Executive Summary / Key Takeaways

• Platform Transformation Accelerates: Nasdaq is successfully evolving into a technology-first platform company, leveraging strategic acquisitions like Adenza and deep AI integration to enhance its mission-critical solutions across the global financial ecosystem.
• Strong Financial & Operational Momentum: The company delivered a standout Q2 2025, with net revenue up 12% and solutions revenue growing 10%, driven by robust performance across all segments, particularly in Financial Technology and Market Services.
• Technological Edge & Innovation: Nasdaq's investment in cloud-based platforms, AI (e.g., Verafin's Agentic AI reducing alert review workload by over 80%), and next-generation trading infrastructure (Eqlipse Trading, on-chain collateral management) provides a significant competitive advantage and drives client value.
• Disciplined Capital Strategy: Strong free cash flow generation supports continued deleveraging, with the gross leverage ratio reaching 3.2x ahead of schedule, alongside progressive dividends and opportunistic share repurchases.

• Resilient Outlook: Despite macroeconomic uncertainties and regulatory shifts, Nasdaq's diversified business model, healthy sales pipeline, and ongoing efficiency programs position it for sustained growth within its 2025 guidance, with cross-sells on track to exceed $100 million in run rate revenue by 2027.

Setting the Stage: Nasdaq's Evolution and Market Imperatives

Nasdaq, Inc., founded in 1971, has transcended its origins as a pioneering stock exchange to become a global technology powerhouse. Its journey reflects a strategic evolution from a market operator to a comprehensive partner for the financial system, offering data, analytics, software, and exchange capabilities. This transformation is particularly evident in its long-standing listing switch program, which by Q1 2025, had attracted over $3 trillion in market value, cementing its role as a premier venue for public companies.

The company's overarching strategy centers on building world-leading platforms that enhance liquidity, transparency, and integrity across the global economy. This vision is underpinned by a relentless focus on technology and innovation, recognizing that the financial system is undergoing a generational shift towards digitalization and advanced data management. Nasdaq's core differentiated technology lies in its advanced cloud-based infrastructure, sophisticated AI integration, and fourth-generation marketplace solutions. These capabilities offer tangible benefits, such as enhanced scalability, hyper-resilience, and improved efficiency for clients.

In the competitive landscape, Nasdaq operates alongside major global exchange operators and financial technology providers like Intercontinental Exchange (ICE), Cboe Global Markets (CBOE), and CME Group (CME). While ICE boasts an entrenched position with the NYSE and broader market reach, and CBOE excels in specialized derivatives, Nasdaq distinguishes itself through its deep technological expertise and integrated solutions. Its proprietary SaaS tools, particularly in anti-financial crime and regulatory technology, offer superior efficiency and faster innovation cycles. For instance, Nasdaq's investment in AI-powered solutions aims to deliver quantifiable improvements, such as Verafin's Agentic AI workforce, which is designed to reduce alert review workloads by over 80% for financial institutions. This directly translates to operational cost savings and enhanced compliance effectiveness for clients.

Nasdaq's strategic response to industry trends, including the maturation of the digital asset ecosystem and increasing demand for cloud-based solutions, involves continuous R&D. The company's expanded partnership with AWS aims to modernize global financial infrastructure, offering clients managed services and AWS-hosted SaaS deployments. This technological roadmap, including Calypso's innovative proof of concept for on-chain collateral management targeting early to mid-2026, seeks to unlock significant liquidity and improve capital efficiency across asset classes. These technological advancements are not merely product features; they are foundational to Nasdaq's competitive moat, driving higher client retention, enabling new revenue streams from managed services, and ultimately contributing to better margins and long-term growth.

Financial Performance: A Diversified Growth Engine

Nasdaq's strategic pivot towards a technology-first platform is clearly reflected in its recent financial performance. In the second quarter of 2025, the company delivered robust results, with net revenue climbing 12% year-over-year to $1.3 billion. Solutions revenue, a key indicator of its strategic focus, grew an impressive 10% year-over-year to $991 million, demonstrating the strength of its diversified offerings. This performance underscores the durability of Nasdaq's model, particularly given the heightened market volatility experienced early in the quarter.

Profitability metrics highlight the operating leverage inherent in Nasdaq's model. For the trailing twelve months (TTM), the company reported a gross profit margin of 61.46%, an operating profit margin of 25.64%, and an EBITDA margin of 30.58%. This translated into a Q2 2025 operating income of $721 million, a 16% increase year-over-year, and a 24% rise in diluted earnings per share. Year-to-date through Q2 2025, revenues less transaction-based expenses reached $2.543 billion, up 11.7% from the prior year, with net income attributable to Nasdaq soaring 85.5% to $847 million.

Breaking down performance by segment reveals the drivers of this growth. The Capital Access Platforms segment generated $527 million in Q2 2025 revenue, up 9.8% year-over-year, with its ARR growing 6%. This was fueled by its Listings franchise, which extended its leadership to 46 consecutive quarters, welcoming 38 U.S. operating company IPOs in Q2 and attracting $271 billion in market capitalization through its switch program year-to-date. The Index business was a standout, with revenue up 17% in Q2, driven by a record $88 billion in net inflows over the last 12 months and a new high of $745 billion in ETP AUM. This segment's performance, particularly in data and index, showcases Nasdaq's ability to capitalize on market activity and investor demand for diversified products.

The Financial Technology segment, a cornerstone of Nasdaq's platform strategy, reported $464 million in Q2 2025 revenue, an increase of 10.3% year-over-year, with ARR growth of 11%. This segment's operating margin remained flat at 47%, reflecting continued investment in growth initiatives. Financial Crime Management Technology (Verafin) was a key contributor, with revenue up 19.7% and ARR up 19%, driven by new SMB clients and successful "land and expand" strategies with Tier 1 and Tier 2 banks. Regulatory Technology and Capital Markets Technology also delivered solid growth, benefiting from strong demand for mission-critical solutions and the normalization of sales cycles.

Market Services, Nasdaq's traditional exchange business, delivered record net revenues of $306 million in Q2 2025, up 22.4% year-over-year, with an impressive 63% operating margin. This was driven by record U.S. cash equities volumes and elevated U.S. equity options activity, demonstrating the resilience and operating leverage of Nasdaq's trading platforms. The successful execution of the Russell reconstitution, handling a record $102.5 billion in notional value, further highlighted the strength and reliability of Nasdaq's market infrastructure.

From a liquidity perspective, Nasdaq generated strong free cash flow of $467 million in Q2 2025, contributing to $1.9 billion in free cash flow over the last twelve months. This robust cash generation has enabled disciplined capital allocation, including paying down $400 million in maturing debt and repurchasing $100 million in common stock during the quarter. The company's gross leverage ratio improved to 3.2x, overachieving its milestone 16 months ahead of schedule, providing significant financial flexibility.

Strategic Execution: Fueling Future Growth

Nasdaq's strategic priorities—Integrate, Innovate, and Accelerate—are actively driving its evolution and future growth. The integration of AxiomSL and Calypso (Adenza) has been a significant success, substantially completed in 2024. This integration has not only expanded Nasdaq's solution suite but also enabled an ambitious efficiency program. The company is on track to action an expanded $140 million net expense efficiency program by year-end 2025, with approximately $130 million already actioned by the end of Q2 2025. These efficiencies, partly driven by internal AI adoption, are expected to further enhance profitability and operating leverage.

Innovation remains central to Nasdaq's strategy, particularly in leveraging artificial intelligence. Nasdaq Verafin's launch of its Agentic AI workforce, featuring digital workers like the Digital Sanctions Analyst, is a prime example. This technology is designed to automate resource-intensive compliance workflows, with early results showing a potential reduction in alert review workload by over 80%. This not only enhances client efficiency but also strengthens Verafin's competitive position against rivals by offering superior, AI-powered fraud detection and anti-money laundering capabilities. Similarly, Calypso's development of on-chain collateral management capabilities, targeting a launch in early to mid-2026, aims to revolutionize capital efficiency in financial markets by enabling more dynamic collateral movement.

The "Accelerate" priority focuses on maximizing cross-sell opportunities across the Financial Technology division. Since the Adenza acquisition, Nasdaq has achieved 26 cross-sells, with these opportunities now accounting for over 15% of the Financial Technology sales pipeline. This momentum positions Nasdaq to surpass $100 million in run rate revenue from cross-sells by the end of 2027. This strategy leverages the combined strength of Nasdaq's diverse product portfolio, allowing it to deepen relationships with existing clients and capture a larger share of their technology spending.

Outlook and Investment Implications: Resilient Growth Ahead

Looking ahead, Nasdaq's management maintains a confident outlook for 2025, despite persistent macroeconomic uncertainty and geopolitical tensions. The company's non-GAAP expense guidance has been updated to a range of $2.295 billion to $2.335 billion, with the midpoint increase attributed solely to foreign exchange rate movements, indicating no change to the underlying organic expense growth rate. The non-GAAP tax rate guidance is maintained at 22.5% to 24.5%.

The improving IPO landscape, marked by the highest level of new issuances in the first half of 2025 since 2021, bodes well for the Capital Access Platforms segment, although revenue recognition for initial listing fees will have a time lag. The Index business is expected to continue outperforming its medium-term outlook, benefiting from strong net inflows and new product innovation, including the extended partnership with CME Group for Nasdaq-100 index products through 2039.

In Financial Technology, management expects revenue growth to remain within its medium-term outlook of 10% to 14%. While some larger client decisions and implementations may experience timing delays, the robust sales pipeline and successful "land and expand" strategies, particularly for Verafin's enterprise segment, underpin this confidence. The early traction in European expansion for Verafin, including the first European Tier 1 bank proof of concept, represents a significant long-term growth pillar.

Key risks to monitor include continued macroeconomic volatility, which could impact trading volumes and corporate decision-making, and the evolving regulatory landscape. For instance, discussions around SEC's Rule 611 and potential changes to U.S. regulatory frameworks could influence market structure and client behavior. However, Nasdaq's diversified revenue streams, mission-critical solutions, and proactive engagement with regulators position it to adapt effectively. The company's strong free cash flow generation and disciplined capital allocation provide a buffer against potential headwinds, allowing it to continue investing in strategic growth areas and returning capital to shareholders.

Conclusion

Nasdaq's journey from a pioneering exchange to a diversified financial technology leader is a compelling investment narrative. The company's strategic focus on building a scalable, technology-first platform, amplified by the successful integration of Adenza and aggressive pursuit of AI-driven innovation, is yielding strong financial results and solidifying its competitive standing. Its ability to deliver robust growth across its Capital Access Platforms, Financial Technology, and Market Services segments, even amidst dynamic market conditions, underscores the resilience and mission-critical nature of its offerings.

Looking ahead, Nasdaq is well-positioned to capitalize on the ongoing digital transformation of financial markets. Its technological leadership, exemplified by advancements in AI for financial crime management and on-chain collateral solutions, provides a distinct competitive edge against traditional and emerging rivals. With a disciplined capital allocation strategy supporting organic growth, deleveraging, and shareholder returns, Nasdaq offers investors a compelling opportunity in a sector poised for continued evolution, driven by its unwavering commitment to liquidity, transparency, and integrity.