CME Group (CME)

Financial derivatives exchange CME Group (NASDAQ:CME) met Wall Street’s revenue expectations in Q3 CY2025, but sales fell by 3% year on year to $1.54 billion. Its non-GAAP profit of $2.68 per share was 2% above analysts’ consensus estimates.

Company Overview

Born from the Chicago Mercantile Exchange founded in 1898 as a butter and egg trading venue, CME Group (NASDAQ:CME) operates the world's largest derivatives marketplace where traders can buy and sell futures and options contracts across interest rates, equities, currencies, commodities, and more.

Financial exchanges and data providers operate trading platforms and sell market information. They enjoy relatively stable revenue from trading fees and subscriptions, increasing demand for data analytics, and expansion opportunities in emerging markets. Challenges include regulatory oversight of market structure, competition from alternative trading venues, and substantial technology investments needed to maintain low-latency trading infrastructure and data security.

CME Group's primary competitors include Intercontinental Exchange (NYSE:ICE), which owns the New York Stock Exchange and numerous derivatives exchanges, Deutsche Börse (ETR:DB1), which operates Eurex, and Nasdaq (NASDAQ:NDAQ). In specific market segments, CME also competes with Hong Kong Exchanges and Clearing (HKEX), London Stock Exchange Group (LON:LSEG), and Cboe Global Markets (BATS:CBOE).

Examining a company’s long-term performance can provide clues about its quality. Any business can have short-term success, but a top-tier one grows for years. Regrettably, CME Group’s revenue grew at a tepid 5.4% compounded annual growth rate over the last five years. This was below our standard for the financials sector and is a poor baseline for our analysis.

Long-term growth is the most important, but within financials, a half-decade historical view may miss recent interest rate changes and market returns. CME Group’s annualized revenue growth of 9.4% over the last two years is above its five-year trend, suggesting some bright spots. Note: Quarters not shown were determined to be outliers, impacted by outsized investment gains/losses that are not indicative of the recurring fundamentals of the business.

This quarter, CME Group reported a rather uninspiring 3% year-on-year revenue decline to $1.54 billion of revenue, in line with Wall Street’s estimates.

Revenue growth is one major determinant of business quality, and the efficiency of operations is another. For Financial Exchanges & Data companies, we look at pre-tax profit rather than the operating margin that defines sectors such as consumer, tech, and industrials.

This is because for financials businesses, interest income and expense should be factored into the definition of profit but taxes - which are largely out of a company's control - should not.

Over the last four years, CME Group’s pre-tax profit margin has fallen by 8.8 percentage points, going from 67% to 75.8%. It has also expanded by 1.5 percentage points on a two-year basis, showing its expenses have consistently grown at a slower rate than revenue. This typically signals prudent management.

CME Group’s pre-tax profit margin came in at 76.5% this quarter. This result was 2.3 percentage points better than the same quarter last year.

We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.

CME Group’s EPS grew at an unimpressive 9.8% compounded annual growth rate over the last five years. On the bright side, this performance was better than its 5.4% annualized revenue growth and tells us the company became more profitable on a per-share basis as it expanded.

Like with revenue, we analyze EPS over a more recent period because it can provide insight into an emerging theme or development for the business.

For CME Group, its two-year annual EPS growth of 11% was higher than its five-year trend. Accelerating earnings growth is almost always an encouraging data point.

In Q3, CME Group reported adjusted EPS of $2.68, in line with the same quarter last year. This print beat analysts’ estimates by 2%. Over the next 12 months, Wall Street expects CME Group’s full-year EPS of $10.96 to grow 2.9%.

Return on equity, or ROE, quantifies bank profitability relative to shareholder equity - an essential capital source for these institutions. Over extended periods, superior ROE performance drives faster shareholder wealth compounding through reinvestment, share repurchases, and dividend growth.

Over the last five years, CME Group has averaged an ROE of 11.2%, respectable for a company operating in a sector where the average shakes out around 10% and those putting up 25%+ are greatly admired.

The debt-to-equity ratio is a widely used measure to assess a company's balance sheet health. A higher ratio means that a business aggressively financed its growth with debt. This can result in higher earnings (if the borrowed funds are invested profitably) but also increases risk.

If debt levels are too high, there could be difficulties in meeting obligations, especially during economic downturns or periods of rising interest rates if the debt has variable-rate payments.

CME Group currently has $3.42 billion of debt and $28.19 billion of shareholder's equity on its balance sheet, and over the past four quarters, has averaged a debt-to-equity ratio of 0.1×. We think this is safe and raises no red flags. In general, we’re comfortable with any ratio below 3.5× for a financials business.

We struggled to find many positives in these results. Zooming out, we think this was a mixed quarter. The market seemed to be hoping for more, and the stock traded down 1.3% to $265.24 immediately after reporting.

Updated: December 4, 2025 at 11:09 PM EST

A common mistake we notice when investors are deciding whether to buy a stock or not is that they simply look at the latest earnings results. Business quality and valuation matter more, so we urge you to understand these dynamics as well.

CME Group isn’t a terrible business, but it doesn’t pass our bar. To kick things off, its revenue growth was uninspiring over the last five years, and analysts don’t see anything changing over the next 12 months.

CME Group’s P/E ratio based on the next 12 months is 24.2x. This multiple tells us a lot of good news is priced in - we think there are better opportunities elsewhere.

Wall Street analysts have a consensus one-year price target of $284 on the company (compared to the current share price of $272.86).