Nasdaq, Inc. (NDAQ) Q2 2026 Earnings Report, Transcript and Summary

Good day, and thank you for standing by. Welcome to Nasdaq's Second Quarter 2026 Results Conference Call. [Operator Instructions] 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.

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 the line for Q&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 in more complete description on 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 onetime benefit to Index revenue related to a contract modification. Definition 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.

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 exploration and the Russell reconstitution. We welcome 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 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 of SpaceX back 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; Quantinuum, the largest pure-play quantum IPO of all time; and Parabilis 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 7 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 are 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 data sets 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 5 years and 22% driven by products launched over the last 3 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 continued to grow our long-standing relationship with Invesco, expanding global investor access to QQQ ETFs, 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 IR Insight clients leveraging our AI tools. Within Analytics, we delivered double-digit revenue growth from bookings and a higher retention rate in both eVestment and Data Link. Growth in eVestment has been driven in part by AI adoption. More than 1/4 of new bookings to date 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 Data Link, we see sustained demand for our unique data assets. This quarter, we are pleased to introduce the Data Link Model Context Protocol, or MCP, which will deliver frictionless client connectivity to power agentic 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 2 expansions, 2 renewals and 2 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 2 new agentic workers, which we've moved into beta, 1 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 workloads 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 Agentic AI Workforce expansion reflects our broader AI-first development approach, which is transforming every stage of the product development life cycle, from design and development to testing and deployment. This enables us to increase innovation velocity, expand our product road map 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 9 new clients, including 2 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 4 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 3 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 signals-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 7 new clients, including 3 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 Eqlipse product suite with 2 existing clients committing to the migration of their market platforms to Eqlipse. We also completed 3 modernization programs, including going live with clearing for BYMA, Argentina stock exchange; and with trading for nuam, 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 2 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, 5 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 2 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 the 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 their 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 and 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 dialogues 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.

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 3 Financial Technology subdivisions. We had diluted EPS growth of 25%, exceeding $1 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, data factories 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 divisional 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 ARR. Data revenue growth was strong and driven primarily by upsells, new sales and usage. Listings revenue benefiting 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 ETP 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 derivates 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 eVestment and Data Link. Corporate Solutions revenue was essentially flat. Excluding the onetime revenue item related to a contract modification in our Index business, quarterly operating margin for the CAP division was 63%, up 4 percentage points for the prior year period. Before we wrap on Capital Access Platforms, we are continuing to optimize our portfolio with 2 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 2 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 Dasseti, an AI-powered due diligence platform used by institutional asset allocators and managers across public and private markets. Dasseti will be integrated into Nasdaq eVestment to provide a seamless experience across eVestment's institutional network. On a pro forma basis for the last 12 months, these 2 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 3 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 7 cross-sells in the quarter, while sales continue to represent over 15% of the FinTech pipeline. Financial Crime 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 2 cross-sells, 2 expansions and 2 renewals in the quarter as well as 1 additional cross-sell 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 AxiomSL. The subdivision delivered 9 new clients, including 3 cross-sells and 63 upsells in the quarter. Capital Markets Technology revenue grew 14% with an ARR growth of 17%. The subdivision delivered 7 new clients, including 3 cross-sells and 42 upsells. The quarter's strong performance reflects demand for data-centric 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 the contribution from Calypso upfront revenue, which will create a tougher comp for Capital Markets Technology in the upcoming 2 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 markets and lower U.S. tape plan revenue, primarily driven by lower audit revenue, following an industry-wide adjustment in the prior year period, which we had called out last year. Quarterly operating margin for this 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 innovation 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 2 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 contra 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 million 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 gross debt. In closing, Nasdaq delivered another quarter of excellent execution. Our results reflect the strength of our business model highlighted by broad-based revenue growth across all 3 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 will turn the call over for Q&A.

I show our first question comes from the line of Ashish Sabadra from RBC Capital Markets.

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 separately for AI capabilities? And then how do you envision AI monetization over the midterm?

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, so Verafin and 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. It's basically an upsell. And we do have -- our clients are 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 prove 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.

And I show our next question comes from the line of Eli Abboud from Bank of America.

I was hoping to unpack the strong results in Trade Management Services. I think you flagged Trade Management Services as the strongest performer in your Capital Markets Tech business for a couple of 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?

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 they have -- 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, as 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 through into these AI work -- and into the workflows, we are making it so that we have more demand, frankly, just for our data assets. So people should know that that's all part of our AI strategy.

And I show our next question comes from the line of Alex Kramm from UBS.

I found it interesting that you mentioned perps proactively, I think, 3 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, it 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?

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 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 we have to pass. But we also provided you a hypothetical that were they to cross that Rubicon and bring them into the equity space, we still see very little overlap. And the kind of 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 2 things are very, very accessible in the equities world today. And the benefit in the equities world with options is that you have convexity of return. It's not a linear return structure. So there are a lot -- and the carrying costs are much lower. So it's just there's 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 for trading technology. So our market technology, our surveillance technology are relevant to firms -- to markets that are looking to launch or provide perpetuals and then also to trade perpetuals, so NTS. 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.

And I show our next question comes from the line of Owen Lau from Clear Street.

Do you have more color on the road map of asset managers leveraging tokenized funds or assets as collateral? I think in the third quarter, you mentioned there are 2 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.

Yes, sure. So the way that we're working with the industry is we want to make sure that Calypso -- we already have this great Calypso -- sorry, 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 2 major asset managers. Essentially, I think it was like a proof of concept that we executed in the second quarter to demonstrate that we couldn't -- they 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, Owen, over time, because this is still a proof of concept, is it would be a new module because think of it as an upsell to offer the ability to actually manage collateral movement in addition to collateral management. And so that's the way that we've monetized it going forward. But we're very excited because it was fun because the guys were there that day, and they basically like kind of came out of the room going victory. It's pretty easy. Yes, 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.

And I show our next question comes from the line of Patrick Moley from Piper Sandler.

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 megadeals versus what you would maybe view as a more durable broadening of the pipeline?

Sure. Actually, it really is a broadening of the pipeline. So 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 Parabilis, and we had Quantinuum. 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 build-out including power and the things that will actually drive compute capabilities as well as we are seeing a pickup in health care 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 defense industry not only like actual building the defense systems but building the components to the defense systems like Arxis 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.

And I show our next question comes from the line of Alexander Blostein from Goldman Sachs.

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 then I understand there is some kind of low-hanging fruit, higher incremental margin tailwinds and 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 can ultimately go?

So 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 on 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 that we're on the front foot as we are able to deal with information and becoming able to transform that into additional [ return ] and opportunities with our clients. But we are also working on efficiencies, and we've been very good at doing that and say, over the years, and that will continue with GenAI.

And I show our next question comes from the line of Simon Clinch from Rothschild & Co.

Adena, I was wondering if you could just elaborate a bit more. With all the AI tools you're rolling out to your clients and the good uptick 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 of 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?

Yes. Actually, 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 product makes it very easy to adopt. It's not hard for them to say, yes, 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 this -- 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. Like 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 -- 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 are walking them through the pipeline of additional agentic workers that we're bringing. And they're -- we thought maybe they'd say, well, we can only take so many. Let's make sure that we pace ourselves here because we're talking about some acceleration. And instead they're saying, yes, please bring it on, but let's work together to figure out how to make sure that 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 a really -- it was very encouraging. I think also, we are very mindful of how we orchestrate the AI into the tooling in terms from a security perspective or resiliency perspective so that it is -- they -- 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.

And I show our next question comes from the line of Brian Bedell from Deutsche Bank.

Great to see the really strong revenue progress across the solutions businesses. But I did want to talk about the actual -- the markets business and more of a broader picture question, Adena. Just your views on the future of Reg NMS just given the -- with the SEC proposals out and then 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're rolling your plan to start that in the first quarter of next year. If you could just talk about the timing on that.

Sure. Yes. 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 if 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. And Reg NMS, there are some benefits to what 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 is 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 in the -- 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 have -- you take away the order protection rule and you think, okay, now we can innovate. We have 3 markets exchanges. We should be able to drive and experiment with different market models to see how they serve the clients' needs. Today, also, it's really a 2-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 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 2 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 of tokenized 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 tokens through to instantaneous settlements 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 launched in early next year with Kraken, but 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 it actually has combined with 23/5 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.

And I show our next question comes from the line of Dan Fannon from Jefferies.

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?

Sure. So outside the United States, we continue to engage with marquee clients in Europe and demonstrate and prove out our solution. I would say sales cycles are slow. 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 proofs of concept. So it's really more a matter of just getting through the internal process to say that this is a worthwhile investment for them versus the many other things that they're dealing with in their own regulatory environments. But we do -- actually, 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 to 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 last -- 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 do -- actually 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.

And I show our next question comes from the line of Michael Cyprys from Morgan Stanley.

I 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?

Yes. So we don't have a Layer 1. I mean, that's not something that we've chosen to invest in. But we work with multiple Layer 1s. Our view is that, first, we should be interoperable. We're a horizontal market operator. We believe in the horizontal infrastructure really driving and maximizing accessibility to investors. So we -- everything we're building, we're building for interoperability across multiple Layer 1s. In terms of like 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'll call more central limit order book-style digital asset ecosystem players and 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 our view might limit its use case. But right now, we're much more focused on working more with, say, more established markets and new exchanges that want to take a more established approach to driving markets in the digital asset ecosystem.

And I show our next question comes from the line of Benjamin Budish from Barclays.

I was just wondering if you could talk a little bit more about the strength you're seeing in the data sales side. 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?

Sure. Yes. So there are really 3 trends that are continuing to drive demand for our data. And it's a Nasdaq market data as well as third-party data that we distribute out through our Data Link platform. One is definitely AI use cases. And that's where -- and 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 we just -- as we mentioned, we launched the MCP protocol to make it much 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 in the -- there will be an up charge for the MCP layer in addition to the license fee for the data. In terms of -- the second trend is digital assets where there -- 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 23/5 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 other -- the Middle East and other parts of the world where they're getting ready for U.S. equities to be availably traded in their home market hours. And so retails brokers are signing up to make sure that, that data is available to them on a real-time basis. So it's all 3 of those trends are driving sales right now.

And I show our next question comes from the line of Michael Cho from JPMorgan.

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 recall 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 just trying to get a sense of how those things offset for the second half of the year. And then if I could just one more in, I just want to make sure I heard correctly on Verafin, the ARR uplift from the large deals signed late last year is still yet to come. I just want to make sure I heard that.

yes. So I'll just say yes to your last question and that's what Adena covered in terms of like we are looking at 12 months implementation from the second half of last year. In terms of the tough comps for Capital Markets Tech, we had some Calypso upfront, 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 that as you look at your models, and of course, you've seen very, very strong Calypso upfront 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, which is the renewal. I wanted to make sure you have that indication. Other than that, we have the Trade Management Services pricing increase, which that continues to accrue to us as you go forward since it's an annual increase.

And I show our next question comes from the line of Alex Kramm from UBS.

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. I'm 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.

Sure. Yes. We definitely are hearing that from clients. We've been hearing that for some time. I think there are few different styles. One is deepfakes and they're getting very good. But that's really kind of 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 engine of the alerting engine is also really, really exciting. I have to say, leveraging GenAI allows us also 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 -- 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 -- it's a consortia data lake comprised of all 2,800 financial institutions. We process somewhere in the range of 1 billion and 1.5 billion transactions a week. So that's a lot of data. So using AI to be able to root out different new behaviors, we can look at new patterns that are emerging but also to 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 uses 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.

And I show our last question in the queue comes from the line of Eli Abboud from Bank of America.

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?

Yes. So we only have a very handful of clients who are using our 24/7 architecture. Eqlipse was built to support 24/7 markets. A lot of them are 23/7. Some are 24/5. Some of them are even 23.5/7, but they also want to have a day, some period of time where they can deal with maintenance and also a crossover of the day. So -- but we do have a small handful who actually uses on a 24/7 basis. In terms of that infrastructure there, like outside of looking at it for a client, we've also talked to our own clients about what would it 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 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. And -- 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 it would be needed to do it for them and their clients.

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

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.

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