Nasdaq, Inc. (NASDAQ:NDAQ) is a global technology leader serving a diverse range of clients, from corporate entities to investment managers, banks, brokers, and exchange operators. The company's mission is to deliver world-class platforms that enhance the liquidity, transparency, and integrity of the global economy. With a rich history spanning over five decades, Nasdaq has transformed itself from a regional stock exchange into a comprehensive financial technology powerhouse.

Business Overview and History

Nasdaq was founded in 1971 as a wholly-owned subsidiary of the Financial Industry Regulatory Authority (FINRA). In 2000, FINRA restructured and broadened Nasdaq's ownership by selling shares to its members, investment companies, and listed issuers. This divestment process culminated in 2006 when FINRA fully divested its ownership, and Nasdaq became an independent, registered national securities exchange in 2007.

The transformative moment for Nasdaq came in 2008 when it combined with OMX AB, a leading European exchange operator. This strategic merger expanded Nasdaq's business from a U.S.-centric exchange to a global exchange company, offering technology that powers its own markets as well as many others around the world. In 2015, the company rebranded itself as Nasdaq, Inc. to better reflect its evolving identity as a technology-driven financial services provider.

Throughout its history, Nasdaq has faced various challenges and regulatory hurdles. As a for-profit market operating self-regulatory functions, the company has had to navigate potential conflicts of interest between its regulatory responsibilities and business objectives. This has required Nasdaq to demonstrate its ability to diligently and fairly regulate its markets. Additionally, Nasdaq has had to adapt to evolving regulatory environments, both in the U.S. and globally, as it has expanded its international presence.

Despite these challenges, Nasdaq has maintained its position as a leading global exchange and technology provider. Through organic growth and strategic acquisitions, the company has diversified its business beyond its core exchange operations into areas such as market technology, analytics, and enterprise governance solutions. These diverse product and service offerings have allowed Nasdaq to serve a wide range of clients, from corporate issuers to investment managers to other exchange operators, as they navigate the global capital markets and financial system.

In November 2023, Nasdaq accelerated its transformation by acquiring Adenza, a provider of mission-critical risk management and regulatory software to the financial services industry. This acquisition has significantly strengthened Nasdaq's Financial Technology segment, solidifying its position as a trusted partner in solving the complex challenges faced by global financial institutions.

Segmental Overview

Nasdaq operates in three main business segments: Capital Access Platforms, Financial Technology, and Market Services.

1. Capital Access Platforms

This segment encompasses Nasdaq's data distribution, listing services, index development, and workflow solutions businesses. Key offerings include proprietary data products, global listings platforms, the renowned Nasdaq-100 Index, and advanced analytics and corporate solutions.

The Capital Access Platforms segment comprises three main business areas: Data Listing Services, Index, and Workflow Insights. This segment delivers liquidity, transparency and integrity to the corporate issuer and investment community by empowering clients to effectively navigate the capital markets, achieve their sustainability goals, and drive governance excellence.

The Data Listing Services business distributes historical and real-time market data to various customers, including sell-side firms, the institutional investing community, retail brokers, proprietary trading firms, and data distributors. Key products in this area include TotalView, which provides market depth quote information, and lower-cost alternatives like Nasdaq Basic. Nasdaq operates listing platforms globally, with a total of 5,250 companies listed on its U.S., Nordic, Baltic, and Nasdaq First North exchanges as of December 31, 2024. This includes 4,080 listings on The Nasdaq Stock Market, with 768 of those being ETPs.

Nasdaq's Index business develops and licenses Nasdaq-branded indices and financial products. As of December 31, 2024, 401 ETPs tracking Nasdaq indices were listed on 28 exchanges worldwide, with $647 billion in associated assets under management. The flagship Nasdaq-100 Index ecosystem alone had over $520 billion in assets tracking it.

The Workflow Insights business provides analytical and corporate solutions products. The analytics offerings, such as eVestment and Solovis, help institutional investors and consultants with investment decision-making and portfolio monitoring. The corporate solutions, including Investor Relations Intelligence, Governance Solutions, and Sustainability Solutions, serve both public and private organizations in enhancing shareholder engagement, governance practices, and sustainability programs.

In 2024, the Capital Access Platforms segment generated $1.97 billion in total revenues, an 11.4% increase from 2023. This growth was driven by higher data usage and pricing, increased initial listing fees, and expansion of the Index and Workflow Insights businesses. The segment reported $1.13 billion in operating income, representing a 16.6% year-over-year increase.

2. Financial Technology

This segment provides mission-critical technology solutions and services to exchanges, clearing organizations, central securities depositories, banks, brokers, and corporate clients. It includes businesses such as Financial Crime Management Technology, Regulatory Technology, and Capital Markets Technology, including the acquired Adenza solutions.

The Financial Crime Management Technology business includes the Nasdaq Verafin platform, a leading cloud-based anti-financial crime solution that helps financial institutions detect, investigate and report money laundering and fraud. As of December 31, 2024, Nasdaq Verafin served over 2,600 North American financial institutions.

The Regulatory Technology business provides solutions for risk data management, regulatory reporting, and market surveillance. This includes the AxiomSL platform, a global leader in regulatory technology for banks, broker-dealers and asset managers. The surveillance solutions assist banks, brokers and other market participants in complying with market integrity rules.

Nasdaq's Capital Markets Technology business is a leading global provider of mission-critical solutions to exchanges, clearing houses, central securities depositories, regulators, banks, brokers and corporate clients. Key offerings include the Calypso platform for cross-asset trading, treasury and risk management, as well as Nasdaq's own market technology powering over 135 marketplaces in more than 55 countries.

In 2024, the Financial Technology segment reported $1.62 billion in total revenues, a 47.5% increase from the prior year. This was driven by strong growth across all three business lines, including the addition of AxiomSL and Calypso from the Adenza acquisition completed in late 2023. Operating income for the segment was $770 million, up 56.1% year-over-year.

3. Market Services

This segment operates Nasdaq's 19 exchanges across multiple asset classes, including derivatives, commodities, cash equity, debt, structured products, and ETPs. It encompasses equity derivative trading and clearing, cash equity trading, fixed income, currency, and commodities trading.

In the U.S., Nasdaq runs six options exchanges - Nasdaq PHLX, The Nasdaq Options Market, Nasdaq BX Options, Nasdaq ISE, Nasdaq GEMX and Nasdaq MRX - which together represented 29.8% of total U.S. equity options market share in 2024. Nasdaq also operates three cash equity exchanges - The Nasdaq Stock Market, Nasdaq BX and Nasdaq PSX - which accounted for 15.6% of total U.S. cash equity market share.

Nasdaq's European operations include the Nasdaq Nordic and Nasdaq Baltic exchanges, which offer trading in cash equities, derivatives, fixed income and commodities products. The company also runs an exchange in Canada with three independent markets for trading Canadian-listed securities.

In 2024, the Market Services segment generated $3.77 billion in total revenues. After deducting $2.75 billion in transaction-based expenses, net revenues were $1.02 billion, up 3.4% year-over-year. Operating income for the segment was $597 million. Strong trading volumes, particularly in U.S. equity derivatives and cash equities, were the primary drivers of the segment's performance.

Financial Performance and Outlook

Financials

For the full year 2024, Nasdaq reported net revenues of $7.40 billion, a 9% increase from the previous year. Net income for the year was $1.12 billion, with operating cash flow of $1.94 billion and free cash flow of $1.73 billion. Solutions revenue, which includes the company's higher-growth businesses, accounted for 77% of total revenue, up 1 percentage point from 2023.

In the most recent quarter (Q4 2024), Nasdaq generated revenue of $1.2 billion, up 10% year-over-year, with net income of $355 million. The increase in revenue was driven by higher volumes across the U.S. equity derivatives and U.S. and European cash equities markets.

Nasdaq ended 2024 with an Annualized Recurring Revenue (ARR) of $2.8 billion, representing a 7.5% year-over-year increase. The company's SaaS revenue grew 14% during the year, now comprising 37% of total ARR.

Looking ahead to 2025, Nasdaq expects the Capital Access Platforms segment to grow within its medium-term outlook range of 5-8%. Within this division, data and listings are expected to grow in the low-single digits, index is expected to exceed the mid-to-high single digit range, and Workflow and Insights is expected to be below the high-single to low-double digit range.

The Financial Technology segment is projected to grow within its 10-14% range. Specifically, Financial Crime Management Technology is expected at the low-end of the mid-20s range, Regulatory Technology at the high-end of the high-single to low double-digit range, and Capital Markets Technology within the high-single to low double-digit range.

The Market Services segment is also anticipated to deliver a solid performance, building on its record net revenue in 2024.

Nasdaq provided non-GAAP expense guidance for 2025 of $2.245 billion to $2.325 billion, which reflects a 6% organic growth rate at the midpoint and includes a 2 percentage point benefit from an expanded efficiency program.

Liquidity

Nasdaq has made significant progress in its integration and cost optimization efforts. The company has actioned over 100% of its $80 million net expense synergy target related to the Adenza acquisition and has expanded this program to $140 million, which is expected to reduce 2025 expense growth by 2 percentage points.

As of December 31, 2024, Nasdaq reported the following liquidity metrics:

• Debt/Equity ratio: 0.88
• Cash and cash equivalents: $592 million
• Available credit facilities: A $1.25 billion revolving credit facility, which was undrawn, and several other credit facilities in Europe totaling $174 million in available liquidity, also undrawn.
• Current ratio: 0.99
• Quick ratio: 0.99

Nasdaq expects to reach a 3.3x gross leverage ratio by the end of 2025 as it continues to focus on deleveraging.

Industry Trends and Market Position

The financial technology and exchange industries have seen strong growth, with a compound annual growth rate (CAGR) of around 10-12% over the past 3 years. Nasdaq's diverse business model spanning capital markets infrastructure, financial technology solutions, and market operations has contributed to the company's solid financial results in 2024.

Nasdaq operates primarily in the U.S. and Europe, though it does not break out performance by geographic market. The company's global reach is evident in its operation of 19 exchanges across various asset classes and its market technology powering over 135 marketplaces in more than 55 countries.

Risks and Challenges

As a global financial technology leader, Nasdaq faces several risks and challenges, including:

1. Regulatory landscape: Nasdaq operates in highly regulated industries, and changes in rules and policies can impact its business model and operations.
2. Cybersecurity threats: As a critical infrastructure provider, Nasdaq is an attractive target for cyber attacks, which could disrupt its systems and services.
3. Competition: Nasdaq competes with other exchange operators, trading platforms, and fintech providers, which could lead to pricing pressure and market share erosion.
4. Economic conditions: Fluctuations in global economic and market conditions can affect trading volumes, listings, and demand for Nasdaq's products and services.
5. Integration and execution risks: The successful integration of acquired businesses, such as Adenza, and the execution of strategic initiatives are crucial for Nasdaq's continued growth and profitability.

Conclusion

Nasdaq has demonstrated its ability to adapt and evolve with the changing landscape of the global financial system. Its transformation from a regional stock exchange to a comprehensive financial technology provider has positioned the company as a trusted partner to a diverse range of clients. With a strong performance in 2024, a robust financial position, and a clear strategic vision, Nasdaq is well-positioned to continue powering the global financial ecosystem in the years to come. The company's focus on technology innovation, strategic acquisitions, and operational efficiency should help it navigate industry challenges and capitalize on growth opportunities in the rapidly evolving financial technology sector.