Nasdaq Inc. (NASDAQ: NDAQ) reported second-quarter earnings that surpassed Wall Street expectations, driven by robust growth in its index and financial technology segments. The exchange operator posted adjusted earnings of $1.07 per share, exceeding the consensus estimate of $0.98. Net revenue came in at $1.50 billion, also above the expected $1.44 billion.
Shares of Nasdaq rose 1.1% to $91.87 by mid-afternoon trading on Wednesday, after opening with a 2.8% gain. The stock's performance came amid a broader market downturn, with the Nasdaq Composite index declining about 2.1% on the day.
Key Growth Drivers
The company's index and financial technology segments each contributed $75 million to the year-over-year revenue increase, together accounting for 77% of the net revenue growth. Index-related revenue surged 38% to $271 million, while financial technology revenue climbed 16% to $539 million.
Index products, which represent just 18% of total net revenue, were responsible for 39% of the net revenue growth, highlighting the segment's outsized contribution. Excluding a one-time contract gain, adjusted index revenue growth was 35%. Assets in index-linked exchange-traded products reached $1.114 trillion at quarter-end, with inflows of $51 billion during the period.
Fintech and Market Services
The financial technology division added 58 new clients, completed 107 upsells, and executed seven cross-sells during the quarter. Organic annualized recurring revenue also grew 16%, matching the overall revenue growth rate for the segment.
Net revenue from market services rose 11% to $340 million. The highly anticipated initial public offering of SpaceX (NASDAQ: SPCX) saw over 500 million shares trade hands during its first session, though it generated minimal direct fee revenue for Nasdaq. The economic impact was more significant from associated trading and related services.
Financial Performance and Outlook
Overall, Nasdaq's net revenue increased 15% year-over-year, while non-GAAP expenses rose 10%. The adjusted operating margin expanded to 57% from 55% in the prior year, and adjusted earnings per share grew 25%.
CEO Adena Friedman highlighted the company's double-digit growth across all three divisions and noted the milestone of reaching $1 trillion in index-linked assets. The company raised its 2026 non-GAAP expense forecast to a range of $2.53 billion to $2.57 billion, with the midpoint $35 million higher than the guidance provided after the first quarter.
Operating cash flow reached $711 million, with dividends and share repurchases consuming $530 million, or 75% of that amount. The number of diluted shares declined by 1.9%, allowing earnings per share growth to outpace the increase in adjusted net income.
Risk Factors
Despite the strong quarter, risks remain. Increased costs could reduce financial flexibility if index inflows or trading activity decline. The emergence of new perpetual-futures platforms could add pressure to exchange volumes, though CFO Sarah Youngwood noted that wider approvals for equity-linked products would jeopardize less than 1% of revenue.
