a 13% decrease in ADV in Q2.
• The North American Equities segment's revenues less cost of revenues remained flat in Q2 2025 and increased by 1% in H1 2025, with U.S. equity exchanges total touched shares up 45% in Q2, but net capture per one hundred touched shares decreased by 53% in Q2.
• An impairment charge of $17.1 million was recorded in Q2 2025 for Cboe Japan's customer relationships intangible assets due to market share declines.
• The company announced its decision to wind down its Japanese equities business, including Cboe Japan proprietary trading system and Cboe BIDS Japan block trading platform, effective August 29, 2025, expecting a pre-tax charge of $4.6 million in Q3 2025.

Sentiment

Score: 7

Explanation: The company reported strong overall financial performance with significant increases in revenue, net income, and EPS, driven by key segments like Options and Europe/Asia Pacific. Operating expenses decreased due to a non-recurring prior-year impairment. However, there are notable negatives including declines in the Futures segment, a significant drop in net capture for North American Equities, and an impairment charge related to the Japanese equities business, which is being wound down. Ongoing and new regulatory litigations (CAT, Equity Access Fees, OEMS) pose material risks and uncertainties, potentially impacting future revenues and costs. The expected gain from the Trading Technologies exit is a positive, but the overall picture is one of strong core performance tempered by strategic adjustments and regulatory headwinds.

Positives

• Strong revenue growth across most segments, with total revenues up 20% in Q2 2025 and 23% in H1 2025.
• Significant increase in net income (up 67% in Q2 2025 and 39% in H1 2025) and diluted EPS (up 68% in Q2 2025 and 40% in H1 2025).
• Operating income saw substantial growth, increasing by 61% in Q2 2025 and 41% in H1 2025.
• Options segment demonstrated robust performance with a 19% increase in revenues less cost of revenues in Q2 2025, driven by strong multi-listed and index options ADV.
• Europe and Asia Pacific segment showed strong growth in revenues less cost of revenues (up 30% in Q2 2025) due to increased European equities ADNV and Cboe Clear Europe net settlement volumes.
• Global FX segment reported healthy growth in revenues less cost of revenues (up 19% in Q2 2025) and ADNV.
• Total operating expenses decreased year-over-year, primarily due to the non-recurrence of a large impairment charge from Q2 2024.
• Cash and cash equivalents increased significantly to $1,256.3 million as of June 30, 2025, from $920.3 million at December 31, 2024.
• The company expects to record a gain from fully exiting its investment in 7Ridge Fund (which owns Trading Technologies) in Q4 2025.
• The company maintains a substantial share repurchase authorization of $614.5 million remaining as of June 30, 2025.

Negatives

• The Futures segment experienced a decrease in revenues less cost of revenues (down 14% in Q2 2025) and operating income (down 35% in Q2 2025) due to a decline in ADV.
• North American Equities segment saw a significant 53% decrease in net capture per one hundred touched shares in Q2 2025, despite increased touched shares.
• Japanese Equities ADNV declined significantly by 32% in Q2 2025 and 16% in H1 2025, leading to an impairment charge.
• An impairment charge of $17.1 million was recorded in Q2 2025 related to Cboe Japan's customer relationships intangible assets.
• Ongoing legal challenges related to the CAT Funding Model Order, which was vacated by the 11th Circuit, could lead to significant additional costs and impact the ability to collect on promissory notes.
• The SEC's Final Rules reducing equity access fee caps from $0.30 to $0.10 per 100 shares are expected to negatively impact transaction fee revenue and competitive positioning, though a stay has been granted.
• The OCC's planned Intraday Risk Charge in September 2025 may increase clearing members' costs, potentially leading to lower trading volumes on Cboe's exchanges, particularly for SPX options.

Risks

• The loss of the right to exclusively list and trade certain index options and futures products.
• Economic, political, and market conditions, including inflation, market volatility, potential recession, and supply chain constraints.
• Compliance with legal and regulatory obligations, which can be complex and costly.
• Price competition and consolidation within the industry, leading to pressure on transaction fees.
• Decreases in trading or clearing volumes, market data fees, or shifts in product mix.
• Legislative or regulatory changes, including changes in tax regimes.
• Cybersecurity vulnerabilities and breaches affecting systems and communication networks.
• Ability to attract and retain skilled management and other personnel.
• Increasing competition from foreign and domestic entities.
• Dependence on and exposure to risk from third-party service providers (e.g., clearing organizations like OCC, NSCC, DTC, CDS, LCH, Cboe Clear Europe, Cboe Clear U.S., JSCC, ASX Clear Pty Ltd, SIX x-clear; information processors like OPRA, UTP SIP, CTA; regulatory services like FINRA; cloud service providers; routing and clearing firms).
• Factors impacting the quality and integrity of Cboe's and other applicable indices.
• Ability to manage global operations, growth, and strategic acquisitions or alliances effectively.
• Increases in the cost of products and services used by the company.
• Ability to operate without violating intellectual property rights of others and costs associated with protecting intellectual property.
• Risks associated with operating clearinghouses, including credit, counterparty, investment, and default risks.
• Ability to accommodate trading and clearing volume and transaction traffic without system failure or degradation.
• Misconduct by market users or those for whom transactions are cleared.
• Challenges to the use of open-source software code.
• Ability to meet compliance obligations, balancing business interests and regulatory responsibilities.
• Loss of key customers or significant reduction in trading/clearing volumes by key customers.
• Ability to maintain BIDS Trading as an independently managed and operated trading venue.
• Damage to reputation.
• Effectiveness of compliance and risk management methods.
• Restrictions imposed by debt obligations and ability to make payments or refinance debt.
• Ability to maintain an investment grade credit rating.
• Impairment of goodwill, long-lived assets, investments, or intangible assets.
• Accuracy of estimates and expectations.
• Litigation risks and other liabilities, including those related to the Consolidated Audit Trail (CAT) funding model and equity access fees.
• The 11th Circuit's decision to vacate the CAT Funding Model Order may significantly delay or impact efforts to collect CAT fees, potentially leading to additional significant costs and uncollectible promissory notes for Plan Participants.
• The SEC's Final Rules reducing equity access fee caps may inhibit the ability to incentivize liquidity and differentiate fee schedules, materially impacting business and financial results.
• The OCC's Intraday Risk Charge, effective September 2025, may increase clearing members' costs and potentially reduce trading volumes on Cboe's exchanges.

Future Outlook

The company expects its cash on hand and other available resources, including cash generated from operations, to be sufficient to meet cash requirements for the foreseeable future. Near-term cash needs are expected to be met by cash from operations and the Revolving Credit Facility. Long-term cash needs will depend on factors like new product introductions, capital needs of subsidiaries, business geographic mix, and potential acquisitions, which may require additional borrowings or equity issuance. The company anticipates continued dividend payments, subject to Board discretion and various financial factors. The One Big Beautiful Bill Act (OBBBA) is expected to result in current year cash tax savings with no significant impact on the effective tax rate for 2025.

Management Comments

• Management uses non-GAAP measures internally to evaluate performance and make financial and operational decisions, believing they provide greater transparency into underlying operations.
• The company is committed to building a trusted, inclusive global marketplace that enables people to pursue a sustainable financial future.
• Management believes the challenge to the CAT Funding Model Order is without merit and intends to vigorously litigate the matter to recoup historical and potential future CAT costs.
• Management believes any potential requirement to make payments under guarantees for clearing services is remote and has not recorded any liability.
• Management regularly monitors financial institutions and believes the potential for future loss from cash holdings is remote.
• Management does not consider goodwill, indefinite-lived, or long-lived intangible assets to have a significant risk of impairment, except as noted for Cboe Japan.

Industry Context

The company's performance is influenced by macroeconomic events, investor sentiment, regulatory environment, geopolitical events, tax policies, central bank policies, and changing technology in financial services. The industry faces ongoing price competition and consolidation, particularly in North American, European, and Asia Pacific markets. The demand for market data and access services is crucial, dependent on product offerings, liquidity center importance, and data quality/pricing. Regulatory changes, including market structure, capital/margin requirements, and instrument-specific rules, continue to impact the business. Global economic issues like inflation, market volatility, and potential recession also pose challenges.

Comparison to Industry Standards

• Cboe Options is the largest options exchange in the U.S.
• Cboe is the third largest equities exchange operator in the U.S.
• Cboe Europe is one of the largest equities exchanges by value traded in Europe.
• Cboe Clear Europe is a leading pan-European equities and derivatives clearinghouse.
• BIDS Holdings owns a leading block-trading ATS by volume in the U.S.
• Cboe subsidiaries collectively serve as a leading market globally for exchange-traded products (ETPs) listings and trading.

Management Changes

Corporate Governance

Legal Proceedings

• CAT Funding Model Order Litigation: The 11th Circuit vacated the SEC's order approving the CAT Funding Model, remanding it to the SEC. This could significantly delay or impact CAT fee collection, potentially leading to additional costs for Plan Participants (including Cboe) and affecting the collectibility of promissory notes related to CAT funding. Cboe intends to vigorously litigate the matter.
• CAT Putative Class Action: A class action lawsuit alleges the SEC engaged in unlawful agency action regarding Rule 613 (mandating CAT creation and funding). This litigation is currently stayed until January 15, 2026, and could further delay CAT fee assessment and impact cost recovery.
• Citadel Petition for Review of SEC Temporary Conditional Exemptive Order: This petition challenges an SEC order related to CAT RFQ reporting and is stayed pending the resolution of the CAT Funding Model Order litigation. Its outcome could also delay CAT fee implementation and cost recovery.
• Equity Access Fees Cap Challenge: Cboe and Nasdaq have filed a Petition for Review against the SEC's Final Rules that reduce equity access fee caps from $0.30 to $0.10 per 100 shares. The SEC has granted a stay of the challenged provision until the litigation is resolved. If upheld, these rules are expected to reduce transaction fee revenue and limit Cboe's ability to incentivize liquidity and compete.
• OEMS Disapproval Order Challenge: Cboe Options has filed a Petition for Review against the SEC's disapproval of its proposed rule regarding order and execution management systems (OEMS). The outcome could impact competition within the OEMS market.
• Routine Reviews and Inspections: Cboe's various subsidiaries (e.g., Cboe Options, CFE, Cboe Clear U.S., Cboe Europe, Cboe Australia) are subject to ongoing routine reviews, audits, examinations, investigations, or inspections by their respective regulators (SEC, CFTC, FCA, DNB, ASIC, JFSA, OSC/CIRO). While no material impact has occurred historically, the possibility of future actions exists.

Related Party Transactions

• The company's investment in 7Ridge Investments 3 LP (7Ridge Fund), which wholly-owns Trading Technologies International Inc., is an equity method investment. The company declined an option to acquire Trading Technologies, and 7Ridge Fund is marketing it for sale. A transaction is expected to result in Cboe fully exiting its investment in Q4 2025 with an expected gain.

Stakeholder Impact

• Shareholders: Positive impact from strong revenue, net income, and EPS growth. Potential positive impact from the expected gain on the Trading Technologies investment exit. Potential negative impact from ongoing litigation risks (CAT, Equity Access Fees) and the impairment/wind-down of the Japanese equities business.
• Employees: Impacted by management changes, including new CEO and President appointments, and the resignation of the Global President. Employee stock plans and compensation are subject to clawback policies. The wind-down of the Japanese equities business will impact employees in that region.
• Customers: Potential impact from regulatory changes like the reduced equity access fee caps, which may affect liquidity incentives and competitive pricing. The OCC's Intraday Risk Charge could increase clearing costs for members. The refocusing of the digital asset business means the Cboe Digital spot market is closed, and futures contracts have transitioned to CFE.
• Suppliers/Vendors: The company's dependence on third-party service providers (e.g., clearing organizations, data centers, cloud services) means any interruption or significant fee increase could adversely affect operations.
• Creditors: The company's debt obligations and compliance with covenants are monitored. The Revolving Credit Facility and Cboe Clear Europe Credit Facility provide liquidity, but cross-acceleration/cross-default provisions pose a risk if a default occurs.

Next Steps

• The company will continue to monitor updates to the climate disclosure rules and potential impacts on financial statements.
• The company expects to adopt ASU 2023-09 (Income Tax Disclosures) for annual financial statements ending December 31, 2025.
• The company expects to adopt ASU 2024-03 (Expense Disaggregation Disclosures) for annual financial statements ending December 31, 2027.
• The company plans to continue to explore applicable avenues to recoup historical and potential future CAT costs and intends to vigorously litigate the matter.
• The company and Cboe U.S. equity exchanges intend to vigorously litigate the Equity Access Fees Cap Challenge.
• Cboe Options intends to vigorously litigate the OEMS Disapproval Order Challenge.
• OCC intends to establish a margin add-on charge (Intraday Risk Charge) in September 2025.
• Cboe expects to suspend operations for its Japanese equities business on August 29, 2025, and formally close the businesses subject to consultation with regulators.
• The transaction to fully exit the investment in 7Ridge Fund (Trading Technologies) is expected to close in Q4 2025 after regulatory clearance.

Key Dates

Recommendation

Cboe Global Markets demonstrates strong financial performance with significant revenue and earnings growth, particularly in its Options and European equities segments. The company's strategic shift away from less profitable digital asset and Japanese equities businesses, while incurring some impairment charges, aims to streamline operations and focus on core strengths. However, the ongoing and significant regulatory challenges, especially concerning the CAT funding model and equity access fees, introduce considerable uncertainty and potential future financial headwinds. While the core business is robust, these regulatory risks and the strategic restructuring warrant a 'hold' recommendation, as investors should monitor the outcomes of these legal proceedings and the successful integration of strategic changes before considering a stronger position.

Keywords

Financial Markets, Exchange Network, Derivatives, Equities, FX Trading, Options Trading, Clearinghouse, Market Data, Regulatory Compliance, SEC Filings, Earnings Report, Share Repurchase, Corporate Governance, Risk Management, Litigation, Cboe Global Markets