Nasdaq, Inc. (NDAQ) September 2026 Conference Transcript

All right. Good afternoon, everyone. Thanks so much for joining us for this next session. And if you don't know me, I'm Ben Budish. I cover the U.S. Brokers, Asset Managers, and Exchanges. And for this fireside chat, really pleased to have Sarah Youngwood, CFO of NASDAQ. Sarah, thank you so much for being here.

Thanks for having me.

Maybe just to start, you talk a bit about how you see the current macro backdrop coming out of a period of heightened volatility early in the year. How does the environment look across capital markets, IPOs, the broader fintech business? I think investors are particularly interested and your expectations for IPO activity over the next 6 to 12 months?

Yes, I'll start with macro. So macro, we would say that the environment is constructive. You still have very good investments, especially in AI and digital. You also have a consumer that remains very resilient and earnings that are really supporting the valuations that we're seeing. So when you take those together, we would say constructive. Let me translate that into IPO, to your question. And we've seen a very robust IPO environment. So the first thing is pipeline is absolutely there. We have had the best half year we have ever had with $111 billion raised. Of course, that includes $86 billion with SpaceX. But that really tells you that the market is looking for scale, mature opportunities, but there is also a broad array of what is in the pipeline. So we're seeing a pipeline, of course, in the whole AI infrastructure, whether you're talking about SEMI or data centers or AI models themselves. And then you've got defense, which remains here. We've got a little bit in insurance and real estate. And even biotech, which had been a little bit too calm for a while, is starting to come back. So we are quite excited to see the breadth of what we are seeing in the IPO market. And then if I then take that to our fintech space, we had an excellent performance in the second quarter, 15% revenue growth, 16% ARR growth. And what that tells you about the environment is really a tremendous engagement with our clients. We are viewed as a core infrastructure for them. We're viewed as an AI forward transformation partner, which enables us to be really in the dialogue. And so whether you're looking at pipelines, whether you're looking at the tenure of our deals, the booking mix, we are seeing just really good stats. with our clients and with how they're behaving with us.

Great. Maybe just quickly, staying on the topic of IPOs, can you talk a little bit about NASDAQ's win rate? I think last quarter you were home to the seven of the ten largest operating company IPOs. What's driving that track record? How do you continue to win today?

Yes, seven of the two, and we have a wonderful 73% win rate, as you said, seven out of ten. And what that's really representing is the fact that whether you're talking about switches like Walmart or people coming to market like SpaceX, but also like many, many others, people are looking for the association with NASDAQ, the quality of trading, of course, but also the innovation and trust that is represented in our brand, as well as at this point we have the top 10 companies that are all listed on NASDAQ and so the association with us. And that creates a flywheel because that creates relevance and the index is a beneficiary from it and also, of course, benefits our listed companies. And the data that we get out of those great companies, as well as the trading, is all a wonderful ecosystem that we have been able to derive. And so we feel great about our position in the markets.

Let's talk about your market services business. I feel like usually this is the one we stick at the end, but there's so many interesting things going on. So a number of initiatives you've got underway on the trading side. Maybe tell us a little bit more about NASDAQ Digital Liquidity Networks. the level markets acquisition, any updates on the tokenization pilot, token design, the progress being made with the Kanton network. I know there's a lot in there.

Yeah, and actually there is a lot. And so if you go back to 50 years ago, we were created to actually connect capital to innovation in a totally different way using technology. And that has resonated. And over the last 50 years, and never more so than right now, we are continuing to evolve what markets are doing, to grow markets, to make sure that we do that, respecting the principles that we have put forward. Integrity, transparency, liquidity, and also the intelligence that comes with all of that. And so our role today is to continue to do that as the markets evolve. So at the intersection of digital ledger and AI, we are seeing those trends converging into a great transformation, and we're particularly well positioned. So we've organized ourselves around digital liquidity networks, which was the first one, and that is really our effort to drive all of the trends that reflect the investor demand for always on and to make sure that this is done in a way that is, again, respecting this liquidity, transparency, integrity principle and putting both the investors and the issuers at the core of that. So then you go to the next piece, level ATS. We just acquired the third largest ATS. And that's very important because this is a foray into off-market, off-exchange. And that gives us the ability to continue to give different pools of liquidity to our investors so that they can operate, whether in the fiat world or outside of the fiat world, in the way they want to operate and with us at the center of that. And this level ATS comes also a connectivity gateway in some ways that gives you access to 2,500 buy-side and sell-side. So quite important as we think about continuing to remain in the middle of the flow of capital. Then if we actually go backwards to last year, We had announced that with the DTCC, we wanted to make sure that we had the settlement, either fiat or token. That's not approved, and this is on its way for a launch. So, again, continuing to make progress. But then with now PayWard or Kraken, we did two things. Both an investment of $100 million in PAYWAR, the parent company of Kraken, but also a strategic investment. And the idea here is that together we can help to bridge between fiat and token and making sure that we maintain the depth of the liquidity pools and also putting the NASDAQ issuer in the center. So we have this NASDAQ equity token. They're also taking our surveillance. And that's an interesting theme because we're talking about market services, but that transformation of market is also incredibly productive for us in terms of core infrastructure provider to markets and market participants as they transform. So that gives you a lot. And then just to round it up with the last one, collateral management. And we have also put forth for Calypso the topic of using Calypso as a central point in the collateral management, but also moving collateral between tokens and fiat.

Very interesting. So you're the CFO, so I'm going to ask you the P&L question. When you put all these initiatives together, how do you think about the ultimate opportunity for NASDAQ, whether it's market share gains, increased trading volumes as liquidity improves across global trading hours, or any other potential benefits to share volumes, P&L? How do we think about all that?

I would say yes to all, but it goes broader than that. So the way you think about it is not only when you have Always On, when you create potentially additional demand for the U.S. markets, and we're very well positioned for that, you will create by being able to navigate between on-market and off-market additional liquidity pools that we're able to participate into, but you will also create with all of those new products. And I should have mentioned one more thing, which is the ability to have your products that are getting approved right now. You create the ability for us to do the hedging, again, additional volumes, additional market shares, but also for us to be the infrastructure provider. And that now is the market tech and Calypso side of the equation. And so we think we're particularly well positioned for this moment because we are AI forward. We have a very strong digital effort that is now extremely robust, well-organized, and that enables us to be both on the market services front as well as on the foundational front.

Maybe one last question on the topic of trading innovation. What are NASDAQ's latest thoughts on prediction markets slash event contracts and perpetual futures? So can you talk about where opportunities may exist for NASDAQ, if these products need to gain traction? How do you think about all that?

Yeah, so we really believe in the evolution of markets and in the role that we have had and will continue to have in the middle of all of that. So if you take event contracts, for example, first of all, we were able to get our first event contract approved with the SEC, and that's part of those new products that I mentioned. So that should launch shortly, probably at the end of this year. And so if you're looking at that, that is basically NASDAQ 100 and doing binary contracts, binary events on that. So continuing to add to that, we could certainly be interested in KPI-related events, but again, all within the constructs of being approved by our regulator. And probably not focused right now or in general beyond right now on sports or politics, but we're staying within the financial realms where we think that all of those, if they are done well, and if they are satisfying investor demand, if they're well-structured, if they're bringing investor trust to the markets, can be incredibly additive. And so we think we have an important role to form here because we have been able to support the formation of markets, which today the U.S. is more than half of the markets in the world, and NASDAQ is the largest market. And so bringing all of that demand from the rest of the world into the U.S. and continuing to evolve the U.S. markets with the principles that we stand for. Perpetrol, if you want.

Yes, I'm sorry. Please, please.

So what we've talked about at Earnings last quarter is that Perpetrol itself is probably representing less than 1% of revenue overlap for us, which is probably what you were moving on. And that's probably the right thing to do. But to the extent that there is a version of perpetual that is interesting and resilient with appropriate leverage, we're certainly open-minded to it. And again, in the meanwhile, we can provide additional capabilities to those who participate in those markets in terms of providing to them core infrastructure. Again, whether you're talking about trading, whether you're talking about surveillance, we have a lot of tools. which the new players in this world are interested in turning ourselves towards us for, because we can help to do things in a very good way.

Great. All right. Moving to your index business. This one's been extremely successful for you. I think ETP AUM is now over a trillion index options. Revenues are growing very rapidly. You've noted that a meaningful portion of inflows recently have come from products launched over the past three to five years. So maybe can you talk a bit about what's working particularly well outside of the core NASDAQ 100 franchise?

I will say we're thrilled with that franchise. It now represents 15% of what we do, 1 trillion of ETPAUM. We had $109 billion of inflows over the last 12 months. We had 35% growth last quarter. Where do I start? So it has been just incredible. And what's great is really the alpha generation, and that's what you're talking about, which is that we've got the NASDAQ 100, which has been then complemented in addition to the distribution from Invasco, which is a fantastic partner. We also have now State Street and BlackRock that are behind it. So, that continues to give us lots of legs of growth for NASDAQ 100 and continuing to create the ecosystem around it, whether you're talking about options or futures. This is an index that continues to have a lot of opportunities. Then, if you look at the $109 billion I talked about, 38% comes from products that were actually launched in the last five years. And so that's the point you were making, which is the innovation of the last five years is not just cool. It's actually creating 38% of $1 in $100 billion of inflows. And then those create the next legs of gold as they grow with market performance in addition to additional inflows that come into those indexes. Because those ETP UNs accumulate really over time. And at five-year mark, you're just getting started. So the things that we're seeing, you have everything from option strategies to, for example, data center has been a big theme. So whatever is investable as a trend, and right now there has been a lot around AI infrastructure, can create opportunities. Then the last thing that I would add is that 50% of our inflows were coming from outside of the U.S. And so the NASDAQ 100 is really a way for the rest of the world to participate in innovation in general, because a lot of it sits in NASDAQ 100. But beyond NASDAQ 100, we also are spending a lot of time on other products with asset managers around the world.

Great. Let's talk about your fintech business a little bit. So maybe starting with Verifin, one of the key narratives here has been the push into Tier 1 and Tier 2 banks. Can we talk about what demand looks like across that client segment? And to what extent are you seeing adoption of point solutions versus the broader Verifin platform? This has been another one you've talked about quite a bit.

So this year we had 11 enterprise deals that we have signed, which is so far as of the second quarter, which is more than what we had done in all of last year, so clearly accelerating. In general, when we get started with an enterprise client, they're really interested in our consortium, which represents 2,800 banks, 13 trillion of assets. And so they usually will take fund protection through that. So that would be the way they enter. But what's really interesting is that we're starting to see them do additional products once they have landed. And what we're also seeing is that whereas we have a 6 to 12 months, usually closer to 12 in the time to close an enterprise, we actually are towards 50% of that timeline when we're doing an add-on. So we are seeing momentum, and we're also seeing the enterprise clients interested in our agent tech platform that we have in Verifin. And so it's a very broad demand for what we're doing. And the great work that we've done now since we've owned Verafin over the last five years is not just establishing a brand, but establishing the data that you can't purchase. And we are now presenting ourselves with a lot more capabilities. We also have nice partnerships that we add so that we can continue to catch the fall earlier in a way that isn't going to be additive to all of our clients. But now all of the enterprise clients are recognizing this.

I think Verapen is also one of the businesses where you've been particularly proactive in deploying agentic AI and other AI power technologies. You alluded to that a little bit. But can you maybe unpack that a little bit more? Or, you know, what are you seeing in terms of AI, you know, powered solutions, specifically client adoption, improvements in fraud detection, workflow efficiencies, you know, things like that?

Yeah, so what's really exciting about Verafin is that they have really moved towards Genentech. And so we don't use that word lightly. Genentech is really those agents which are able to not just be a good co-worker, but be a good worker. And those workers are able to generate efficiencies, both in terms of, like, when you time the catching of the fraud, but also the efficiencies that they can represent for the financial institutions. So we are seeing about four times our productivity when you use those agents. We have two that have been in place since December. They are used by 800 of our clients. So this is not something that's in beta. This is something that's used by 800 clients out of our 2,800 clients. Mostly, I would say, in our small and medium-tier clients, but also interest from the larger enterprise clients, as I just mentioned. So we're seeing that as continuing to add to productivity and to timelines. And in fraud, timeline is very important. And so if you think about what's happening, where everything is going faster, and potentially you are introducing in payments additional risks related to that, having the verifying solutions becomes even more important than it has ever been to small institutions and to large institutions. And if the majority of people start having verifin, then you can't afford not to have access to that additional protection, and everybody is realizing that.

Maybe just one follow-up there. And I know you've kind of been asked this on some of the earnings calls over the past year or two, but maybe could you just remind us, what does this mean for the financial impact? Does it mean you have more pricing power? Does it mean the product becomes stickier? You kind of suggested that the depth of moat, especially from the size of, like, the data that's being pulled in from the consortium is itself sort of a source of that moat. So how do we think about that translating into, I don't know, faster revenue growth, stickier revenue growth, anything like that?

Yeah, so we were at 22% last quarter for that business, and we have a medium term out, like, I would look up in the mid-20s, so we definitely have good revenue growth. We have a net retention that is above 110. So we have, I would say, benefited and will continue to benefit from an ability to price for the very strong service that we deliver. In addition, we are pricing this agentic workforce as a separate add-on. And right now, we're still, I would say, mostly in what we call the free period. So we gave a certain amount of volumes to our clients really to let them adopt. If you're a financial institution and you want to adopt something, the first thing you want to do is go through compliance and get through your AI governance committees. And so if in addition you need to pay, that's probably too many things. but now that there is adoption and we've been very clear with the clients that that would be a paying product we are starting to convert and we're starting to convert we haven't disclosed the numbers but it's a contributor to our future expected growth it's still a very small number for today but the pipeline is very robust that's very helpful Maybe shifting some other parts of the fintech portfolio.

Earlier, we talked about the opportunities created by developments like always-on-markets, tokenization. So beyond the trading ecosystem, where else do these changes create opportunities for NASDAQ? How are you thinking about the implications for Eclipso, your post-trade solutions, surveillance?

Yeah, so we were talking about that a little bit earlier. What's exciting about our positioning is you think about us as markets. You think about us as index. But with the credibility of those, we've been able to develop core infrastructure solutions that we test ourselves and we use ourselves and therefore can sell to the very best. And I would say that we participate in bringing integrity as well as efficiency to the financial system. So we don't say it lightly when we say that we are the fabric of the financial system, the trusted fabric of the financial system, but equipping this transformation of market services with the right surveillance, with the right data, with the right collateral management is exactly where we sit. And so Calypso is participating in the collateral management and pre-trade, trade, post-trade. We're seeing Axel and SEL continuing to play their role in regulation. And if others become regulated, that can open opportunities. We're seeing the importance of connectivity as being higher now than ever with very strong demand, as you know, in trade management services. And our market tech technology, which serves 120 marketplaces, including the 20 we serve ourselves, but 100 others, is also serving new tech, I would say, and new markets so that we can be there. And then I wouldn't forget data, because as the world moves to what's always on, we also power the world. And if you're going to trade in the U.S., you need to have the data to trade in the U.S. And as the index becomes a broader index, you are creating, again, that flywheel that I was referring to before.

Moving through this segment, and I think you alluded to Axiom a little bit. We talked about Verif and moving upmarket to Tier 1 and 2s. I know with Axiom, that's sort of been the historical bread and butter, and you are working to move further down market. So can you give an update on that effort, and maybe in particular talk about how existing Calypso and Verifin customer bases have contributed to the Axiom opportunity?

Yeah, so one of the key things we've done with Axiom SL is we've taken it to the cloud. And when you have a cloud solution, you have this solution that's a bit simpler to implement, and that's more suited towards smaller clients. And so we went from being this really amazing partner to all of the GCBs, minus one, and to all of the largest banks beyond the GCBs, to actually now having the credibility that comes from being able to say that we have all of the GCBs and having served them and understood them and serving, I want to say, 114 regulators. across the world in 64 countries, and my team will correct me with the exact numbers, but it's a tremendous credibility that we have and that we can then bring to the smaller banks, but also by sides are starting to look at that. And again, we're prepared to serve anybody who needs regulation and to bring the rigor and the techniques that we have had to do that.

Maybe sticking with Axiom, you talked about the cloud journey. So maybe sticking on that sort of theme, you talked a bit about increased use of AI, again, the cloud. How do these developments affect the addressable market, monetization opportunities, client demand? And I think there's always been a perception that, like, there's an accessing of a lot of bank data that banks may be hesitant to allow AI that kind of access. But I'm sure there are a lot of efficiencies that can be gained and whatever else. So, you know, curious if you could talk a little bit more about that tech journey.

Yeah. So what's really interesting is that we're already touching their data. So the magic of NASDAQ is that we are already the partner to the largest financial institutions. And so it took us, and you see it with Verafin, years to be in the position of having the banks review our cyber review, our infrastructure review, how we do things to the point where they are already letting us touch data. And then we have enterprise contracts, which means that with online, if our services get integrated through their agents or through their people, and in fact, we are helping them become more efficient. And when I'm looking at some of the migrations to the cloud or additional sales in AI, because usually we need to be in the cloud, although we have some solutions to do it differently, but that's the simplest way to do it, the clients have a very easy business case to do more with us, give us more value as they generate a great business case for their own shareholders. And that has really worked. And so the hard work has been done. We are already, I would say, a safe partner, a trusted transformation partner. Our solutions are really excellent, and they are forward, and they enable us both to sell, to maintain the credibility, to move towards the higher ACV that comes with the cloud, and then, in some cases, to sell separately on AI. But I would say, in general, it's in the first three buckets that we have been for Exxon and Self-Ride level.

Maybe stepping back, thinking about the broader cross-sell and relationship-deepening opportunities across the fintech portfolio, I'm curious if you could talk about any examples, any metrics you can share around product adoption, client penetration. It's funny, from a sell-side analyst perspective, it feels like there's all these different revenue lines, but there's obviously this top-down logic around exchange data, information, and everything else. So curious if you could give us examples, anecdotes about how things are coming together, again, cross-cell penetration, things like that.

Yeah, so the cross-cell metric that we have been sharing is that over 15% of our fintech pipeline is indeed cross-cell. And we are very much seeing that our one-line-back efforts are paying for us. We are elevating within the financial institutions where we are, where we have C-suite relationships, which are covered by our management committee in general. And so, whereas those remain separate solutions, we have a real cross-sell motion that is driven, I would say, with the machinery that you would expect from a very strong revenue organization. But you also have, in complement to that and for some of the largest clients, the C-suite to C-suite relationships.

Maybe a few questions now on the cost side and capital allocation. So we talked about AI as a revenue driver. Curious, how do you think about that opportunity internally? How much runway is there for incremental efficiency gains through deployment of AI across the organization?

So also by saying to all that we think that it's a massive capture the sum opportunity. So there's a revenue opportunity that is really important. helping us to move in adjacent in an organic basis is incredibly important. And so I want to start with that, even though you asked me the question in the context of efficiencies. There are efficiencies, too. And we will capture them. You know that we have put forth as invested a $100 million of AI efficiencies, which we are executing upon. And we are incredibly organized, I will say, as a leadership team. We spend tons of time on both the revenue opportunity and the efficiencies. And the efficiencies, by the way, give you the power to generate additional investments, additional revenue growth. And so we are providing our team with a lot of support, training, engagement, as well as just great tooling, great opportunity to have the best tools available. And then we are measuring. You know me enough by now. I can't have a face-to-face without talking about return on invested capital. So we're looking at the returns on what we are doing, both in terms of the revenue and in terms of the efficiencies. And we're seeing a great equation associated with both with AI.

Great. Maybe on the capital side, you know, a little bit of an update on your capital allocation priorities, you know, the current M&A pipeline types of assets that are most attractive to NASDAQ today. Then, of course, I have to ask thoughts on the potential for larger or more transformative acquisitions over time. I know the messaging in there has been pretty consistent the last year or two, but worth asking all the same.

So we just start with over $2 billion of free cash flow. And that's a great place to start because it enables you to do more than one thing. We have always had a progressive dividend. When I say always, for the recent times, we have a progressive dividend, and that will continue, and no supply is expected there. But that has been a very nice contributor to some of our investors. The second part is share repurchase. You have seen us very engaged in share repurchases recently. That's in the context of we have a great organic strategy. We fully fund our investments. We are, I would say, pretty full in actually dedicating dollars towards organic growth, and that is the priority. But after that, after the dividend, we still have a lot that is available. And we believe that our price is undervalued. And to be honest, we have been very consistent at buying that stock. And we've done, as of the second quarter, about $900 million, which is a lot more than what we had done last year altogether. And we launched at the entering of the third quarter an additional $200 million to $250 million variable ASR program, so the sign that we are continuing to buy, despite being already way over what we had done last year. So, that's share with purchase. The deleveraging that we have done a fair bit since the Adenza transaction, I would say we don't need to do proactive deleveraging. We have a leveraged target range of 2.5 to 3, and we are, as of the second quarter, at 2.6 gross leverage. So at this point, you should not expect, I would say, anything particularly in terms of de-leveraging other than potential natural de-leveraging since we have a very nice worth of EBITDA which contributes to that. And so when you go towards M&A, we have a focus on organic growth, and that's really, that was just a lot. there could still be M&A that could become interesting but I wouldn't expect anything in what you described as a transformative category but could there be tokens? We've done a few. Vacity or level were two of them and could there be even bolt-ons? Absolutely if they made sense in the context of the other opportunities that we have.

We'll go back and revisit one or two topics, I think, that are also of interest. So we didn't spend much time talking about your data and data sales business, and I'm curious if there's sort of a tie-in to, like, the retail trading angle, which has been obviously, like, a huge growth driver for equities, particularly options, now maybe a big driver of prediction markets. So your data sales have also been quite strong. I'm curious if you could give a breakdown of where those are coming from. Is there a read to sort of, like, the broader retail trading environment Any color there would be helpful.

Yeah, so we don't sell directly to retail, but we sell to people who sell to retail. And so we have a very strong relationship with brokerage houses around the world. And I will say with the advent of 23.5 at the end of this year in December, people are equipping themselves to have data. And it's not like a December 6th and on. This is a trend that started some time ago and that we would expect is going to continue for years thereafter because this is really equipping the world in trading in the U.S. is a continued journey. And so we're very much at the center of that. We have solutions which are not only very thorough but very easy to implement, very real-time. And so we've had very great success, as you mentioned, in growing that business. We think that this continues to have lots of legs of growth. And this is something also where there is an advantage to real-time data, which is that, by definition, it's protected because it is real-time. And so we're very good at monitoring the use of our data and at making sure that we generate the revenue associated with the value of what we provide. So we've got a very strong interest coming from Asia and the rest of the world. We don't give breakdowns as to exactly where it's coming from, but the U.S. is, of course, a contributor, but the rest of the world is also a contributor to the additional work that we have.

Well, with that, we're nearly out of time, Sarah, so I think we'll leave it there. But what a pleasure to have you. Thank you so much for being here.

Thank you very much.