Executive Summary / Key Takeaways

• Cboe Global Markets delivered record first-quarter 2025 results, with net revenue up 13% and adjusted diluted EPS up 16% year-over-year, driven by strong performance across its Derivatives, Cash and Spot Markets, and Data Vantage segments.
• The company's core investment thesis is centered on its leading Global Derivatives franchise, expanding Data Vantage business, and leveraging its global network and proprietary technology platform, Cboe Titanium, to capitalize on secular trends like the rise of options, retail participation, and globalization.
• Cboe Titanium, the company's unified exchange technology platform, is a key differentiator, enabling innovation, enhancing market quality, and supporting global expansion and data solutions, with recent migrations completed across key markets.
• Management has increased its full-year 2025 organic total net revenue growth guidance to mid to high single digits and reaffirmed Data Vantage organic net revenue growth at mid to high single digits, reflecting confidence in the business momentum and strategic initiatives.
• Disciplined capital allocation balances investment in organic growth and technology with returning capital to shareholders through dividends and opportunistic share repurchases, supported by a strong balance sheet and healthy free cash flow generation.

Cboe Global Markets stands as a pivotal player in the global financial landscape, operating a leading network of exchanges and market infrastructure across multiple asset classes and geographies. At its core, the investment thesis for Cboe is built upon its dominant position in the U.S. options market, its expanding suite of data and access solutions, and its strategic pivot to leverage a unified global technology platform and network to capture growth from secular trends reshaping capital markets worldwide. This strategy, refined over recent years, emphasizes organic growth, disciplined expense management, and returning capital to shareholders, a focus that is beginning to yield tangible results.

The company's journey has seen significant transformation, notably through the acquisition of Bats Global Markets in 2017, which dramatically expanded its footprint in U.S. equities and established a significant presence in Europe. Subsequent acquisitions and organic build-outs have extended its reach across North America, Europe, and Asia Pacific, positioning Cboe as a truly global entity. This history of expansion provides the foundation for its current strategic emphasis on importing trading activity back to the highly liquid U.S. markets and exporting its market models and technology to new regions.

A critical enabler of Cboe's strategy and a core competitive advantage is its proprietary technology platform, now unified under the brand Cboe Titanium. This platform powers all of Cboe's equities and derivatives markets across its global network. The completion of the final equities exchange migration in the U.S. in the first quarter of 2025 and the successful migration of Cboe Canada in March 2025 mark significant milestones, freeing up technology resources previously dedicated to integration work to focus on revenue-generating initiatives. Cboe Titanium is designed for resilience, reliability, and efficiency, providing the foundation for enhanced market quality, faster trade processing, and lower latency. While specific, directly comparable quantitative metrics versus competitor platforms are not detailed, management highlights that this technology enables innovation, supports the development of new products and data solutions, and is expected to drive future growth. The company is also exploring the potential of AI through an internal center of excellence to improve productivity and identify new revenue opportunities. This technological backbone is fundamental to Cboe's ability to compete effectively and execute its global strategy.

Cboe operates through five reportable business segments: Options, North American Equities, Europe and Asia Pacific, Futures, and Global FX. The Options segment remains a powerhouse, contributing the largest share of revenue and driving significant growth. In the first quarter of 2025, the Options segment generated $584.6 million in revenue, resulting in $352.4 million in revenue less cost of revenues and $257.9 million in operating income. This represented a 22% increase in net revenue year-over-year. This performance was fueled by robust volumes, particularly in proprietary index options like SPX (ADV up 13% YoY) and XSP (ADV up 61% YoY), as well as VIX options (ADV up 33% YoY). The continued rise of zero DTE options trading, now accounting for a record 55% of overall SPX volume, and increasing index option volume in global trading hours (up 36% YoY) underscore the growing utility of Cboe's volatility toolkit for investors navigating dynamic markets. New products like Bitcoin index options are also showing encouraging early growth.

The North American Equities segment, encompassing U.S. and Canadian equities and ETPs, also performed well, with revenues reaching $460.1 million in Q1 2025, contributing $94.6 million in revenue less cost of revenues and $44.4 million in operating income. Net revenue grew 32% year-over-year, although management noted that the benefit from healthy industry activity in the U.S. was partially muted by a smaller addressable market due to off-exchange and auction volumes. The segment saw durable demand for access services and data products. Plans to launch 24x5 U.S. equities trading on Cboe EDGX, leveraging the Cboe Titanium platform, aim to capture growing global demand for access to the U.S. market, although this is subject to regulatory and industry infrastructure readiness.

The Europe and Asia Pacific segment delivered the strongest percentage growth in Q1 2025, with net revenue increasing 15% year-over-year to $93.1 million, resulting in $64.1 million in revenue less cost of revenues and $22.0 million in operating income (a significant 116% increase in operating income YoY). This growth was driven by higher transaction and clearing fees (up 30%) from strong industry volumes and market share gains in European equities (Cboe was the largest European stock exchange in Q4 2024) and solid performance in Australia and Japan. Non-transaction revenues also saw healthy growth. Strategic investments in the region, including the acquisition of a stake in Japanx and expanding sales teams, aim to further strengthen Cboe's presence and facilitate the import of derivatives activity back to the U.S. The launch of SFT clearing in Europe in March 2025 represents another avenue for growth.

The Futures segment, which now includes the Digital business results, generated $35.3 million in revenue in Q1 2025, with $32.8 million in revenue less cost of revenues and $20.6 million in operating income. Net revenue increased 12% year-over-year (though this comparison is impacted by the inclusion of Digital in 2025). Growth was supported by a 13% increase in VIX futures ADV and an uptick in corporate bond futures. The company is refocusing its digital asset business on derivatives, planning to transition Bitcoin and Ether futures to CFE in Q2 2025.

The Global FX segment reported $21.9 million in revenue in Q1 2025, contributing $21.3 million in revenue less cost of revenues and $10.3 million in operating income. Net revenue increased 16% year-over-year, driven by higher transaction and clearing fees.

Underpinning all segments is the Data Vantage business (formerly Data and Access Solutions), which provides recurring revenue streams from access fees, proprietary market data, and analytics. This segment saw revenue increase 9% year-over-year in Q1 2025 to $152.5 million, with $149.4 million in revenue less cost of revenues. Growth is driven by increased demand for access and proprietary data, particularly internationally, where 55% of new data sales occurred in Q1 2025. Technology enhancements, such as the dedicated cores offering and the Cboe Global Cloud, are instrumental in delivering data and access solutions closer to customers globally and are expected to drive continued growth.

Cboe operates in a highly competitive landscape against major global exchange operators like CME Group (CME), Nasdaq (NDAQ), and Intercontinental Exchange (ICE), as well as smaller niche players and alternative trading venues. While CME dominates the U.S. futures market, Cboe holds a leading position in U.S. options trading. Nasdaq and ICE compete across equities, derivatives, and data services. Cboe's competitive advantages lie in its specialized product suite (particularly proprietary index options), its unified global technology platform (Cboe Titanium), its expanding global network, and its focus on specific growth areas like retail and international access. While Cboe may not match the sheer scale of some competitors in all segments, its strategic focus on leveraging its strengths in derivatives and data, coupled with its technological capabilities, allows it to compete effectively and differentiate its offerings. For instance, in multi-listed options, Cboe competes on pricing, functionality, technology, and data analytics to balance market share and capture against new entrants focused on lower capture flows. The ongoing litigation challenging the SEC's Reg NMS access fee caps highlights a key competitive pressure point in U.S. equities that could impact transaction fee revenue and the ability to incentivize liquidity.

Financially, Cboe demonstrates robust performance. For the three months ended March 31, 2025, total revenues were $1,195.0 million, with total cost of revenues of $629.8 million, resulting in revenues less cost of revenues of $565.2 million. Operating expenses were $211.3 million, leading to operating income of $353.9 million. Net income for the quarter was $250.6 million.

The company maintains a strong balance sheet with $1,047.2 million in cash and cash equivalents and $1,441.5 million in long-term debt as of March 31, 2025. The leverage ratio stands at a healthy 1.0 times. Net cash provided by operating activities was $912.9 million for the first quarter of 2025. This strong financial position supports disciplined capital allocation, including returning capital to shareholders. In Q1 2025, Cboe paid $66.4 million in cash dividends ($0.63 per share) and repurchased $30.0 million of common stock. The company had $649.8 million remaining under its share repurchase authorization as of March 31, 2025.

Looking ahead, Cboe's outlook is positive, supported by management's increased guidance for full-year 2025. Organic total net revenue growth is now targeted at mid to high single digits, up from mid-single digits, reflecting the strong start to the year and confidence in the business momentum. Data Vantage organic net revenue growth is reaffirmed at mid to high single digits. Adjusted operating expenses are guided to be between $837 million and $852 million, accounting for modest core growth and targeted investments in areas like global sales, European SFTs, and marketing for index options education. CapEx is expected to be $75 million to $85 million, reflecting continued investment in technology and infrastructure. Depreciation and amortization is guided between $55 million and $59 million. The effective tax rate on adjusted earnings is expected to be 28.5% to 30.5%. Management anticipates interest expense net of interest income to be in the $2 million to $3 million range in Q2 2025.

While the outlook is optimistic, investors should be mindful of key risks. Regulatory challenges, particularly litigation surrounding the CAT funding model and the SEC's access fee caps, could impact costs, revenue, and competitive positioning. Intense competition across all segments could pressure market share and pricing. Global operations expose the company to foreign currency fluctuations and geopolitical risks. Risks related to clearing operations, including credit and liquidity risks, are also present, although mitigated by established procedures and facilities like the Cboe Clear Europe Credit Facility (which is set to terminate in June 2025). The ability to obtain a replacement facility on commercially reasonable terms is a factor to watch.

Conclusion

Cboe Global Markets has demonstrated strong execution of its refined strategic framework, delivering record first-quarter 2025 results driven by its core strengths in derivatives, expanding data solutions, and leveraging its global technology platform. The company's focus on capturing growth from secular trends like the increasing use of options, the rise of retail investors, and the globalization of markets, particularly through its "import and export" strategy, is proving effective. With a unified technology platform, targeted investments in high-growth areas, disciplined expense management, and a commitment to returning capital to shareholders, Cboe appears well-positioned to build on its recent momentum. While regulatory challenges and intense competition remain inherent to the industry, Cboe's differentiated product suite, technological capabilities, and strategic clarity provide a compelling investment narrative, supported by positive guidance for the year ahead.