Nasdaq Delivers Record Q1 Growth on Surging FinTech Demand and Client Engagement Across Platform
Q1 2026 Earnings Call, April 23, 2026
Nasdaq reported one of the strongest quarterly performances in company history during the first quarter of 2026, posting the highest Q1 organic growth since 2021 and record revenue expansion in its Financial Technology division. The exchange operator delivered 13% net revenue growth to $1.4 billion and 21% diluted earnings per share growth to $0.96, demonstrating impressive execution amid a volatile macroeconomic backdrop characterized by persistent geopolitical tensions, inflation pressures, and uncertainty around private credit markets.
Financial Technology Reaches Record Heights on Cloud and AI Adoption
The standout performance came from Financial Technology, which delivered record revenue growth of 18% to $517 million and ARR growth of 16%. More impressively, the division achieved over 50% year-over-year ACV bookings growth in the quarter, setting a new first quarter record. Chief Executive Adena Friedman emphasized that 80% of ACV bookings were cloud-based deals, "reflecting our position as the trusted transformation partner to drive modernization for our clients."
The division signed 64 new clients, 85 upsells, and one cross-sell during the quarter, with another cross-sell completed early in the second quarter. Friedman highlighted a particularly compelling example of the company's One Nasdaq strategy in action: "In Q1, we completed a significant renewal and expansion of AxiomSL driven by our ability to deliver cloud and AI-enabled regulatory solutions. Early in the second quarter, we expanded the relationship further with a cross-sell for Nasdaq Verafin, our cloud-based AI-native financial crime management solution."
Capital Markets Technology delivered an exceptional 20% revenue growth with 18% ARR growth, driven by broad-based demand across Calypso, Market Technology, and Trade Management Services. The business benefited from strong demand for data center services, pricing increases in Trade Management Services, and notably, termination fees from M&A activity among market operators that contributed four percentage points to the subdivision's growth. CFO Sarah Youngwood clarified these were "M&A of market operators, which is really different than bank M&A," and not indicative of a broader trend.
Verafin Expands Enterprise Footprint with Tier 1 Bank Wins
Nasdaq Verafin delivered robust 21% revenue growth and 17% ARR growth, expanding its client base to more than 2,800 institutions representing nearly $12 trillion in collective assets. The business signed 58 new SMB clients during the quarter, driving a 24% year-over-year increase in SMB ACV bookings. In the enterprise segment, the company signed two renewals and one expansion during the quarter, followed by an upsell and a new Tier 1 bank cross-sell in early Q2.
Friedman noted that the company's Agentic AI workforce is now deployed by more than 500 clients, up 40% since Investor Day in February. She announced the upcoming launch of a new drug trafficking analytic "which embeds generative AI directly into our models and synthesizes open-source intelligence, social media, and third-party research to help clients more effectively detect potential drug trafficking activity."
While acknowledging strong momentum, management tempered near-term revenue expectations for Verafin. Youngwood explained that "the sequential revenue improvement in the fourth quarter was primarily driven by professional services fees related to SMB and enterprise client implementations," and the company did not expect to maintain those elevated levels in the first half of 2026 based on implementation timing for deals signed in late 2025.
Index Business Navigates Market Volatility with Product Innovation
The index franchise delivered $6 billion in net inflows during the quarter, contributing to $79 billion over the trailing twelve months, though flows were impacted by sector rotation and risk-off sentiment in March as the Nasdaq-100 declined 6%. The business exited the quarter with $836 billion in ETP AUM while average AUM reached a record $877 billion, up 32% year-over-year. Management offered encouraging commentary on momentum reversing sharply, with $15 billion of net inflows recorded through April 20.
Friedman emphasized the role of innovation in driving performance, noting that "46% of inflows were driven by product launches over the last 5 years and 25% were driven by launches over the last 3 years." International expansion continued with 19% of total ETP AUM now coming from non-U.S. clients, driven by strong demand from EMEA and APAC. Institutional adoption grew notably among annuity providers, contributing to a 30% increase in insurance-related revenues.
The company announced an expansion of access to the Nasdaq-100 index through new partnerships with BlackRock and State Street, alongside long-standing partner Invesco. Friedman clarified that "the pricing terms related to the index license for these upcoming new U.S.-listed ETFs will be consistent with the QQQ pricing terms." She explained the strategic rationale: "They have incredible distribution out into the institutional ecosystem as well as broad-based retail investor base... They're not having to — they can leverage the relationships they already have with BlackRock or State Street in order to get access to these products in a seamless way."
Index revenue growth of 14% was partially offset by continued mix shift in derivative volumes from higher-priced E-mini contracts to lower-priced micro E-mini contracts driven by retail participation, along with year-over-year capture decline, though volumes themselves reached record levels.
Data Business Accelerates on International Demand and Always-On Market Preparation
The data and listings business delivered 9% revenue growth with 8% ARR growth, driven by strong demand for enterprise license agreements, which grew 32% year-over-year, and continued momentum in Asia and the Middle East. Friedman pointed to structural drivers: "Over the last really 5 to 6 years, we've seen a broad-based increase in demand internationally for Nasdaq's market data... retail investors have really kind of grown and expanded around the world, and there's just more accessibility to the U.S. markets."
She noted accelerating momentum related to the transition to always-on markets: "As 23/5 trading in U.S. equities... as these firms are getting ready for 23/5 trading with lit markets like ours and central transparency, I think they're getting themselves ready to be able to offer those capabilities so they can trade in domestic hours and that is definitely driving more demand for enterprise license deals."
Listings Benefit from Improving IPO Environment Despite Ongoing Volatility
Nasdaq welcomed 15 new operating companies raising over $5 billion in proceeds during the quarter, including seven of the top ten IPOs. The company added two significant IPOs early in the second quarter with Arxis and Kailera Therapeutics. Friedman acknowledged the uneven environment: "While the IPO environment has been uneven amid market volatility, issuer engagement remains strong. Companies in our pipeline continue to prepare for market entry."
Listings revenue benefited from pricing increases and a $2 million one-time benefit from prior period application fees, partially offset by delistings and lower amortization of prior period initial listing fees. The company maintained an optimistic outlook for building momentum throughout the year.
Always-On Markets and Tokenization Progress Toward Launch Milestones
Nasdaq received SEC approval to extend market operations to 23/5 trading with a planned launch date of December 6, 2026. Friedman emphasized the company's leadership position: "We are excited to set a new standard for how regulated markets operate in an increasingly global and digital economy." She noted that roughly 2% of volume already occurs during the hours that would be covered by extended trading, representing immediate addressable demand.
On tokenization, the SEC approved the company's proposal to enable trading of tokenized securities. Friedman outlined the implementation timeline: "We will continue to collaborate with DTCC and the industry to build the infrastructure needed to launch tokenized equities." She indicated DTCC has expressed interest in executing a first trade before year-end, though she tempered expectations: "It's likely that this will still be an early kind of an early phase by the end of the year to make sure that we're — the end-to-end is working seamlessly."
The company announced development of the Nasdaq equity token design, which "takes modernization a step further by putting issuers at the center of ownership rights" and plans to provide early benefits in the first half of 2027. Friedman outlined multiple near-term revenue opportunities from always-on markets across the platform, including increased surveillance demand, trading platform upgrades to Eclipse, expanded collateral management needs in Calypso, and greater colocation demand in trade management services.
Regulatory Technology Gains Momentum on Cloud Migration and AI Capabilities
Regulatory Technology delivered 12% revenue growth and 13% ARR growth, reflecting strong performance in surveillance and solid growth in AxiomSL. Friedman highlighted key wins: "A large international bank significantly expanded its U.S. footprint with us, extending the use of our platform to support CCAR reporting. Another large bank expanded into cloud-based broker-dealer capital management and regulatory reporting."
The business secured a new European client for consolidated reporting across capital, liquidity and financial regulatory requirements. Approximately 90% of AxiomSL ACV bookings in Q1 were cloud-based solutions, up substantially from historical levels. The company continues to see strong interest in AI solutions including RegCopilot, RegSimplify, RegNavigator and RegInvestigator.
In surveillance, the company renewed a global Tier 1 bank and is experiencing interest in crypto surveillance services. Recent product launches include Calibration Copilot, an AI-powered tool enabling workflow optimization and false positive reduction, with a GenAI platform extension connecting news and market events to trade data planned for Q2 release.
Corporate Solutions Remains Challenged by Muted Buying Environment
Workflow and Insights delivered 6% revenue and ARR growth, driven primarily by analytics, particularly eVestment and Datalink. Both businesses benefited from strong sales momentum and client engagement with AI capabilities. Management noted that eVestment's AI-ready data has been adopted by institutions representing over $9 trillion in assets under management, helping drive 29% year-over-year growth in Q1 bookings.
Corporate Solutions revenue was essentially flat, with Friedman acknowledging "the corporate buying environment remains muted, driven by lower IPO activity compared to historical levels." However, AI adoption metrics remain strong, with 74% of IR Insight users and 51% of Boardvantage users leveraging AI solutions embedded in the products.
Market Services Posts Record Volumes Amid Elevated Volatility
Market Services delivered 10% net revenue growth to a record $317 million, driven by record volumes in U.S. equities and U.S. equity options, along with elevated volumes in European equities and strong Canadian equity volumes tied to commodity market volatility. The company maintained elevated market share in U.S. equities and options while continuing to expand in index options, where revenue more than doubled year-over-year.
Management noted some capture pressure in U.S. equities and options driven by volume mix shift toward lower revenue capture order flow, though the company emphasized it continues to "manage effectively the balance between capture and market share while maintaining our strong lead in U.S. equities capture and in U.S. options market share."
Margin Expansion and Accelerated Capital Return Highlight Financial Discipline
Operating margin expanded 200 basis points to 57% while EBITDA margin reached 60%, also up 200 basis points year-over-year. Operating expenses increased 8% to $608 million, driven by investments in people and technology and higher compensation tied to revenue performance. The company raised its full-year non-GAAP expense guidance to $2.485 billion to $2.545 billion from $2.455 billion to $2.535 billion, reflecting strong revenue momentum. Youngwood indicated a higher expense growth rate is expected in Q2 than Q1, "driven in part by the timing of our annual compensation cycle consistent with the prior year."
Nasdaq generated $629 million in free cash flow during the quarter and $2.1 billion over the trailing twelve months at a 102% conversion ratio, or 108% excluding tax payment timing impacts. The company significantly accelerated share repurchases, buying back $548 million in the quarter compared to $616 million for all of 2025. Combined with the $153 million quarterly dividend, Nasdaq returned over $700 million to shareholders in Q1. The Board previously approved a dividend increase to $0.31 per share from $0.27, effective with the June payment. The company ended the quarter with gross leverage of 2.8x, within its mid- to high-2x target range.
Management Reinforces Confidence in AI Strategy and Internal Efficiency Program
When asked about internal AI adoption, Friedman detailed the company's program to achieve $100 million in expense efficiencies by the end of 2027, with the majority expected to materialize in 2027 as the company continues making AI investments. Focus areas include automating product development lifecycles, creating new capabilities in client success for service and implementations, and deploying automation across expert teams in finance, marketing, legal and HR.
Friedman expressed particular enthusiasm about product development impacts: "The most exciting part of that is our ability to speed up the ability to deliver new capabilities to clients to use automation to really make sure that the code that we're delivering is really clean. It's fit for purpose... you can be more creative as a product team, if you know you can deliver things faster."
On cybersecurity concerns related to new AI models like Anthropic's Mythos, Friedman emphasized the company's disciplined approach: "We're not going to just race forward with any new model and bring it in. We do a lot of work first to determine if it's got utility and then to do incredible IT security reviews on it." The company leverages partnerships with AWS Bedrock and Microsoft Azure while conducting extensive testing before deploying any new models into production environments.
Cross-sell opportunities continue to represent over 15% of the Financial Technology division pipeline with strength across all three subdivisions. Management highlighted that cloud-based solutions accounted for 80% of ACV bookings in the quarter, reinforcing the successful transition to cloud infrastructure that enables AI capabilities and drives client value. Annualized recurring revenue across the company grew 12% year-over-year to $3.2 billion, providing strong visibility into future performance.
Nasdaq, Inc. Deep Dive
The Business Model and Revenue Mechanics
Nasdaq has fundamentally transformed its operational identity over the last decade, evolving from a traditional transaction-heavy equities exchange into a diversified, recurring-revenue enterprise software and financial technology powerhouse. The company currently categorizes its business into three primary divisions: Market Platforms, Capital Access Platforms, and Financial Technology. While Market Platforms houses the legacy cash equities and derivatives trading operations, the strategic center of gravity has decidedly shifted toward the other two segments. Capital Access Platforms encompasses the listing business, proprietary data and analytics, and the highly lucrative index franchise that monetizes the intellectual property behind the Nasdaq-100. The Financial Technology segment is the primary growth engine, delivering mission-critical risk management, regulatory compliance, and anti-financial crime software to global financial institutions.
The core economic mechanism driving Nasdaq today is the subscription model. Management has aggressively pivoted away from the cyclical, volume-dependent trading fees that historically characterized exchange operators. As of the first quarter of 2026, annualized recurring revenue reached $3.2 billion, growing at 13% year-over-year. Software-as-a-service revenues now represent 38% of this annualized recurring revenue baseline. Solutions revenue, which excludes market-driven transaction fees, has expanded to account for nearly 80% of the firm's total top line. This structural shift provides Nasdaq with highly predictable cash flows, insulating the company from macro-induced volatility in trading volumes while supporting a valuation architecture more akin to a software provider than a traditional financial marketplace.
Customers, Competitors, and Market Share Dynamics
Nasdaq serves a vast, institutional client base that spans global tier-one banks, regional financial institutions, asset managers, broker-dealers, and corporate issuers. In its Financial Technology division, the acquisitions of Adenza and Verafin expanded the end-customer profile deep into the back offices of major commercial banks and regulatory bodies. In the Capital Access Platforms segment, clients range from early-stage venture-backed startups seeking public listings to massive passive asset managers that license Nasdaq indices for their exchange-traded products. On the supply side, as Nasdaq transitions its physical data centers into cloud-native environments, Amazon Web Services has emerged as a critical infrastructure supplier and strategic partner, securely hosting the exchange's low-latency matching engines and high-throughput data workloads.
The competitive landscape is bifurcated across Nasdaq's varied business lines. In the traditional exchange and listings arena, Intercontinental Exchange, which operates the New York Stock Exchange, remains the primary domestic rival. In the global data and analytics space, Nasdaq contends with the London Stock Exchange Group following its acquisition of Refinitiv, as well as entrenched terminal operators like Bloomberg and S&P Global. In the derivatives and options markets, Cboe Global Markets represents the dominant force. Market share data reflects these competitive tensions clearly. In the United States equity options market, Nasdaq currently commands a 29% to 30% market share, trailing Cboe, which consistently captures 38% to 41% of matched volumes. In the highly commoditized and fragmented United States cash equities market, Nasdaq captures approximately 18% to 20% of volumes. However, in the regulatory technology and anti-financial crime software verticals, Nasdaq is rapidly carving out a dominant, less commoditized market position where direct peer-to-peer market share heavily favors its modern software stack over fragmented legacy vendors.
Competitive Advantages and Economic Moat
Nasdaq's economic moat is constructed upon dual pillars of deep network effects and formidable switching costs. The Market Platforms division benefits from liquidity-driven network effects; trading participants naturally gravitate toward venues with the deepest order books and tightest spreads, creating a self-reinforcing cycle that is difficult for sub-scale entrants to replicate. However, the most robust competitive advantage resides in the Financial Technology division. By embedding software solutions like Adenza for complex regulatory reporting and Verafin for enterprise-wide fraud detection, Nasdaq weaves itself into the core regulatory compliance infrastructure of financial institutions. The operational risk and financial cost of ripping out and replacing these mission-critical systems create immensely high switching costs. Once integrated, client retention is extraordinarily high.
Additionally, the company possesses highly valuable, irreplaceable intellectual property within its index business. The Nasdaq-100 brand is synonymous with technological innovation, and as passive investing continues to capture massive market share, the licensing fees generated from exchange-traded products tethered to these indices provide a high-margin, scalable revenue stream. The sheer pricing power derived from these integrated advantages is evident in the company's financial profile, with operating margins consistently hovering around 52%, an elite profitability profile that highlights the strength of its structural positioning.
Industry Opportunities and Structural Threats
The most compelling growth opportunity for Nasdaq lies in the escalating global financial crime epidemic. Recent industry data reveals that global illicit financial activity surged to an estimated $4.4 trillion in 2025, representing a 19.2% compound annual growth rate since 2023. With banks absorbing nearly $179 billion in direct fraud losses globally last year, the demand for sophisticated, enterprise-grade anti-money laundering and fraud detection software has reached a critical inflection point. Nasdaq's Verafin platform is uniquely positioned to capture this demand. Furthermore, a substantial geographic expansion opportunity exists by cross-selling Verafin, which has historically been North American-centric, into the European banking sector by leveraging the established continental client base of Adenza.
Conversely, structural threats persist within the legacy transaction businesses. Regulatory shifts and the continual push for best execution drive fee compression across cash equities. The proliferation of dark pools, alternative trading systems, and aggressive electronic market makers constantly challenges traditional exchange economics. Furthermore, impending regulatory adjustments regarding consolidated market data feeds could pressure the margins on proprietary data products, forcing Nasdaq to continuously innovate and upsell higher-value bespoke analytics to offset potential baseline revenue erosion.
New Products and Technological Drivers
Nasdaq is aggressively deploying agentic artificial intelligence to fortify its Financial Technology offerings. As criminal syndicates increasingly utilize large language models to scale business email compromises and complex payments fraud, financial institutions are locked in a technological arms race. Nasdaq has responded by deploying AI-powered digital analysts within the Verafin platform, significantly reducing investigation times and identifying anomalous behaviors that rules-based legacy systems inevitably miss. This convergence of artificial intelligence and unified data layers between enterprise risk and compliance creates a holistic defense architecture that serves as a massive revenue growth catalyst.
In market infrastructure, Nasdaq is pioneering the migration of capital markets to the cloud. Through its deep strategic partnership with Amazon Web Services, Nasdaq has successfully migrated its own matching engines, including the MRX and GEMX options markets, to AWS Outposts. More importantly, Nasdaq has productized this modernization blueprint into the Eqlipse platform, offering an exchange-in-a-box solution to regional exchanges worldwide. This turns a massive internal capital expenditure program into a highly scalable, external commercial product that empowers foreign market operators to transition to cloud-native architectures without the frictional costs of in-house development.
Industry Disruptors and New Entrants
The threat from new entrants is heavily concentrated in the transaction execution layer of the market. Low-cost venues and consortium-backed exchanges, such as MEMX, have successfully captured mid-single-digit market shares by competing aggressively on latency and execution fees. These entities exert downward pressure on execution margins across the industry. However, the scope of this disruption is largely confined to pure trade matching.
In the broader ecosystem of data analytics, index licensing, and regulatory software, the barriers to entry are prohibitively high for upstarts. While blockchain-native digital asset exchanges possess disruptive underlying settlement technology, their institutional appeal remains narrow. Institutional adoption of tokenized securities requires deep regulatory compliance, rigorous market surveillance, and trusted governance mechanisms. These are capabilities that heavily favor incumbent operators like Nasdaq, which are already authorized by global regulators, over untested digital-first entrants. Consequently, the holistic threat from new entrants to Nasdaq's diversified software-centric earnings base remains minimal.
Management Track Record
Under the stewardship of Chief Executive Officer Adena Friedman, the management team has executed one of the most successful corporate pivots in modern financial history. The strategic foresight to acquire Adenza for $10.5 billion initially drew intense skepticism from institutional investors concerned about high valuation multiples and integration friction. Management has definitively silenced these critics through clinical operational execution. Nasdaq surpassed its deleveraging targets by hitting a 3.3x gross leverage ratio in the second quarter of 2025, a full sixteen months ahead of its internal schedule, while simultaneously delivering tangible cross-selling synergies between the Verafin and Adenza platforms.
The financial results from the first quarter of 2026 underscore this exceptional execution. Total net revenue grew 14% year-over-year to $1.4 billion, while Financial Technology revenue surged 20%. Non-GAAP earnings per share increased by 22% to $0.96. Moreover, management has demonstrated an unwavering commitment to shareholder returns, raising the dividend for fourteen consecutive years and executing highly disciplined share repurchases, including $548 million in the first quarter of 2026 alone. This track record reflects a management team that perfectly balances aggressive technological vision with stringent capital discipline.
The Scorecard
Nasdaq has structurally decoupled its earnings power from the volatile, commoditized mechanics of traditional equity trading. By aggressively building out its Financial Technology and Capital Access Platforms divisions, the company has transformed into an enterprise software vendor deeply embedded within the operational fabric of the global financial system. The exponential rise in global financial crime and escalating regulatory complexity act as powerful secular tailwinds, driving durable demand for the high-margin, sticky software suites acquired through Verafin and Adenza. With annualized recurring revenue crossing the $3.2 billion threshold, the high visibility into future cash flows provides a robust foundation for continued operating leverage and multiple expansion.
While the legacy transaction businesses face persistent fee compression from low-cost alternative venues, these segments now serve primarily as utility engines that generate the cash required to fund the higher-growth software verticals. Management's flawless execution of complex mega-acquisitions, rapid balance sheet deleveraging, and pioneering integration of artificial intelligence and cloud-native matching engines demonstrate an elite level of capital allocation. Ultimately, Nasdaq has successfully insulated itself against the very market volatility it helps facilitate, emerging as a critical, irreplaceable layer of modern financial infrastructure.