Nasdaq (NDAQ)

Global exchange operator Nasdaq (NASDAQ:NDAQ) reported Q3 CY2025 results exceeding the market’s revenue expectations, with sales up 65.9% year on year to $1.96 billion. Its non-GAAP profit of $0.88 per share was 3.8% above analysts’ consensus estimates.

Company Overview

Originally founded in 1971 as the world's first electronic stock market, Nasdaq (NASDAQ:NDAQ) operates global exchanges and provides technology, data, and corporate services that help companies, investors, and financial institutions navigate capital markets.

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.

Nasdaq's competitors vary by business segment. In exchange services, it competes with Intercontinental Exchange (NYSE:ICE), Cboe Global Markets (BATS:CBOE), and London Stock Exchange Group (LSE:LSE). In market technology and data, competitors include CME Group (NASDAQ:CME), S&P Global (NYSE:SPGI), MSCI (NYSE:MSCI), and FactSet (NYSE:FDS).

A company’s long-term performance is an indicator of its overall quality. Even a bad business can shine for one or two quarters, but a top-tier one grows for years. Over the last five years, Nasdaq grew its revenue at an impressive 15.7% compounded annual growth rate. Its growth beat the average financials company and shows its offerings resonate with customers.

Long-term growth is the most important, but within financials, a half-decade historical view may miss recent interest rate changes and market returns. Nasdaq’s annualized revenue growth of 24.7% over the last two years is above its five-year trend, suggesting its demand was strong and recently accelerated. 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, Nasdaq reported magnificent year-on-year revenue growth of 65.9%, and its $1.96 billion of revenue beat Wall Street’s estimates by 50.1%.

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.

Interest income and expenses play a big role in financial institutions' profitability, so they should be factored into the definition of profit. Taxes, however, should not as they are largely out of a company's control. This is pre-tax profit by definition.

Over the last four years, Nasdaq’s pre-tax profit margin has risen by 9.8 percentage points, going from 44.7% to 35%. It has also declined by 4.3 percentage points on a two-year basis, showing its expenses have consistently increased at a faster rate than revenue. This usually raises questions unless the company is in high-growth mode and reinvesting its profits into attractive ventures.

Nasdaq’s pre-tax profit margin came in at 27% this quarter. This result was 3.2 percentage points worse than the same quarter last year.

Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

Nasdaq’s EPS grew at a decent 10.9% compounded annual growth rate over the last five years. However, this performance was lower than its 15.7% annualized revenue growth, telling us the company became less profitable on a per-share basis as it expanded.

Like with revenue, we analyze EPS over a shorter period to see if we are missing a change in the business.

For Nasdaq, its two-year annual EPS growth of 9.2% was lower than its five-year trend. We hope its growth can accelerate in the future.

In Q3, Nasdaq reported adjusted EPS of $0.88, up from $0.74 in the same quarter last year. This print beat analysts’ estimates by 3.8%. Over the next 12 months, Wall Street expects Nasdaq’s full-year EPS of $3.28 to grow 10.7%.

Return on equity, or ROE, tells us how much profit a company generates for each dollar of shareholder equity, a key funding source for banks. Over a long period, banks with high ROE tend to compound shareholder wealth faster through retained earnings, buybacks, and dividends.

Over the last five years, Nasdaq has averaged an ROE of 15.6%, healthy for a company operating in a sector where the average shakes out around 10% and those putting up 25%+ are greatly admired. This is a bright spot for Nasdaq.

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.

Nasdaq currently has $9.55 billion of debt and $12.03 billion of shareholder's equity on its balance sheet, and over the past four quarters, has averaged a debt-to-equity ratio of 0.8×. 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 were impressed by how significantly Nasdaq blew past analysts’ revenue expectations this quarter. We were also glad its EPS outperformed Wall Street’s estimates. Zooming out, we think this quarter featured some important positives. The stock remained flat at $89.75 immediately following the results.

Updated: December 4, 2025 at 10:38 PM EST

When considering an investment in Nasdaq, investors should account for its valuation and business qualities as well as what’s happened in the latest quarter.

Nasdaq isn’t a bad business, but we have other favorites. To kick things off, its revenue growth was solid over the last five years. And while Nasdaq’s declining pre-tax profit margin shows the business has become less efficient, its solid ROE suggests it has grown profitably in the past.

Nasdaq’s P/E ratio based on the next 12 months is 23.8x. 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 $103.13 on the company (compared to the current share price of $90.26).