10-Q: Nasdaq Reports Strong Q3 2025 Earnings, Strategic Growth

Nasdaq, Inc. announced robust financial results for the third quarter and first nine months of 2025, driven by strong performance in Capital Access Platforms and Financial Technology segments, alongside increased shareholder returns.

Summary

• Revenues less transaction-based expenses increased by 14.8% to $1,315 million for Q3 2025, and by 12.7% to $3,857 million for the nine months ended September 30, 2025, compared to the prior year periods.
• Operating income rose significantly by 31.0% to $586 million in Q3 2025 and by 32.9% to $1,702 million for the nine-month period.
• Net income attributable to Nasdaq increased by 38.4% to $423 million for Q3 2025 and by 66.6% to $1,270 million for the nine-month period.
• Diluted earnings per share grew by 38.4% to $0.73 in Q3 2025 and by 66.6% to $2.19 for the nine-month period.
• Annualized Recurring Revenue (ARR) for the Financial Technology segment grew by 12%, reflecting new clients, cross-sells, and upsells.
• Index business achieved a record $91 billion in net inflows over the last twelve months, with end-of-period ETP AUM reaching $829 billion.
• Nasdaq completed the transfer of its Nordic power futures business in June 2025 and the sale of its Nasdaq Risk Modelling for Catastrophes business in April 2025.
• An agreement to sell Nasdaq Solovis was entered into in September 2025 and closed in October 2025, with a gain to be recorded in Q4 2025.
• The Adenza restructuring program has actioned over $150 million in net expense synergies through September 30, 2025, surpassing the initial target.

Sentiment

Score: 8

Explanation: The filing indicates strong financial performance with significant increases in net income and EPS, driven by growth in key technology and capital access segments. Strategic divestitures and effective restructuring are contributing to efficiency and future capital release. While there are minor market share dips in trading, overall volumes are up, and shareholder returns are increasing. The CEO's stock sale is for personal financial planning, not a reflection of company prospects.

Positives

• Strong revenue growth across Capital Access Platforms (9.1% in Q3) and Financial Technology (23.3% in Q3) segments.
• Significant increases in operating income (31.0% in Q3) and net income (38.4% in Q3) year-over-year.
• Diluted EPS saw substantial growth of 38.4% in Q3 and 66.6% for the nine-month period.
• Capital Access Platforms segment reported 76 IPOs on The Nasdaq Stock Market in Q3 2025, up from 48 in Q3 2024, and an increase in total listed companies to 4,359 from 4,039.
• Index business achieved record ETP AUM of $829 billion and $91 billion in net inflows over the last twelve months.
• Financial Technology segment demonstrated 12% ARR growth, driven by new clients, cross-sells, and upsells.
• Market Services delivered record U.S. equity derivatives revenue and volumes, with Nasdaq Index options volumes also reaching record levels.
• Nasdaq's Closing Cross set a new daily notional value record in September 2025.
• Successful divestitures of non-core assets (Nordic power futures, Risk Modelling for Catastrophes, Solovis) are expected to release regulatory capital and generate gains.
• Achieved over $150 million in net expense synergies from the Adenza restructuring program, exceeding initial targets.
• Increased cash dividends declared per common share by 12.5% in Q3 2025 to $0.27, reflecting a commitment to shareholder returns.
• Net cash provided by operating activities increased by $396 million to $1,630 million for the nine months ended September 30, 2025.

Negatives

• Market Services total revenues decreased by 7.4% in Q3 2025, although revenues less transaction-based expenses increased.
• U.S. Tape plans revenues decreased by 7.4% in Q3 2025, primarily due to lower audit revenue collection.
• Total matched market share executed on Nasdaq's exchanges for U.S. Equity Derivative Trading decreased to 28.5% in Q3 2025 from 30.2% in Q3 2024.
• Total matched market share executed on Nasdaq's exchanges for Cash Equity Trading decreased to 14.1% in Q3 2025 from 16.1% in Q3 2024.
• Net cash used in investing activities shifted from a $55 million provision in 2024 to a $462 million usage in 2025 for the nine-month period, primarily due to net purchases of investments related to default funds and margin deposits.

Risks

• Operating results may be lower than expected.
• Ability to successfully integrate acquired businesses or divest sold businesses or assets, with integration or transition potentially being more difficult, time-consuming, or costly than expected.
• Inability to realize synergies from business combinations, acquisitions, divestitures, or other transactional activities.
• Loss of significant trading and clearing volumes or values, fees, market share, listed companies, market data customers, or other customers.
• Ability to develop and grow non-trading businesses.
• Ability to keep up with rapid technological advances, including effectively managing the development and use of AI and adequately addressing cybersecurity risks.
• Economic, political, regulatory, and market conditions and fluctuations, including inflation, tariffs, U.S. federal government shutdowns, interest rate and foreign currency risk, and geopolitical instability.
• Performance and reliability of technology and technology of third parties on which the company relies.
• Any significant systems failures or errors in operational processes.
• Ability to continue to generate cash and manage indebtedness.
• Adverse changes in litigation or regulatory areas, or in the securities markets generally, or increased regulatory oversight domestically or internationally.
• Uncertainty regarding the duration or ultimate outcome of the European Commission's review into potential competition law concerns, and the amount of any fines or other remedies.

Future Outlook

Nasdaq expects to wind down commodities clearing and trading services for its Nordic power futures business by the end of the second quarter of 2026, with additional consideration expected in 2026 and 2027 and regulatory capital release in the medium term. The Adenza restructuring program initiatives are expected to be actioned by the end of 2025, with some costs recognized in the first half of 2026. The company anticipates a positive, but not material, impact on future earnings from the One Big Beautiful Bill Act signed into law on July 4, 2025. The final settlement of the variable notional ASR agreement is expected in the fourth quarter of 2025.

Management Comments

• Nasdaq delivered a strong quarter in Listing Services, highlighting the Company's continued market leadership and welcomed U.S. operating companies that raised $6.0 billion in proceeds.
• The Financial Technology segment delivered 12% ARR growth, reflecting an increase in new clients, cross-sells and upsells.
• Market Services delivered record U.S. equity derivatives revenue and volumes.
• My belief in the Company's prospects remains strong, and the plan was implemented to facilitate the exercise and sale of stock options expiring on January 3, 2027. (Adena T. Friedman regarding her stock sale plan)

Industry Context

Nasdaq's performance reflects a mixed but generally positive macroeconomic environment. Higher overall U.S. trading volumes in the first nine months of 2025 contributed to increased U.S. Equity Derivative Trading and U.S. Cash Equity Trading revenues. Market factors also led to higher valuations in Nasdaq indices. While global uncertainty due to tariff policies caused some delays in IPOs, the expectation of a lower cost of capital, U.S. economic resilience, and deregulation efforts have boosted investor confidence in new issuances. The company's focus on SaaS and subscription-based revenues in its Capital Access Platforms and Financial Technology segments aligns with broader industry trends towards recurring revenue models and technology-driven financial services.

Comparison to Industry Standards

• Nasdaq's 76 IPOs on The Nasdaq Stock Market in Q3 2025, compared to 48 in Q3 2024, indicates strong performance in attracting new listings, potentially outperforming competitors in a recovering IPO market.
• The record $91 billion in net inflows for Nasdaq-tracked ETP AUM over the last twelve months and $829 billion in total AUM suggest robust demand for Nasdaq's index products, positioning it competitively against other index providers like S&P Dow Jones Indices or MSCI.
• The 12% ARR growth in the Financial Technology segment, particularly in Financial Crime Management Technology, Regulatory Technology, and Capital Markets Technology, demonstrates strong adoption of its SaaS solutions, comparable to leading FinTech providers in these specialized areas.
• While Nasdaq's total matched market share in U.S. equity derivatives (28.5% in Q3 2025) and cash equities (14.1% in Q3 2025) saw slight declines, the overall industry average daily volumes increased significantly, indicating that Nasdaq captured a smaller slice of a larger pie, which is a common dynamic in competitive trading environments with multiple exchanges (e.g., NYSE, Cboe).

Management Changes

Corporate Governance

Legal Proceedings

• The European Commission conducted an inspection in September 2024 at Nasdaq Stockholm offices related to a potential competition law concern regarding a cooperative arrangement with Eurex from 1999. The arrangement ended before the investigation, but the duration, outcome, and potential fines are uncertain.

Related Party Transactions

• Nasdaq's equity method investments primarily include a 40.0% equity interest in OCC (The Options Clearing Corporation), from which net income of $24 million (Q3 2025) and $73 million (YTD Sep 2025) was recognized.

Stakeholder Impact

• Shareholders benefit from increased diluted EPS ($0.73 in Q3 2025, $2.19 YTD Sep 2025) and higher cash dividends ($0.27 per share in Q3 2025).
• Employees are impacted by increased headcount (9,625 vs. 9,120) and higher incentive compensation, but also by restructuring charges related to the Adenza program.
• Customers in Capital Access Platforms and Financial Technology segments benefit from new product launches (e.g., 30 new Index products) and increased subscription revenues from new sales and price increases.
• Clearing members and market participants are affected by the transfer and wind-down of the Nordic power futures business and changes in regulatory capital requirements for clearing operations.
• The company's investment in technology, including cloud initiatives and AI capabilities, aims to improve service offerings for all clients.

Next Steps

• Wind down of commodities clearing and trading services for the Nordic power futures business by the end of Q2 2026.
• Migration of open positions for the Nordic power futures business by the end of Q1 2026.
• Recognition of additional consideration in 2026 and 2027 from the Nordic power futures divestiture.
• Release of regulatory capital in the medium term from the Nordic power futures divestiture.
• Actioning of remaining initiatives under the Adenza restructuring program by the end of 2025, with some costs recognized in H1 2026.
• Final settlement of the variable notional ASR agreement expected in Q4 2025.
• Payment of a regular quarterly cash dividend of $0.27 per share on December 19, 2025, to shareholders of record on December 5, 2025.
• CEO Adena T. Friedman's plan to exercise expiring stock options and sell shares in 2026, starting as early as January 2, 2026.

Key Dates

Recommendation

The filing demonstrates strong financial performance with significant year-over-year growth in net income, EPS, and operating income, driven by robust performance in its Capital Access Platforms and Financial Technology segments. Strategic divestitures are streamlining operations and expected to release capital, while the Adenza restructuring program is yielding substantial expense synergies. The increase in dividends and ongoing share repurchase program indicate a commitment to shareholder returns. Despite minor market share fluctuations in trading, overall industry volumes are favorable, and Nasdaq's diversified business model, particularly its growing SaaS and subscription revenues, positions it well for continued growth. The CEO's stock sale is for personal financial planning and not indicative of a negative outlook on the company's future.

Keywords

Financial Technology, Capital Markets, Exchange Operator, SEC Filing, Earnings Report, Stock Market, Trading Volumes, IPO, ETP AUM, SaaS, Financial Crime Management, Regulatory Technology, Market Data, Index Products, Share Repurchase, Dividends, Restructuring, Adenza, Risk Management, Corporate Governance