Nasdaq OMX Earnings Call Highlights Record Growth, Near-Term Risks

Nasdaq OMX ((NDAQ)) has held its Q4 earnings call. Read on for the main highlights of the call.

Nasdaq OMX Strikes Confident Tone as Record Revenues Offset Near-Term Headwinds

Nasdaq OMX’s latest earnings call carried a distinctly upbeat tone, underscored by record revenue, double‑digit growth in key metrics, and solid cash generation, even as management carefully mapped out several manageable headwinds. Executives emphasized strength across indexes, market services and financial technology, alongside margin expansion, rising free cash flow and rating upgrades. At the same time, they were transparent about rising operating expenses, some lumpiness in professional services revenue, expected quarterly revenue volatility, and regulatory and technical uncertainty around new initiatives like tokenization. Overall, the message was one of strong, broad‑based momentum with challenges acknowledged but firmly framed as controllable within the company’s strategic plan.

Record Year: Revenue Surpasses $5 Billion with Solutions at the Core

Nasdaq marked a major milestone in 2025, topping $5.2 billion in net revenue for the year, up 12% from the prior period and signaling the scale of the post‑transformation company. Solutions revenue – which includes technology, data, and analytics offerings – reached $4.0 billion, up 11% year over year and representing 76% of total net revenue. It was the first time Nasdaq exceeded both $5 billion in total revenue and $4 billion in solutions revenue, reinforcing its pivot away from a pure trading‑venue story toward a more diversified, recurring‑revenue model. Management highlighted this mix shift as a key underpinning of resilience and long‑term growth.

ARR, Profitability and EPS Surge on Operating Leverage

Annual recurring revenue (ARR) ended 2025 at $3.1 billion, up 10% year over year, reflecting healthy demand across core technology and data offerings. Operating income rose even faster, climbing 16% to $2.9 billion, as operating leverage kicked in. That translated into a sharp acceleration in earnings: full‑year diluted EPS grew 24%, while Q4 diluted EPS rose 27% to $0.96. Management framed the strong EPS performance as proof that the investment cycle in higher‑growth, higher‑margin businesses is now translating into tangible bottom‑line gains.

Strong Fourth Quarter Caps a Standout Year

The fourth quarter rounded out Nasdaq’s strong year with net revenue of $1.4 billion, up 13% from Q4 2024. Solutions revenue in the quarter came in at $1.1 billion, up 12%, while Q4 operating income climbed 16% to $783 million. Operating margin held at a robust 56% for both Q4 and the full year, showing that Nasdaq has been able to grow aggressively without sacrificing profitability. Management emphasized that the solid finish gives the company momentum as it enters 2026, despite some expected quarterly variability.

Index and ETP Franchise Delivers Record Inflows and Revenue Growth

Nasdaq’s index business continues to be a standout growth engine. The index franchise recorded $99 billion in net inflows over the past 12 months, a record, including an unprecedented $35 billion in Q4 alone. Exchange‑traded product (ETP) assets under management tied to Nasdaq indexes hit an all‑time high of $882 billion. Index revenue jumped 23% in the quarter, reflecting strong investor demand for Nasdaq‑branded strategies and the power of the licensing model. For investors, this business provides a high‑margin, scalable revenue stream tied to long‑term trends in passive and rules‑based investing.

Market Services and Options Activity Hit New Highs

Market Services posted record annual net revenue of $1.2 billion, up 17% year over year, underscoring the continued vibrancy of Nasdaq’s trading venues. The options franchise was a particular highlight, with index options revenue more than doubling year over year for the second consecutive quarter. In Q4, market services net revenue climbed 14% to $311 million. Management underscored that options and index derivatives remain key growth pillars, though they also warned that some pricing mechanics and regulatory fee timing will create near‑term volatility in capture rates.

FinTech Expansion: Double‑Digit Growth and Deepening Client Relationships

Nasdaq’s Financial Technology segment delivered 11% revenue growth in 2025, reaching $1.85 billion. A key driver was Financial Crime Management Technology, which grew roughly 22% for the year and 24% in Q4, riding structural demand for anti‑money‑laundering and fraud‑detection solutions. The company added 291 new FinTech clients and executed 462 upsells in 2025, and now counts every global systemically important bank (GSIB) as a client. This breadth and depth of relationships reinforces Nasdaq’s positioning as a critical technology partner to the world’s largest financial institutions.

Cash Flow Strength Fuels Buybacks, Dividends and Deleveraging

Nasdaq’s cash‑generation profile stood out. Free cash flow was approximately $2.2 billion in 2025, with a conversion ratio of 109%, underlining the quality of earnings. The company returned substantial capital to shareholders, repurchasing $616 million of stock (7.2 million shares) and paying $601 million in dividends, equivalent to $1.05 per share. At the same time, Nasdaq paid down $826 million of debt, bringing gross leverage down to 2.9x, better than its previous 3.0x target. Management framed this as a balanced capital‑allocation approach that supports growth, rewards shareholders, and strengthens the balance sheet ahead of future opportunities.

Efficiency Gains and Credit Rating Upgrades Strengthen the Balance Sheet

Beyond raw deleveraging, Nasdaq pushed through structural efficiency improvements. The company exceeded its expanded efficiency program goals, achieving more than $160 million in cost reduction actions. These efforts, combined with consistent cash generation and lower leverage, led Moody’s and S&P to upgrade Nasdaq’s senior unsecured debt ratings to Baa1 and BBB+, respectively. Higher credit ratings reduce funding costs and give Nasdaq more flexibility to pursue selective acquisitions and continued investment in strategic initiatives.

Innovation Push: AI Workforce, Tokenization and 23×5 Trading Plans

Nasdaq emphasized an active innovation pipeline spanning AI, digital assets and market structure. It launched an “Agentic AI workforce,” including an AI sanctions analyst and enhanced due‑diligence analyst, with early client engagement described as strong. The company also partnered with BioCatch to bolster its fraud‑prevention capabilities. On the digital‑assets front, Nasdaq filed a tokenized equities approach that prioritizes issuer choice and investor protection, while acknowledging material regulatory and infrastructure complexity. Additionally, it announced plans to offer 23×5 trading (extended weekday hours) subject to regulatory approval, targeting the growing demand for around‑the‑clock market access.

Cross-Sell Strategy Gains Traction Across the Franchise

The “One Nasdaq” strategy, aimed at cross‑selling technology, data and analytics across the client base, showed further progress. In 2025, the company reported 25 FinTech cross‑sell wins, bringing the total to 42 since closing its major acquisition in the segment. Cross‑sell opportunities now represent more than 15% of the FinTech sales pipeline, and management reiterated that Nasdaq is on track to surpass $100 million in run‑rate cross‑sell revenue by 2027. This integration and bundling strategy is central to the company’s plan to deepen client relationships and extract more value from its platform.

Rising Operating Expenses and 2026 Cost Guidance

While revenue and earnings growth were strong, Nasdaq also flagged rising costs. Operating expenses in 2025 increased 7% to $2.331 billion, with Q4 expenses up 8% to $609 million. For 2026, the company guided to non‑GAAP operating expenses of $2.455–$2.535 billion, implying roughly 7% organic growth at the midpoint. Foreign exchange is expected to add about $20 million to the expense base, partially offset by a $25 million net decline tied to a divestiture and a small acquisition. Management argued that these expense levels are necessary to support innovation and growth, but investors will be watching execution closely to ensure margins remain well supported.

Professional Services to Normalize, Adding Revenue Volatility

Part of the recent strength in Financial Crime Management Technology came from higher professional services fees, particularly implementation work for both small‑ and mid‑sized businesses and large enterprises. Management cautioned that these elevated professional services revenues, which boosted Q4 results, are not expected to continue at the same level through 2026. As these one‑time or project‑based revenues normalize, Nasdaq expects more quarter‑to‑quarter variability, especially within the FinTech segment, even as underlying recurring revenue trends remain positive.

Implementation Delays Weigh on Calypso and Axiom Professional Services

Nasdaq also noted that implementation delays tied to client readiness impacted professional services revenue in its combined Calypso and Axiom SL businesses during parts of 2025. These delays led to uneven revenue recognition and contributed to the patchy professional services performance across quarters. While management framed these issues as timing‑related rather than structural, they add another source of short‑term variability in reported FinTech results and underscore the complexity of large enterprise technology rollouts.

FinTech Margins Under Pressure Despite Growth

Despite healthy top‑line gains, Nasdaq’s Financial Technology margins faced some pressure. In Q4, the segment’s operating margin declined 100 basis points year over year to 48%, with the full‑year margin at 47%. Management attributed this to factors including investment in growth initiatives, the mix of professional services, and ongoing integration efforts. Investors are likely to monitor whether margins stabilize or improve as implementation revenues normalize and cost‑efficiency programs take fuller effect, given FinTech’s role as a central growth pillar.

Options Capture and Contract Rate Resets Add Short-Term Noise

In the derivatives business, Nasdaq highlighted some technical factors that weighed on Q4 economics and will affect early‑2026 results. The Q4 options capture rate was lower due to the timing of regulatory fees (ARF): robust volumes earlier in the year helped recover regulatory expenses sooner, which reduced ARF in Q4 and lowered capture. Looking ahead, a contracted derivatives trading rate will reset at the start of 2026 and is expected to create a sequential revenue dip in the first quarter until a revenue threshold is crossed, likely early in Q2, when the rate is scheduled to step up. These dynamics do not reflect underlying demand trends but will impact reported quarterly results.

Listing Revenue Headwinds and IPO Timing Risks

Nasdaq warned of a meaningful drag on listing revenues in 2026. Management expects about a $9 million year‑over‑year headwind in each quarter of 2026, stemming from prior‑year delistings, proposed listing‑standards changes, and an amortization “cliff” for earlier initial listing fees. Additionally, the government shutdown in late 2025 disrupted capital‑markets activity and pushed some IPOs into 2026, adding timing risk to near‑term listing revenue despite what Nasdaq described as a healthy overall pipeline. The company suggested these pressures are cyclical and regulatory rather than indicative of structural weakness in its listing franchise.

Tokenization and New Markets: Big Opportunity, Meaningful Uncertainty

Nasdaq spent time outlining both the promise and the uncertainty surrounding tokenized assets and new market structures. While it has filed a tokenized equities model designed to preserve issuer choice and investor protection, management stressed that regulatory, interoperability and capital‑efficiency challenges remain substantial. They acknowledged that blockchain‑native trading, at the scale and latency required for modern equity markets, is not yet feasible. Success will depend heavily on regulatory frameworks and infrastructure partners, and there is a risk of liquidity fragmentation as new venues and models emerge. For now, tokenization is framed as a long‑term strategic option rather than a near‑term financial driver.

Guidance: Solid Growth Outlook with Managed Volatility

For 2026, Nasdaq guided to non‑GAAP operating expenses of $2.455–$2.535 billion, implying about 7% organic growth at the midpoint, and a non‑GAAP tax rate of 22.5%–24.5%. The company reiterated that it expects roughly a $9 million year‑over‑year revenue headwind per quarter from listing‑related factors, and flagged a sequential revenue impact in the first quarter from the derivatives trading rate reset, with improvement expected once a threshold is reached, likely in early Q2. Management also highlighted the strategic backdrop: more than $160 million in cost reductions already executed, gross leverage at 2.9x, about $2.2 billion of free cash flow with 109% conversion, a $1.05 per share dividend paid in 2025, $616 million of share repurchases, and $826 million of debt reduction. Looking forward, Nasdaq reiterated its focus on organic growth, selective bolt‑on deals, and a goal of exceeding $100 million of run‑rate cross‑sell revenue by 2027.

In sum, Nasdaq OMX’s earnings call painted the picture of a company entering 2026 from a position of strength, with record revenues, expanding recurring business, and a fortified balance sheet, but facing a more complex near‑term operating environment. Investors were told to expect some quarterly noise from professional services timing, listing headwinds, and derivatives pricing mechanics, as well as ongoing investment in innovation and technology. Yet the overarching narrative remains positive: Nasdaq is increasingly a diversified, high‑margin technology and data platform with robust cash generation, growing strategic relevance to global financial institutions, and a clear roadmap to navigate the short‑term bumps on the road to longer‑term growth.