Executive Summary / Key Takeaways

• Nasdaq delivered a strong first quarter in 2025, with revenues less transaction-based expenses growing 10.7% and non-GAAP diluted EPS increasing 24%, demonstrating the resilience and operating leverage of its diversified business model amidst dynamic market conditions.
• The company's strategic pivot towards becoming a technology partner is accelerating, highlighted by 14% SaaS revenue growth and 9% ARR growth, fueled by robust performance in the Financial Technology segment (10.3% revenue growth, 12% ARR growth) and continued momentum in Capital Access Platforms solutions.
• Significant progress on the Adenza integration and expanded efficiency program has resulted in over $100 million in actioned synergies by the end of Q1 2025, contributing to expense management and supporting profitability expansion.
• Nasdaq is leveraging technological differentiation, particularly in AI (Verafin's GenAI Copilot seeing 20% usage increase) and cloud partnerships (enhanced AWS collaboration), to enhance product value, drive client adoption, and modernize global financial infrastructure.
• Strong free cash flow generation and a disciplined capital allocation strategy are supporting accelerated deleveraging (gross leverage reduced to 3.4x, targeting 3.3x soon), increased shareholder returns (13% dividend hike), and opportunistic share repurchases.

The Evolution of a Market Leader: Building the Trusted Fabric of Finance

Nasdaq, Inc. stands as a global technology company deeply embedded within the world's financial system. While historically synonymous with its pioneering stock market, the company's journey has evolved significantly, particularly accelerating in recent years to become a comprehensive technology partner serving a broad spectrum of clients, from corporations and investment managers to banks and exchange operators. This transformation is rooted in a strategic vision to be the "trusted fabric of the world's financial system," moving beyond traditional exchange functions to provide mission-critical data, analytics, software, and market infrastructure capabilities.

A pivotal moment in this evolution was the acquisition of AxiomSL and Calypso, which closed in late 2023. This move was designed to greatly accelerate Nasdaq's transition into a platform company, significantly bolstering its Financial Technology division and positioning it as a vital force for innovation across risk, regulation, and trade infrastructure. This strategic shift has been accompanied by a divisional realignment program, completed by late 2024, aimed at optimizing the organizational structure to fully realize the potential of this expanded mandate.

In the competitive landscape, Nasdaq operates alongside other major global exchange operators like Intercontinental Exchange (ICE), CME Group (CME), and Cboe Global Markets (CBOE), as well as various fintech providers. While competitors like ICE and CME maintain strong positions in derivatives trading and clearing with potentially higher profitability margins (ICE's net margin ~25-30%, CME's ~40-45% vs. Nasdaq's TTM 16.36%), Nasdaq differentiates itself through its integrated ecosystem spanning listings, data, and a growing suite of software solutions. Its strength in equity listings, particularly in the U.S. where it maintains a high win rate for IPOs and attracts significant listing transfers, provides a unique foundation. Nasdaq's strategic emphasis on technology, particularly in areas like anti-financial crime and regulatory reporting, positions it to capture growth in segments where traditional exchange operators may have less depth.

Technological Differentiation and the Innovation Engine

At the heart of Nasdaq's strategy is its differentiated technology, which serves as a critical competitive moat. The company is actively investing in and deploying advanced solutions across its segments, with a particular focus on cloud migration and artificial intelligence.

Nasdaq's own transition to cloud-based infrastructure for its markets, such as the migration of options markets to the Fusion platform, provides valuable experience and a blueprint for its clients. An enhanced partnership with AWS, announced in early 2025, is a key initiative leveraging this expertise. This collaboration aims to modernize global capital markets infrastructure by offering packaged public and hybrid cloud solutions and services, initially targeting market operators. The stated goal is to enable cost-effective modernization, mitigate transformation risk, ensure data sovereignty, and maintain high levels of performance, security, and resilience. Early adopters or partners in this initiative include Nasdaq's Nordic markets, the Johannesburg Stock Exchange, and Mexico's Grupo BMV (BMV), signaling the global reach and strategic importance of this cloud-enablement effort.

Artificial intelligence is another critical area of technological differentiation. Within the Financial Crime Management Technology segment, the Nasdaq Verafin solution is leveraging AI, including a GenAI-powered entity research co-pilot. This tool has seen a 20% increase in client usage between Q4 2024 and Q1 2025, with over 1,200 clients leveraging it to expedite alert reviews. Management plans to launch a new copilot feature in the case management module and expects future "AgenTik AI" capabilities to automate entire workflows, promising significant efficiency gains for banks in compliance operations like due diligence and sanction screening. While specific quantifiable benefits across the entire AI suite are still emerging, the strategic intent is clear: use AI to deliver tangible efficiency improvements and differentiated capabilities that enhance the value proposition of Nasdaq's software solutions, supporting client retention and attracting new business.

These technological advancements are foundational to Nasdaq's strategy, contributing to its competitive positioning by offering clients cutting-edge tools for risk management, compliance, and operational efficiency. While competitors also invest in technology, Nasdaq's integrated approach across market operations and software solutions, coupled with its focus on areas like AI for financial crime, provides a distinct edge. The success of these initiatives is expected to drive future revenue growth, potentially improve operating margins over time as SaaS scales, and reinforce Nasdaq's position as a trusted technology partner.

Strategic Execution and Robust Performance

Nasdaq's strategic priorities of Integrate, Innovate, and Accelerate are yielding tangible results, particularly evident in the company's strong performance in the first quarter of 2025. The integration of Adenza is progressing ahead of schedule, contributing to significant expense synergies. The expanded efficiency program, targeting $140 million in run rate cost reductions, saw over $100 million actioned by the end of Q1 2025, demonstrating effective cost management while continuing to invest in growth initiatives.

The company delivered robust financial results in Q1 2025. Revenues less transaction-based expenses increased 10.7% year-over-year to $1,237 million. Non-GAAP operating income grew 24% to $682 million, reflecting operating leverage. Non-GAAP diluted EPS also rose 24% to $0.79. This performance was underpinned by strong growth across the business segments.

The Financial Technology segment was a key driver, with revenue increasing 10.3% to $432 million and ARR growing 12% to $1.45 billion. This growth was broad-based, with Financial Crime Management Technology revenue and ARR up 21%, Regulatory Technology revenue up 11.9% and ARR up 11%, and Capital Markets Technology revenue up 7% and ARR up 9%. Management highlighted new client wins, upsells, and cross-sells (19 since Adenza, 2 in Q1 2025) as contributors, noting the mission-critical nature of these solutions in the current environment.

Market Services also delivered a standout performance, with net revenue increasing 18.7% to $281 million. This was driven by higher market-wide volumes across asset classes, increased capture rates, and higher market share in U.S. cash equities. The segment achieved record revenues and volumes in cash equities, equity options, and index options, showcasing the performance and resilience of Nasdaq's trading infrastructure, particularly during periods of high volatility and message traffic, such as the unprecedented levels seen in early April 2025.

The Capital Access Platforms segment saw revenue grow 7.4% to $515 million and ARR increase 5%. This was primarily driven by the Index business, which delivered 14.3% revenue growth due to higher average ETP AUM and increased derivatives trading volume, and growth in the Data business. While the listings environment faced some headwinds, Nasdaq maintained an 82% win rate for eligible U.S. operating company IPOs and continued to attract significant listing transfers.

Financial Strength and Capital Deployment

Nasdaq maintains a focus on financial discipline and strategic capital allocation. The company generated strong free cash flow of $674 million in Q1 2025, providing ample liquidity. Deleveraging remains a key priority following the Adenza acquisition. Nasdaq repurchased $279 million in aggregate principal amount of senior unsecured notes for $257 million cash in the quarter, contributing to a reduction in the gross leverage ratio to 3.4x at March 31, 2025, down from 3.6x at the end of 2024. Management targets reaching 3.3x gross leverage in Q2 or Q3 2025 and intends to pay down the $400 million bond maturing in June 2025 with cash on hand. This progress was recognized by Moody's (MCO) with a credit rating upgrade to Baa1.

Shareholder returns are also a component of the capital allocation strategy. Nasdaq declared and paid a quarterly cash dividend of $0.24 per share in Q1 2025 and subsequently approved a 13% increase to $0.27 per share, payable in June 2025, signaling confidence in future cash flow generation. The company also repurchased $115 million of common stock in the quarter under its existing program, alongside shares withheld for employee tax obligations, demonstrating a commitment to offsetting dilution and opportunistic buybacks.

Outlook and Potential Headwinds

Looking ahead, Nasdaq management expressed confidence in achieving its full-year 2025 outlook, projecting revenue growth within the medium-term ranges for its key segments: Capital Access Platforms (5-8%), Financial Technology (10-14%). While Market Services did not have a specific full-year range provided in the Q1 call, its strong Q1 performance suggests continued contribution. The non-GAAP expense guidance was narrowed to a range of $2.265 billion to $2.325 billion, reflecting the benefits of the expanded efficiency program and continued investment. The non-GAAP tax rate is expected to be between 22.5% and 24.5%.

The outlook is supported by the continued momentum in the Financial Technology pipeline, the ongoing benefits from the Adenza integration and synergies, the expected improvement in the IPO environment in the latter half of 2025, and the durable demand for mission-critical solutions across all economic cycles.

However, the company acknowledges potential headwinds. Macroeconomic uncertainty, changing trade policies, and heightened geopolitical tensions could weigh on global GDP growth expectations and cause delays in larger client decisions, particularly impacting the timing of growth in the Financial Technology segment in the near term. The Corporate Solutions business within Capital Access Platforms continues to face challenges from elongated sales cycles. Regulatory changes, while often driving demand for solutions like AxiomSL, can also introduce uncertainty or shift implementation timelines. Competition from other exchanges and fintech providers remains intense, requiring continuous innovation and operational efficiency to maintain market share and protect margins.

Conclusion

Nasdaq's first quarter 2025 results underscore the success of its strategic transformation into a diversified technology and market operator. Strong growth in solutions revenue, particularly within the Financial Technology segment, coupled with robust performance in Market Services driven by market activity, demonstrates the power of its platform model. The company is effectively executing on its integration and efficiency initiatives, enhancing profitability and generating significant free cash flow. Nasdaq's technological leadership, especially in AI and cloud, provides a competitive edge in addressing the evolving needs of financial institutions. While macroeconomic and regulatory uncertainties persist, Nasdaq's mission-critical solutions, diversified revenue streams, and disciplined capital allocation position it for continued resilient growth and value creation for shareholders. The focus on organic growth, deleveraging, and increasing dividends highlights management's confidence in the company's forward trajectory.