Nasdaq (NASDAQ:NDAQ) held its second-quarter earnings conference call on Thursday. Below is the complete transcript from the call.

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The full earnings call is available at https://edge.media-server.com/mmc/p/8pores9q/

Summary

Nasdaq reported strong Q2 2026 results, with net revenue of $1.5 billion, up 15%, and solutions revenue of $1.2 billion, up 17%. Diluted EPS grew 25% to $1.07.

The company achieved significant milestones, including surpassing $1 trillion in assets under management in its index business and record quarterly net inflows.

Nasdaq welcomed major IPOs, including SpaceX, and became the largest exchange by market capitalization.

Strategic initiatives include engaging with regulators on market innovations like always-on markets and tokenization of assets, aiming to expand investor access.

Nasdaq Verafin reached $13 trillion in combined assets, with notable expansions in financial crime management technology.

The company plans to launch 23/5 trading by December 2026, and received SEC approval to list event options.

Operating expenses increased by 10% to $641 million, with an updated non-GAAP expense guidance of $2.53 billion to $2.57 billion for 2026.

Nasdaq returned over $530 million to shareholders in Q2 through dividends and share repurchases, with a free cash flow of $477 million.

Management highlighted AI as a key growth driver, with new AI capabilities being integrated into products, and discussed potential AI monetization strategies.

The company is focused on modernizing financial technology and expanding its role in tokenization and collateral management, with ongoing proof of concepts.

Full Transcript

OPERATOR

Good day and thank you for standing by. Welcome to Nasdaq's second quarter 2026 results conference call. At this time all participants are in a listen-only mode. After the speaker's presentation there will be a question-and-answer session. To ask a question during the session you will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To rejoin your question, please press star 11 again. In the interest of time, we ask that you please limit yourselves to one question and one follow-up.

Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker, Ato Garrett, Senior Vice President and Investor Relations Officer. Please go ahead.

Ato Garrett, Senior Vice President and Investor Relations Officer

Good morning everyone and thank you for joining us today to discuss Nasdaq's second quarter 2026 financial results. On the line are Adena Friedman, our Chair and Chief Executive Officer, Sarah Youngwood, our Chief Financial Officer and other members of the management team. After our prepared remarks, we will open line for Q and A. The press release and earnings presentation accompanying this call can be found on our investor relations website. I would like to remind you that we will be making forward-looking statements on this call that involve risks.

A summary of these risks is contained in our press release and a more complete description in our annual report on Form 10-K. We will discuss our financial performance on a non-GAAP basis excluding the impact of acquisitions and divestitures, the impact of changes in FX and a $6 million one-time benefit to index revenue related to a contract modification. Definitions and reconciliations of U.S. GAAP to non-GAAP plus adjustments can be found in our earnings presentation as well as in a file located in the financial sections of our investor relations website at ir.nasdaq.com and with that I'll now turn the call over to Adena.

Adena Friedman — Chair and Chief Executive Officer

Thank you, Ato, and good morning, everyone. Today I will start with a review of our second quarter financial results and we'll then review the operating performance across our divisions. I will then hand the call over to Sarah to walk through the financial results in more detail. In the second quarter, Nasdaq delivered outstanding growth across each of our divisions, underpinned by our leadership in driving the transformation of the financial system and fueled by the continued demand for leading market infrastructure and mission-critical technology.

Our leadership translated into a series of historic milestones this quarter: in our index business, assets under management surpassed $1 trillion for the first time in our history and we had our largest quarterly net inflows ever. Nasdaq Verafin crossed $13 trillion in combined assets across more than 2,800 financial institutions that rely on our platform to fight financial crime. We set new records in notional value traded during both the June Triple Witch expiration and the Russell reconstitution.

We welcomed SpaceX, the largest IPO in history, and are proud to have become the largest exchange in the world by market capitalization of our listed companies. We continue to operate in a constructive U.S. economic environment supported by resilient corporate earnings, ongoing investment in AI and digital infrastructure, and healthy consumer spending. Within the capital markets industry, we're working constructively with regulators who are seeking to encourage innovation, including always-on markets and tokenization of assets.

These emerging innovations have the potential to become durable market advancements that meaningfully expand investor access across the globe when paired with appropriate investor protections, as well as with structures that drive institutional investor demand alongside that of retail investors. We look forward to continuing our efforts to engage regulators and legislators to define the future of markets. Now I'd like to turn to our results. In the second quarter we delivered $1.5 billion in net revenue, up 15%, and solutions revenue of $1.2 billion, up 17%.

Our overall annualized recurring revenue, or ARR, grew 12% year over year to $3.3 billion. Expenses were $641 million, up 10%, and we delivered 25% diluted EPS growth driven by 19% growth in operating income and strong capital returns. Within our divisions, Capital Access Platforms generated 18% revenue growth and 8% ARR growth. Financial Technology delivered 15% revenue growth and 16% ARR growth, and Market Services delivered 11% net revenue growth.

These results reflect our expand, evolve, and transform framework in action. Throughout the quarter, we deepened our client relationships through our One Nasdaq strategy, launched innovative products while enhancing existing solutions, and invested in strategic opportunities that will drive our next phase of growth. Now, turning to the divisional results, I will start with Capital Access Platforms where I will first discuss data and listings. Our U.S. listings franchise delivered the strongest first half in U.S. exchange history with $111 billion in operating company proceeds raised. Our performance was underpinned by the historic IPO SpaceX on June 12, raising $86 billion, marking the largest IPO in history. We were also proud to dual-list SpaceX on Nasdaq Texas, the region's premier listing venue. Other landmark listings in the second quarter included Cerebras, the largest semiconductor IPO of all time; Continuum, the largest pure-play quantum IPO of all time; and Parabolis Medicines, the largest biotech IPO of all time. In total for the quarter, we welcomed 26 new operating companies, raising $106 billion in proceeds, including seven of the top 10 IPOs. Earlier this month, we also welcomed SK Hynix, which raised $27 billion, the largest ADR listing in U.S. capital markets history. The IPO environment is robust and we're in a strong position to capitalize as new companies look to join the public markets in the second half of the year.

Nasdaq powers the innovation economy, connecting leaders from around the world with capital that turns their ambitions into reality. The breadth and significance of the companies that list with us this quarter is a meaningful testament to that pillar of our strategy. Turning to our data business, we delivered strong growth driven by new bookings and increased usage. This includes a 34% year-over-year increase in the number of enterprise licenses across multiple geographies.

The growing adoption of AI and rising demand from digital asset platforms continues to accelerate interest in our data solutions. Looking ahead, we're excited to support the transition to always-on trading with the launch of unique integrated datasets that will expand usage of Nasdaq's proprietary data among investors worldwide. Our index franchise set new inflow records with $51 billion in net inflows for the quarter and $109 billion in net inflows over the last 12 months.

Our quarter-end and average ETP AUM reached new milestones and exceeded $1 trillion for the first time ever. Product innovation remains a key driver of growth in our index business, with 38% of the trailing 12-month net inflows driven by products launched over the last five years and 22% driven by products launched over the last three years. We launched 34 new products in the quarter, including 11 insurance products, demonstrating the breadth of our innovation pipeline.

We also continued to expand our global reach: 50% of all new products introduced this quarter were launched outside the United States. We're pleased to introduce expanded access to the Nasdaq-100 with the recent launches of BlackRock's IQQ and State Street's QNDX ETFs in the United States. We also continue to grow our long-standing relationship with Invesco, expanding global investor access to the QQQ ETF, which we cross-listed in Japan in the second quarter.

Turning to Workflow and Insights, revenue grew 5% with continued momentum in Analytics. In Corporate Solutions, we continue to operate in a challenging environment; however, clients remain highly engaged with our AI-enabled capabilities, with 65% of Boardvantage users and 79% of Higher Insights clients leveraging our AI tools. Within Analytics, we delivered double-digit revenue growth from bookings and a higher retention rate in both eVestment and Datalink.

Growth in eVestment has been driven in part by AI adoption; more than a quarter of new bookings are associated with AI use cases. We also continue to expand the reach of eVestment's data assets, which now include almost 91,000 private funds. Within Datalink, we see sustained demand for our unique data assets. This quarter we are pleased to introduce the Datalink Model Context Protocol, or MCP, which will deliver frictionless client connectivity to power AgentIQ workflows.

This capability makes it easier for clients to integrate Nasdaq's trusted data, including our market data, directly into AI-driven applications, enhancing the value and reach of our data assets across the AI ecosystem. Turning to Financial Technology, we achieved an outstanding quarter, delivering revenue growth of 15%. The performance was underpinned by strong engagement across our clients for solutions that address market modernization, the transition to always-on trading, and the evolving regulatory landscape.

Our sales cycles, our contract term lengths, and our bookings mix between existing and new clients have remained consistent, reflecting the durable nature of our mission-critical solutions. In the quarter we signed 58 new clients, 7 cross-sells, and 107 upsells, driving 16% ARR growth. In Financial Crime Management Technology, Nasdaq Verafin delivered 22% revenue growth driven by significant expansions across key client segments. Our product suite now serves more than 2,800 clients representing over $13 trillion in collective assets.

During the quarter we signed 47 new SMB clients and continue to see strong momentum in the enterprise clientele with two expansions, two renewals, and two cross-sells. Early in the third quarter we signed an additional enterprise expansion and a cross-sell, totaling 11 enterprise signings so far in 2026, which already exceeds the total number of signings we had in all of 2025. Nasdaq Verafin continues to accelerate AI innovation in its business and across its platform.

Our Agentic AI workforce is now used by 750 clients. In the second quarter we announced an expansion of the workforce, including two new Agentic workers which we've moved into beta: one for AML structuring alerts and the second for ACH fraud alert triage. The new role-based workers enable end-to-end automation of financial crime workflows, from fraud and AML alert reviews to investigations and reporting. We also plan to introduce new auto-dispositioning capabilities in Q3 and flexible deployment options that extend our AI solutions across third-party systems by the end of the year.

Verafin's AgentIQ AI workforce expansion reflects our broader AI-first development approach, which is transforming every stage of the product development lifecycle from design and development to testing and deployment. This enables us to increase innovation velocity, expand our product roadmap, and bring new capabilities to clients faster than ever before. Regulatory Technology delivered sustained growth driven by significant expansions to always-on markets and infrastructure modernization.

Overall, we signed nine new clients, including two cross-sells, and 63 upsells. In AxiomSL, we deepened relationships with existing clients while expanding our global footprint with continued strength in our cloud bookings. During the quarter, a U.S. bank expanded its footprint with AxiomSL as the client grew through acquisition and faced more significant regulatory requirements. Additionally, a top-four Australian bank expanded their relationship with us to leverage our cloud-enabled regulatory reporting solution, reinforcing the global demand for our platform.

In Surveillance, we delivered strong growth while experiencing significant demand from clients expanding into new markets, including energy and digital assets. This demand included a significant renewal and expansion with a global broker-dealer, as well as a renewal with a key global financial institution. We signed three upsells for our cross-product surveillance capability, which we launched earlier this year. The new solution enables our clients to detect complex market abuse tactics across multiple markets and asset classes, highlighting the power of our new signal-based detection.

We also secured a Tier 1 client for our newest AI solutions, Calibration Copilot and GenAI News Copilot, in July, reflecting growing demand for AI-powered workflows and positioning us for broader adoption over time. Capital Markets Technology continued to deliver strong performance, highlighted by significant new clients and excellent revenue growth in Trade Management Services. In the quarter we signed seven new clients, including three cross-sells, and 42 upsells.

In Market Technology, we maintained momentum while advancing key infrastructure modernization initiatives. We made further progress in the rollout of our Eclipse product suite, with two existing clients committing to the migration of their market platforms to Eclipse. We also completed three modernization programs, including going live with clearing for BYMA, the Argentina Stock Exchange, and with trading for new UoM, a regional market operator that integrates the Peru, Chile, and Colombia stock exchanges.

In Calypso, we signed several new clients that expand the reach of our products to new countries, institutions, and asset classes, including our first U.S. Treasury clearing deals with two large financial institutions. Additionally, earlier this week we announced a deal with the Georgian Financial Markets Treasury Association to modernize the country's treasury and financial markets infrastructure. As part of this deal, five leading commercial banks in the country of Georgia will adopt the Calypso platform, with opportunities to onboard more banks over time.

With this deal, Calypso now operates in more than 70 countries. Additionally, we piloted tokenized collateral trades on the Canton Network in July alongside two of the world's leading asset managers. Specifically, tokenized money market funds were successfully transmitted as collateral through Calypso, leveraging the Canton Network. Now turning to Market Services, the division delivered 11% organic net revenue growth against a backdrop of record industry volumes in U.S. options and U.S. cash equities. We also achieved record volumes for index options, doubling year-over-year revenue for the fourth consecutive quarter. In European cash equities, we experienced higher industry volumes and delivered a 3-percentage-point increase in lit market share, bringing us to 74%. On June 18, we achieved a record Triple Witch event, recording $296 billion, the largest ever in notional value traded. That date also marked a record date for U.S. equity industry volumes, with 34.6 billion shares traded on the day. The Russell reconstitution on June 26 set new records across the board, achieving our highest-ever revenue, our highest-ever share volume in the cross at 4.6 billion shares, and a record notional value traded of $334 billion, more than triple the prior Russell rebalance record set last year. Looking ahead to near-term milestones, we remain on track for a projected launch of 23/5 trading on December 6, 2026.

Additionally, we received SEC approval to list event options and remain on track for launch in the fourth quarter. Overall, our results demonstrate the strength of a business increasingly driven by recurring revenue from deeply integrated platforms and long-term growth trends that are still in the early innings, such as AI adoption and market modernization, including tokenization and always-on markets. Markets are evolving rapidly as new technologies, asset classes, market structures, and resiliency requirements reshape the financial system.

Nasdaq continues to be a leader in this transformation by building the trusted, resilient infrastructure that enables institutions and market operators to modernize responsibly to serve both institutional and retail investors. Our role is to help design a durable investor experience with the goal to increase investor access while also protecting investors and the broader financial system through the markets we operate, the technology we provide to other markets, our index and analytics products, and our risk management solutions.

Our competitive position reflects decades of investment in a deep client community, gold-standard data, mission-critical technology platforms, and exceptional technical talent. Together these advantages have created powerful network effects across our ecosystem. AI is enabling us to strengthen these advantages by enhancing the pace and scope of product capabilities that we can deliver to our clientele. Looking ahead, we're energized not only by the strength of our performance, but the breadth and depth of the dialogue we have with clients and the scale of the opportunity in front of us.

With that, I'll turn the call over to Sarah to walk through the financial results in more detail.

Sarah Youngwood — Chief Financial Officer

Thank you, thank you, Adena, and good morning everyone. In the second quarter of 2026, Nasdaq delivered exceptional results headlined by Solutions revenue growth of 17%, including the second straight quarter of double-digit revenue growth. In all three financial technology subdivisions, we had diluted EPS growth of 25%, exceeding a dollar in quarterly EPS for the first time in the company's history. Let's start with quarterly results on Slide 11.

We reported net revenue of $1.5 billion, up 15%, with Solutions revenue of $1.2 billion, up 17%. Operating expense was $641 million, up 10%, leading to an operating margin of 57% and an EBITDA margin of 60%, both up 2 percentage points over the prior-year period. This resulted in net income of $605 million and diluted EPS of $1.07, up 25%. Slide 12 shows the drivers of our 15% net revenue growth for the quarter. We generated 11 percentage points of alpha, the second consecutive quarter of double-digit alpha growth driven by new and existing clients and product innovation.

Meanwhile, beta factors contributed 4 percentage points of growth this quarter, driven by higher valuations in Nasdaq indices and higher derivatives volumes in Index and higher overall volumes in Market Services. Let's review division results starting on Slide 14. In Capital Access Platforms, we delivered revenue of $621 million, up 18%, with ARR growth of 8%. Data and Listings was up 9% for both revenue and arrangements data. Revenue growth was strong and driven primarily by top sales, new sales and usage.

Listings revenue benefited from the improving IPO environment and pricing increases, partially offset by delistings and lower amortization of prior-period initial listing fees, which were marginally better than our expectations. Index revenue was up 35%, and ARR, which covers a very small portion of revenue, increased 8%. Revenue growth was primarily driven by record average AUM surpassing $1 trillion in the second quarter, bolstered by record net inflows of $109 billion over the last 12 months, including a record $51 billion in the second quarter.

Volume-based revenue also contributed to growth, with record derivatives contract volumes up 33% in the quarter. Notably, volume growth outside of the U.S. was very similar to growth in the U.S., reflecting the strength of the product ecosystem in regions around the world where perpetual-style derivatives are already available. The volume growth was partially offset by the continued mix shift in derivatives volumes from higher-priced E-mini contracts to lower-priced Micro E-mini contracts.

In Workflow and Insights, revenue was up 5% in the quarter with ARR growth up 6%. The revenue increase was driven primarily by Analytics, mainly from Investment and Datalink Corporate Solutions. Revenue was essentially flat excluding the one-time revenue item related to a contract modification. In our Index business, quarterly operating margin for the CAP division was 63%, up 4 percentage points versus the prior-year period. Before we wrap our Capital Access Platforms, we are continuing to optimize our portfolio with two transactions.

Earlier this week we announced an agreement to sell Nasdaq Fund Secondaries to Nasdaq Private Market, where we remain an investor and strategic partner. This transaction brings together two highly complementary businesses and strongly positions Nasdaq Private Market to capitalize on the significant opportunity to provide secondary liquidity infrastructure for both private company shares and private fund interests. And today we are announcing that we have entered into an agreement to acquire Daasity, an AI-powered due diligence platform used by institutional asset allocators and managers across public and private markets.

Daasity will be integrated into Nasdaq Investment to provide a seamless experience across Investment's institutional network. On a pro forma basis for the last 12 months, these two transactions would have combined to result in a net increase in revenue of approximately $4 million to Nasdaq and both companies are still early stage. We did not provide purchase or disposition prices for the transactions as neither of them is material. Moving to Financial Technology on Slide 15, revenue was $539 million, up 15%, driven by double-digit growth across all three subdivisions.

ARR growth was 16%. Our business continues to see strong demand across all FinTech subdivisions and high levels of client engagement. The division signed 58 new clients, 107 upsells and seven cross-sales in the quarter. Cross-sales continue to represent over 15% of the FinTech pipeline. Financial Plan Management Technology revenue grew 22% in the quarter with ARR growth of 17% and net revenue retention of 110%. We signed 47 new SMB clients in the second quarter, reflecting continued momentum in the SMB client cohort.

In Enterprise, we signed two cross-sales, two expansions and two renewals in the quarter, as well as one additional cross-sale and an expansion early in the third quarter. Regulatory Technology delivered revenue growth of 13% and ARR growth of 14%, reflecting strong performance across both Surveillance and Axtermas Sales. The subdivision delivered 90 appliances including 2 plus sales and 63 sales. In the quarter, Capital Market Technology revenue grew 14% with a growth of 17%.

The subdivision delivered seven new clients including three cross-sales and 42 upsells. The quarter's strong performance reflects demand for data center services as well as a pricing increase in trade management services and continued execution at Calypso, including a strategic long-term renewal with a large global bank. Performance in the quarter was partially offset by lower professional services revenue. As a note, Capital Markets Technology revenue growth in the third and fourth quarter of 2025 benefited from a contribution from Calypso upfront revenue, which will create a tougher comp for Capital Market Technology in the upcoming two quarters.

Financial Technology quarterly operating margin was 46%, in line with the prior-year period. Turning to Market Services on Slide 16, we had record quarterly net revenue of $340 million, up 11%. Growth in the quarter was driven by record industry volumes across U.S. equities and U.S. options and strong volumes across European equities and fixed income. We also continued to deliver alpha as reflected in higher market share and higher capture in U.S. equities. Index options revenue more than doubling versus the prior-year period for the fourth straight quarter, strong adoption of newly launched short-dated options products, and higher market share in European equities. This performance was partially offset by lower capture in U.S. options driven by a continued mix shift in the composition of order flow as new consolidators have entered our market, and lower U.S. Tech client revenues, primarily driven by lower audit revenue following an industry-wide adjustment in a prior-year period, which we had called out last year.

Quarterly operating margin for the division was 64%, up 1 percentage point versus the prior-year period. The financial system is undergoing one of its most significant periods of modernization in decades. The shift is visible across multiple dimensions in the move towards 23.5 trading, the adoption of tokenized assets, the use of AI across financial infrastructure, and the development of new instruments such as perpetual-style derivatives and prediction markets.

This market evolution enables Nasdaq to expand its role across the financial ecosystem. Perpetual-style derivatives are the latest example of a potential product innovation being considered by U.S. regulators. Today, U.S. regulatory approval has been limited to instruments outside the scope of Nasdaq's U.S. markets. Should there be a consideration by the SEC and the CFTC to expand U.S. approval across equity products including options and equity-linked index products, even in an extreme case, we would still expect minimal crossover representing less than 1% of our total revenue over time.

However, such innovations, to the extent they are durable, can create opportunities for us as they expand market access and increase demand for trusted and resilient market infrastructure. Nasdaq thrives in an environment that enables responsible innovation while remaining focused on protecting investors. Moving to expense on Slide 17, we had operating expense of $641 million in the second quarter, an increase of 10% driven by employee compensation reflecting the timing of our annual compensation cycle as well as incentive compensation driven by our strong revenue execution, increased marketing expense due to a strengthening IPO environment, investment in technology to support revenue and drive innovation and growth, and severance costs. The second quarter operating margin was 57% and the EBITDA margin was 60%, both up 2 percentage points versus the prior-year period. We are updating our non-GAAP expense guidance for the year to a range of $2.530 billion to $2.570 billion from $2.485 billion to $2.545 billion, with two primary drivers of the increase: higher employee compensation given the strong revenue performance we have experienced year to date, and increased marketing expense due to a strengthening IPO environment, with marketing expense having a larger effect within the quarter of the planned IPO. To note, in the third quarter of 2025 we collected a $5 million regulatory fine which was recorded as a contract expense. As a result, we expect a tougher expense comparison in the upcoming quarter. We maintain our 2026 non-GAAP tax rate guidance of 22.5% to 24.5%. Turning to capital allocation on Slide 18, Nasdaq generated free cash flow of $477 million in the second quarter. Over the last 12 months, Nasdaq generated $2.2 billion in free cash flow at a conversion ratio of 97%.

We paid a dividend of $0.31 per share, or $174 million in the quarter, representing a 31% annualized payout ratio. During the quarter, we repurchased a total of 4.1 million shares of our common stock for $356 million. In combination with the dividend, Nasdaq returned over $530 million to shareholders in the second quarter. In the first half we have repurchased $903 million, compared to $616 million of repurchases in all of 2025. In July, we launched a $200 to $250 million variable accelerated share repurchase plan, which will be completed in the third quarter.

We finished the quarter with a gross leverage ratio of 2.6x driven by EBITDA growth and a net repayment of approximately $162 million of source debt. In closing, Nasdaq delivered another quarter of excellent execution. Our results reflect the strength of our business model, highlighted by growth-based revenue growth across all three divisions, expanding margins, rigorous capital allocation and mid-20s EPS growth. As we enter the second half of the year, we are extremely confident in our opportunity, and we are focused on executing on our ambitious strategic objectives to deliver long-term value for shareholders.

With that, I'll open the call for Q&A.

OPERATOR

Thank you. As a reminder, to ask a question, you would need to press Star 11 on your telephone. To withdraw your question, please press Star 11 again. We ask that you please limit yourselves to no more than one question, but feel free to go back into the queue and, if time permits, we will be happy to take your follow-up questions at that time. Please stand by while we compile the Q&A roster. Our first question comes from the line of Ashish Sabhadra from RBC Capital Markets.

Please go ahead.

Ashish Sabhadra, Analyst at RBC Capital Markets

Thanks for taking my question. Really solid results. Adena, you mentioned several AI initiatives across all segments and significant client adoption of your AI solutions. How has your thinking evolved on AI monetization? Are you primarily focused on driving better sales momentum, retention and pricing power, or do you also see opportunities to charge

Adena Friedman — Chair and Chief Executive Officer

Great, thank you. We actually take an approach that's product by product, and frankly, capability by capability. So in some cases we are integrating the AI capabilities into the core product, and we would look to evaluate the pricing of that product over time based on the value we're providing to our clients. And that would be in the case of the Calibration Copilot and some of the work we're doing in Boardvantage and IR Insight. But then we also have other capabilities where we are charging as a new module, but we are taking kind of a freemium approach.

So with, for instance, in Anti-Financial Crime, Verafin, and in Surveillance, the GenAI News Copilot within Surveillance, and all of the digital workers within Verafin, we're basically offering a certain number of alerts for free. And then, if they want to have the ability to have an unlimited number of alerts that they're working through, the digital workers, then they would pay a subscription fee — basically an upsell. And we do have clients definitely signing up for the upsell.

We're in the process of contracting many clients actually for the upsell, but we also want to make sure we're driving usage because it's the best way for them to provide value to themselves and for us to prove that we can charge successfully for these great capabilities. So we're in the very early innings of monetizing our AI capabilities, but we're very encouraged by the way that the clients are moving from free to a paid subscription. In terms of monetization overall, we're not providing any sort of details on that yet, but over time we'll make sure that we continue to update you on the progress of our AI strategy.

OPERATOR

Thank you. Our next question comes from the line of Eli Abboud from Bank of America. Please go ahead.

Eli Abboud, Analyst at Bank of America

Good morning. Thanks for taking the question. I was hoping to unpack the strong results in Trade Management Services. I think you've flagged Trade Management Services as the strongest performer in your capital markets tech business for a couple quarters in a row now. To what extent are you seeing new trading firms come into your data center versus existing clients demand more bandwidth? And then how much of this do you think is tied to the use of generative AI in trading?

Adena Friedman — Chair and Chief Executive Officer

Sure. So it is really coming from new and existing clients, and it is definitely just demand for connectivity, for power, and for the ability for them to drive their trading strategies. I would not say that it's really AI, GenAI driven. A lot of trading strategies are algorithmic AI, and that's been in the markets now for a long time. But it's definitely more from the fact that there's more trading, there are more strategies that people are deploying.

They're trying to make sure that they're looking at multi-asset-class strategies and things like that that really drive the usage of our connectivity services. And then also we did have a pricing increase earlier this year that's flowing through the financials as well — we mentioned in the first quarter — and that's also benefiting us. And one other thing I should mention on the AI strategy is also in data. We have been very intentional about making sure that our data is ready and available — it's kind of what we call AI-ready — to be able to be integrated into AI workflows.

That would include our investment data as well as our Data Link data, which includes our market data. So by offering our data out into these AI workflows, we are making it so that we have more demand, frankly, just for our data assets. So people should know that that's also part of our AI strategy.

OPERATOR

Thank you. Our next question comes from the line of Alex Cram from UBS. Please go ahead.

Alex Cram, Analyst at UBS

Yes. Hey, good morning, everyone. I found it interesting that you mentioned perps proactively, I think three times, if I counted correctly, on this call. So considering that you're pretty far away from that topic, I think, although I think you've gotten caught up in this narrative a little bit. But just wondering, sounds like you're certainly evaluating what your role could be. So maybe you can elaborate a little bit when you talk to regulators, how you think it's going to evolve, where you could potentially lend technology, offer some products yourself, and then maybe at the very least, are you getting some interest to maybe license the Nasdaq index to some overseas perps providers? And how do you feel about that in general?

Adena Friedman — Chair and Chief Executive Officer

All right, great. Thanks, Alex. I think perpetuals are definitely a topic that has come up, obviously, and we did try to address it in terms of how do we see the overlap with our existing business today from a trading perspective and from, you know, kind of just overall, what is a perpetual derivative. Where are they today? They're really outside of the scope of the Nasdaq world today. If they were to come into the equities world, it would have to be the result of a joint regulatory approval from both the SEC and the CFTC.

So that's just a different bar that would have to be passed. But we also provided you a hypothetical that, you know, were they to cross that Rubicon and bring them into the equity space, we would — we still see very little overlap. And the qualities of perpetuals are very different than the qualities of options and futures in our space. I would say, just to kind of give you a little framing, and then I'll talk to you about the opportunity in front of us.

If you think about what do perpetuals solve in the crypto ecosystem, they solve the ability for investors to trade on margin — meaning they solve the ability to trade with leverage — and they provide a more elegant way to short crypto assets. Those two things are very, very accessible in the equities world today. And the benefit in the equities world, in options, is that you have convexity of return — it's not a linear return structure. And the carrying costs are much lower.

So there are structural advantages that are already offered in the equities world that I think address a lot of the benefits that investors use perpetuals for in the crypto world. But when we look at it in terms of our opportunity in front of us, we have a few things. One is on technology. We are providing surveillance technology and also trading technology. So our market technology and our surveillance technology are relevant to markets that are looking to launch or provide perpetuals, and then also to trade perpetuals.

And we also want to make sure that things like risk management and other technologies that Calypso offers — potentially regulatory reporting — could also be covered. So we do see it as an opportunity for us to expand our FinTech division. In terms of licensing the Nasdaq 100 or QQQ, those are conversations that we would have with our partner CME and others to consider as we move forward.

Alex Cram, Analyst at UBS

Very good, thanks.

OPERATOR

Thank you. Our next question comes from the line of Owen Lau from Clear Street. Please go ahead.

Owen Lau (Analyst)

Hi, good morning. Thank you for taking my question. Do you have more color on the roadmap of asset managers leveraging tokenized funds or assets as collateral? I think in the third quarter you mentioned that two large asset managers completed tokenized collateral trades on the Canton network. I'm wondering how Calypso can monetize it incrementally and the pace of adoption there. Thank you.

Adena Friedman — Chair and Chief Executive Officer

Yeah, sure. So the way that we're working with the industry is we want to make sure that Calypso — we already have this great collateral management capability in Calypso that's used by hundreds of firms around the world. So we provide them a very good way for them to determine what's the optimal collateral they should have in every collateral pool that they have to operate with. Now, what we're working on with Canton is to make sure that we can facilitate the movement of collateral in a tokenized form.

So we had two major asset managers — essentially, it was a proof of concept that we executed in the second quarter — to demonstrate that they could, you know, take a tokenized money market fund that they've created — the asset managers created — and they're able to put it into the collateral network through Calypso and transfer that collateral using Canton. So it's basically a proof of concept on how do we turn Calypso not only from collateral management to a collateral network in a tokenized form, and the way that we would charge for that over time — because this is still a proof of concept — is it would be a new module, basically an upsell, to offer the ability to actually manage collateral movement in addition to collateral management. And so that's the way that we monetize it going forward. But we're very excited because it was fun, because the guys were there that day and they basically kind of came out of the room going, victory — you know, it's pretty easy. Yep, the money moved. So that was pretty neat. But we definitely feel like we can be a part of that tokenization effort with the buy side and the sell side going forward.

OPERATOR

Thank you. Our next question comes from the line of Patrick Moley from Piper Sandler. Please go ahead.

Patrick Moley, Analyst at Piper Sandler

Yes, good morning, Adena. I would love to get your thoughts on the IPO environment here. And then as you look out to the back half of 2027, how much of your IPO pipeline today is idiosyncratic mega deals versus what you would maybe view as a more durable broadening of the pipeline? Thanks.

Adena Friedman — Chair and Chief Executive Officer

You know, actually it really is a broadening of the pipeline so that we just are seeing a lot of really great companies coming out across, and there are certain themes to it, but we are actually as focused on a broader pipeline as we would be on some of the larger opportunities. I think it actually shows up a little bit in the second quarter where you had these really large marquee listings — obviously we had SpaceX, but we also had Cerebras, we also had Fabilous, and we had Continuum, and we actually had a major data center company come live, some very large raises, had SK Hynix in the third quarter.

But the pipeline is pretty broad across the themes of anything related to AI infrastructure and buildout, including power and the things that will actually drive compute capabilities, as well as we are seeing a pickup in healthcare and biotech listings, which is very exciting given the fact we've had a dearth of that over the last few years. So we're very excited to see that. And then the defense industry is also seeing some really good companies come out.

And companies that serve the defense industry — not only actually building the defense systems, but building the components to the defense systems like Arcsys — and other compounders that are really interesting coming into the market as well. And then also we also are seeing more consumer companies coming out into the market. So it's becoming more and more broad based, and we're very excited about that.

OPERATOR

Thank you. Our next question comes from the line of Alexander Blostein from Goldman Sachs. Please go ahead.

Alexander Blostein, Analyst at Goldman Sachs

Hey, good morning. Thank you for the question. I was hoping to zoom out and maybe talk about profitability in the business as a whole. Nasdaq's put out a couple of quarters of really good operating leverage now. And I understand there's some kind of low-hanging-fruit, higher incremental margin tailwinds in whether it's trading or index. But as you think about just where you are and the efficiencies from AI — whether it's on the top line or the bottom line — how do you think about the margins as a whole over the next couple of years and where do you think they could ultimately go?

Sarah Youngwood — Chief Financial Officer

Thank you, Alex. We've seen, as you have noted for the first half of this year, really very strong performance. And what I think you are reminding everyone is the gap that we are creating between our revenue, especially in solutions, as well as the operating expense. And that has been something which we've been very consistent with, which is we fund our investments very well and that's why you're seeing us put on the front foot as we are able to deal with transformation and becoming able to transform that into additional time and opportunities with our clients.

But we are also working on efficiencies and we've been very good at doing that over the years. And that will continue with GenAI.

OPERATOR

Thank you. Our next question comes from the line of Simon Clinch from Rothschild & Company. Please go ahead.

Simon Clinch, Analyst at Rothschild & Co

Hi. Thanks for taking my question, Adena. I wonder if you could just elaborate a bit more. With all the AI tools you're rolling out to your clients and the good uptake you're getting from clients, could you give us a sense of, I guess, how rapidly and how sophisticated your clients are at the outset at using these products and how to think about the sort of momentum in that usage? Is it something that's really going to build over time or are they actually coming at it with a fairly sophisticated approach already and sort of getting really stuck in straight away?

Adena Friedman — Chair and Chief Executive Officer

Yeah, it's interesting. I mean, I would say that the clients are downright eager to be able to take advantage of the automations we're able to deliver because for them it's a direct return on investment to them to be able to be more efficient internally. So first of all, the way that we're deploying the AI capabilities out to our products makes it very easy to adopt. It's not hard for them to say, yeah, I would automate that workflow to make it so that I can investigate a potential criminal actor.

I can make sure that I can see all the investigation, I can see all the sites of the sources that the AI generated. I can also, how did AI write the report? I can review the report and I can click and go right into and submit that report. So it's a very easy use case. These are easy use cases for the clients to adopt. They also recognize that it saves up to 80% of their time. So it's also, you know, it's an easy sell to be honest with you. But we also bring our clients together.

We actually recently had an event in Boston with 150 of our anti-financial crime clients and we were walking them through the pipeline of additional intelligent workers that we're bringing and we thought maybe they'd say, well, we can only take so many. You know, let's make sure that we pace ourselves here because we're talking about some acceleration and instead they're saying yeah, please bring it on. But let's work together to figure out how to make sure that we can demonstrate, we can show to our CFO and our CTO the clear return so that we can adopt these as fast as possible.

So it was very encouraging. I think also we are very mindful in how we orchestrate the AI into the tooling from a security perspective, a resiliency perspective. In terms of our clients, they're obviously doing reviews of us as we are introducing these tools and we feel very good about the diligence they do on us before they adopt them. So it's been pretty smooth so far.

Simon Clinch, Analyst at Rothschild & Co

That's really great. Thank you very much.

Adena Friedman — Chair and Chief Executive Officer

Sure, thank you.

OPERATOR

Our next question comes from the line of Brian Bedell from Deutsche Bank. Please go ahead.

Brian Bedell, Analyst at Deutsche Bank

Great, great, thanks. Good morning. Thanks for taking my question. Great to see the really strong revenue progress across the solutions businesses. But I did want to talk about the markets business and more of a broader picture question. Adena, just your views on the future of Reg NMS just given with the SEC proposals out and more broadly, just the evolving market structure. Clearly order protection is going to be important for your views, I'm sure.

But how about your views on strengthening the NBBO, allowing exchanges to sub-penny price for example, and how would that interact with tokenizing securities in terms of tokenized securities trading alongside certificated form? And I think you said you were rolling your plan to start that in the first quarter of next year. If you could just talk about the timing on that.

Adena Friedman — Chair and Chief Executive Officer

Sure, yeah. It's a big topic. So let's start with Reg NMS and the Order Protection Rule, which we call OPR, just so everyone knows I use that acronym. So the Order Protection Rule has been in place now for 20 years. And interestingly I was at Nasdaq before the Order Protection Rule was put in place. And at that time we were not in favor of introducing that rule into the markets. So we have a long history of understanding it, understanding the effect of it, the consequences that come from it.

With Reg NMS, there are some benefits to what the Order Protection Rule has brought, which is, of course, all the markets now are intimately networked together to create a lot of resiliency. And I think that's important to recognize because we have to route to each other, we've connected with each other, and by connecting with each other, it means that there's more resiliency in the markets. But there's also more fragmentation of order flow and it has kept us from being able to innovate because coincident with the Order Protection Rule, it basically says that everything has to be price-time ordered and it doesn't allow for us to have a more flexible structure around should it be price-size. If you get size done, can you do that a penny away from the inside and still be compliant with best ex? But if you take away the Order Protection Rule and you think, okay, now we can innovate. We have three markets, exchanges. We should be able to drive and experiment with different market models to see how they serve the client's needs. Today also it's really a two-tiered market between on-exchange and off-exchange.

We really can't compete in the off-exchange space. We can't segment order flow. We can't do a lot of things that we think will serve investors better. And by loosening up the Order Protection Rule and saying, well, let's allow more innovation to come in, it allows us to think about how we can serve clients in a different way in working with the SEC. So we see some benefits, but we also have to make sure we don't lose sight of the benefits OPR has brought in terms of the resilience of the ecosystem, the transparency of the best bid and offer, and making sure that investors are protected in the process.

So that's a big body of work that we'll be working on with the SEC and with our clients. Outside of that, if you think about tokenized equities, we have two projects going on with tokenized equities. One is to collaborate with the DTCC as they're trying to make sure that they allow for the settlement to tokenize shares. All of that's post-trade. And then the other is to work with Kraken to say is there a new model that can be created leveraging the Nasdaq token design and having a flow-through of the token through instantaneous settlement and having the actual rights and everything related to the equity conveyed to the client, to the end investor, with instantaneous settlement. And for that we do expect that to be something we launch in early next year with Kraken. Kraken has been a great partner, but it is not exclusive to them in terms of our ability to distribute that to other trading venues. And so we're in the midst of it. I think combined with 24/5 trading, it really opens the aperture and accessibility of equities to more investors. So we see it as a net positive to us and to the industry in general.

Brian Bedell, Analyst at Deutsche Bank

It's great color. Thank you very much.

Adena Friedman — Chair and Chief Executive Officer

Thank you.

OPERATOR

Next question comes from the line of Dan Fannin from Jefferies. Please go ahead.

Dan Fannin, Analyst at Jefferies

Thanks. Good morning. I wanted to follow up on Verafin and the momentum in that business. Curious about progress outside the U.S. and then as you think about the longer or the medium-term target of mid-20s growth, what do you think is a reasonable time period to hit those numbers?

Adena Friedman — Chair and Chief Executive Officer

Sure. So outside of the United States, we continue to engage with our key clients in Europe, demonstrate and prove out our solution. I would say sales cycles are slow. You know, when you're trying to land an entirely new jurisdiction, it just takes a long time to get through the internal processes within the large banks. But we have been able to prove true value to them through our proof of concepts. So it's really more a matter of just getting through the internal process and to say that this is a worthwhile investment for them versus the many other things that they're dealing with in their own regulatory environment.

But we still have a lot of confidence in our ability to go in and land and expand there. But it's just taking longer to make sure that we're showing some beachhead clients. In terms of the medium-term outlook, one thing that I just remind you of is we did mention earlier this year that we had a lot of the signings of our enterprise clients in the second half of last year. And it takes around a year to really onboard them fully and to recognize the recurring revenue that comes from them.

So we would anticipate that the ability to show the benefit of the second half of the year's signings would start to flow in the second half of the year this year, and so that helps. And then we also have, of course, 11 new signings so far this year. Upsells are able to be implemented faster than new sales. So there is some benefit from that. So we still continue to underwrite the medium-term outlook for the business.

OPERATOR

Our next question comes from the line of Michael Siffers from Morgan Stanley. Please go ahead.

Michael Siffers, Analyst at Morgan Stanley

Great. Thank you for taking the question. Wanted to ask about market tech. Just curious how you're thinking about new and emerging opportunities for the market tech business and the world of DeFi where firms like HyperLiquid are enabling third-party builders and developers to deploy their own exchange and markets on their protocol. I guess what's the opportunity for a Nasdaq chain and blockchain-native market tech offering?

Adena Friedman — Chair and Chief Executive Officer

Yeah, so we don't have a layer one. I mean that's not something that we've chosen to invest in. But we work with multiple layer ones. Our view is that first we should be interoperable. You know, we're a horizontal market operator. We believe in the horizontal infrastructure really driving and maximizing accessibility to investors. So everything we're building, we're building for interoperability across multiple layer ones. In terms of native DeFi venues, that's not a space that we've actually engaged in from a market tech perspective.

We've been more engaged with what I would call more central limit order book-style digital asset ecosystem players as well as providing surveillance for those types of players. But the native DeFi, where it's just peer-to-peer, is an ecosystem that's still very nascent and I would say has some structural differences that are pretty significant and, in our view, might limit its use case. But right now we're much more focused on working with more established markets and new exchanges that want to take a more established approach to driving markets in the digital asset ecosystem.

OPERATOR

Thank you. Our next question comes from the line of Benjamin Budish from Barclays. Please go ahead.

Benjamin Budish, Analyst at Barclays

Hi, good morning and thanks for taking my question. I was wondering if you could talk a little bit more about the strength you're seeing on the data sales side. I'm just curious what you're seeing in terms of customer types. You mentioned there's some usage-based components if you could unpack maybe how big that is. And then lastly you mentioned some advantages to the data business from always-on market. So how do you see that as maybe another catalyst or where Nasdaq may be uniquely positioned to benefit from that trend?

Adena Friedman — Chair and Chief Executive Officer

Thank you. There are really three trends that are continuing to drive demand for our data. It's the Nasdaq market data as well as third-party data that we distribute out through our Datalink platform. One is definitely AI use cases, including investment, where people are integrating our data into AI workflows. We're not selling our data to core training models; we're selling them to applications that are leveraging AI. We have very good visibility and ability to monitor usage, by the way, but AI use cases is one.

And as we mentioned, we unlocked the MCP protocol to make it even smoother for AI-driven workflows to be able to pick up and use our data. And the way that we charge for that, by the way, is an upcharge. There will be an upcharge for the MCP layer in addition to the license fee for the data. The second trend is digital assets, whether it's outside the United States, the notion of tokenized equities, but also just the ability for them to integrate market data into other digital asset ecosystems.

And so we're definitely seeing more demand there. And then the third is 24/5 trading, having more and more international demand for our data. That's been a long-term trend for us, particularly in Asia, but it's extending now into the Middle East and other parts of the world where they're getting ready for U.S. equities to be traded in their home market hours. And so retail brokers are signing up to make sure that that data is available to them on a real-time basis.

So all three of those trends are driving sales right now.

Benjamin Budish, Analyst at Barclays

Okay, great. Thank you, Adena.

OPERATOR

Our next question comes from the line of Michael Cho from J.P. Morgan. Please go ahead.

Michael Cho, Analyst at J.P. Morgan

Hi, good morning. Thanks for squeezing me in here, Sarah. I just had a quick modeling question. You called out some tough comps, I think for capital markets tech in the second half. Hoping you can flesh that out a little bit. I recalled a few points of growth, but there's a number of moving pieces. And then you had a price increase in trade management as well. So trying to get a sense of how those things offset for the second half of the year. And then if I could just squeeze one more and I just want to make sure I heard correctly on Verafin, you know, the ARR uplift from the large deal signed late last year is still yet to come.

Just want to make sure I heard that. Thanks.

Sarah Youngwood — Chief Financial Officer

Yeah, so I'll just say yes to your last question, and that's what Adena covered in terms of, like, we are looking at a 12-month implementation from the second half of last year. In terms of the tough comps for capital markets tech, we had some Calypso upfronts, and you remember that those can be lumpy in both the third and the fourth quarter of 2025. And so I just wanted to make sure that I reminded you of that as you look at your models. And of course you've seen very, very strong actually during this first half, and so those things come in phases, and so we have great momentum in the business.

But as you think about the specific type that generates the upfront, I wanted to make sure you had that indication. Other than that, we have the Trade Management Services pricing increase, which continues to accrue to us as you go forward since it's an annual increase.

OPERATOR

Next question comes from the line of Alex Cram from UBS. Please go ahead.

Alex Cram, Analyst at UBS

Hey, hello again. Just one quick follow-up. Over the last few weeks there's been a lot more headlines around how AI is driving financial crime higher. So just wondering to what degree you're hearing that from your clients as you engage with them around Verafin. Not sure if what you offer today kind of addresses those kind of new types of financial crime, but just wondering to what degree we could maybe see some uplift in the future as you hopefully fight that.

Adena Friedman — Chair and Chief Executive Officer

Sure, yeah, we definitely are hearing that from clients. We've been hearing that for some time. I think there's a few different styles. One is deepfakes, and they're getting very good, but that's really using better deepfake technology to perpetrate the types of financial crimes that we've seen for quite some time in terms of romance scams, elderly scams, things that are very, very insidious, but they're just getting better at them. So I think the work that we're doing inside the alerting engine is also really, really exciting, I have to say.

Leveraging GenAI allows us to look through the data in new ways and capture different signals within the data. And that is something that we've been very focused on, and again we talked about this because we're also driving the AI across the business in terms of how they develop technology, how they use it. They are able to mine the data to look for new things. We are very excited about the efficacy of our ability to root out new forms of financial crime, and also just to be better at connecting data across the network.

Just as a reminder, the data sits inside a consortium data lake comprised of all 2,800 financial institutions. We process somewhere in the range of a billion to a billion and a half transactions a week. So that's a lot of data. Using AI to be able to root out different new behaviors, we can look at new patterns that are emerging, but also look across the network of clients in new ways is really quite exciting in terms of what we're going to deliver to our clients going forward.

But it is a changing landscape, so we have to stay on top of it and support our bank clients in that way. The only other thing I would mention also is in the cross-asset-class work that we're doing in SMARTS, because the other thing that you're also seeing is more sophistication of criminal behavior in the capital markets as they're using largely algorithmic data, AI, to perpetrate crimes across asset classes and use more sophisticated strategies that way.

Our new cross-asset-class capability in SMARTS is actually used as a different alerting technique to make it so we can look at behaviors differently. It's not just rules-based; it's signals-based. And that also creates new ways for us to fight back criminal behavior as well.

Alex Cram, Analyst at UBS

All right, very good. Thanks for the color.

OPERATOR

Thank you. Our last question in the queue comes from the line of Eli Abboud from Bank of America. Please go ahead.

Eli Abboud, Analyst at Bank of America

Thanks for taking the follow-up. I wanted to dig into the impact of 24/7 trading on your FinTech businesses and the runway that's left there. How many of your clients are already taking the 24/7 version of your solution across regulatory and capital markets tech? And what does the ASV uplift look like when a client transitions to 24/7 trading?

Adena Friedman — Chair and Chief Executive Officer

Yeah, so we only have a very small handful of clients who are using a 24/7 architecture. You know, Eclipse was built to support 24/7 markets. A lot of them are 23/7, some are 24/5, some of them are even 23-and-a-half/7. But they also want to have a day, you know, some period of time where they can deal with maintenance and also crossover of the day. But we do have a small handful who actually use it on a 24/7 basis. In terms of that infrastructure, though, outside of looking at it for a client, we've also talked to our own clients about what it would take to think about moving mainstream markets like Nasdaq or any of the national exchanges and thinking about that on a 24/7 basis as opposed to 24/5. And I can tell you that it's a major lift for our clients and for us, just because the architecture is different and you'd have to replicate a lot of architecture to make it so you can basically operate without a maintenance window. And that is just a fundamental architectural difference. But I have to say that as we are engaging with clients, there is a growing pipeline of demand for moving to 24/5, all the way to 24/7.

So we know we can deliver it. We have delivered it. We just want to make sure that we're working with them on the investment that would be needed to do it both for them and their clients.

OPERATOR

Thank you. That concludes our Q and A session. At this time, I'd like to turn the conference back over to Adena Friedman, President and CEO, for closing remarks.

Adena Friedman — Chair and Chief Executive Officer

Our second quarter results reflect the disciplined execution of our strategy and reinforce our role as a trusted transformation partner to the global financial system. I want to thank you all for joining today and have a great day.

OPERATOR

Thank you. This concludes today's conference call. Thank you for attending. You may all disconnect. Goodbye.

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