Nasdaq (NDAQ) Q3 2026 earnings review
Nasdaq's software and index sales jump, but its costs rise
Nasdaq's bank software and index businesses carried the exchange operator while its trading division barely grew. Net revenue from businesses owned a year ago rose 14% to $1.48 billion, and profit per share excluding one-offs climbed 18% on lower employee pay ratios and stock buybacks. Chief executive Adena Friedman pointed to record growth in financial technology subscriptions and index fund inflows.
| Net revenue from businesses owned a year ago | +14% $1,481M reported (+13% from a year ago) |
|---|---|
| Annualized recurring revenue (ARR) | $3,365M +14% from businesses owned a year ago |
| Profit per share, excluding one-offs | $1.04 +18% from a year ago |
| Full-year operating cost outlook | Raised $15M middle of the range: 10.0% growth |
⚖️ Verdict: 🟢 Bullish
The story got better because large bank deals signed last year by the Verafin anti-crime unit started turning into billed subscription revenue, pushing Financial Technology recurring revenue growth to a record 18%. One caution: nearly half of Nasdaq's total dollar revenue increase came from Index licensing, where rising stock prices drove 57% of the past year's asset expansion by our math, and management raised its full-year cost plan for a third straight quarter to 10% growth.
The question now is whether software subscriptions can keep total revenue growing above 10% if stock markets flatten out while the higher cost base stays in place. Either new bank onboarding and round-the-clock trading fees replace market-driven index gains, or profit margins compress against the raised fourth-quarter expense run rate. Fourth-quarter recurring revenue and the initial 2027 cost plan will decide it.
🐂 Bull Case
Financial Technology Subscriptions Reached a Record Pace
Nasdaq sells software to banks and brokers for fraud prevention, compliance, and trade processing under its Financial Technology division. Chief executive Adena Friedman highlighted "record FinTech ARR growth" as annualized recurring revenue (ARR), the yearly value of active subscription contracts, rose 18% from a year ago to $1.95 billion. Total company ARR reached $3.37 billion, up 14% from businesses owned a year ago after stripping out $42 million from sold units.
- Financial Crime Management ARR: $375 million, up 18.7% from a year ago by our math, accelerating from 16.6% last quarter
- Capital Markets Technology ARR: $1.14 billion, up 18.7% by our math despite comparing against last year's upfront software fees
- Regulatory Technology ARR: $443 million, up 13.9% by our math for a fifth straight quarter of faster growth
- Verafin AI software users: more than 850 clients, up from 750 last quarter
This matters because the anti-crime unit, Nasdaq Verafin, signed 12 large banks this year against 9 in all of 2025, and those deals take about a year to start paying. Faster growth here shows last year's bank wins are now turning into billed revenue.
What to watch: Financial Crime ARR growth in the fourth quarter. Another step up toward the company's mid-20% multi-year target would show the 12 large bank deals signed this year are converting on schedule.
Stock Buybacks and Operating Leverage Lifted Profit
Finance chief Sarah Youngwood pointed to "continued operating leverage, and strong EPS growth" as profit per share excluding one-offs rose 18% to $1.04, outpacing the 13% rise in net revenue. Operating expenses excluding one-offs fell by 1.3 percentage points of net revenue by our math, because employee pay and benefits grew 7% while revenue rose 13%. On a reported basis, a $16 million "favorable legal settlement" cut general and administrative costs.
Share buybacks amplified the per-share gain. The exchange group spent $323 million buying back stock in the quarter, beating its $200 million to $250 million accelerated repurchase plan, which shrunk diluted share count by 2.7% from a year ago to 563.3 million.
What to watch: fourth-quarter share repurchases against the $2.2 billion remaining board authorization. Continued buying above $250 million a quarter would keep per-share profit growing faster than operating income.
🐻 Bear Case
Rising Stock Markets Carried the Fastest-Growing Business
Nasdaq licenses its benchmarks, such as the Nasdaq-100, to exchange-traded products (ETPs) and charges fees based on assets under management (AUM). Friedman celebrated "record Index net inflows" of $141 billion over the past twelve months, including $49 billion in the third quarter, which lifted Index revenue 39% to $286 million. Because Index is both a customer-inflow story and a stock-market exposure risk, both sides meet here.
- Index share of company revenue growth: $80 million of the $166 million net revenue gain, or 48% by our math
- Twelve-month AUM increase from rising stock prices: $190 billion, or 57% of the $331 billion total gain by our math
- Annualized Index fee rate on average AUM: 10.3 basis points by our math, down from 10.6 basis points a year ago
- Market Services net revenue growth: 2% to $309 million, as U.S. options market share slipped to 28.1% from 28.5%
This cuts against the steady-platform framing because nearly half of Nasdaq's revenue growth came from one division where rising stock prices drove most of the asset expansion, while annualized fee capture per dollar of assets ticked down.
What to watch: average ETP AUM in the fourth quarter relative to the $1.16 trillion quarter-end level. A flat or falling stock market would immediately slow Index revenue toward single-digit growth.
Full-Year Cost Plan Raised for a Third Time
Nasdaq does not forecast revenue, but it sets an annual plan for operating expenses excluding one-offs. The company raised that 2026 cost range for a third straight quarter to $2.55 billion to $2.58 billion, citing "higher compensation and benefits costs from our strong revenue execution and increased investments in technology to drive long-term growth".
By our math, the middle of the new range puts full-year cost growth at 10.0% from 2025, well above the 5% to 8% multi-year expense target Nasdaq set previously, and leaves $678 million or 11.3% growth for the fourth quarter. Because employee pay and technology spending rise with market-driven revenue, costs could stay elevated if market volumes cool.
What to watch: the initial 2027 operating expense outlook on the fourth-quarter report. A range above 8% growth would show higher spending is structural rather than tied only to this year's bonuses.
Risks this quarter didn't answer
Four standing concerns from prior quarters received no new numbers or updates in the third-quarter earnings release.
- Total new contract bookings (ACV): Nasdaq noted "cloud-based solutions accounting for 85% of ACV bookings" but omitted the dollar bookings growth rate for a second quarter; the quarterly filing or call remarks may clarify.
- Cross-sell revenue progress: FinTech signed 5 cross-sells in the quarter, down from 7 in the second quarter, with no dollar update toward the $100 million end-2027 run-rate target.
- European antitrust probe: no update in the release on the European Commission derivatives investigation; the quarterly Form 10-Q legal footnote will carry any status change.
- Divestiture and acquisition pricing: the release booked a $4 million net loss on selling Nasdaq Metrio and Nasdaq Fund Secondaries without disclosing sale prices or the purchase price for LeveL Markets.
👓 Other Themes
Nasdaq Builds Round-the-Clock and Off-Exchange Trading
Within Market Services, Nasdaq formed Digital Liquidity Networks to focus on digital assets and bought LeveL Markets, the third-largest U.S. alternative trading system (an off-exchange venue matching large institutional orders), early in the fourth quarter. It also signed Bruce Markets to "power the first 24/7 continuous trading in U.S. equities" and confirmed its main U.S. stock exchange "remains on track to go live with 23/5 trading on December 6, 2026".
💲 Other KPIs
Deferred revenue — cash customers have paid upfront for software and listing services not yet delivered — rose 13.9% from $719 million a year ago by our math, matching the 14% underlying rise in net revenue. It fell seasonally from $931 million in the second quarter as annual listing and subscription bills amortized into revenue.
Uncollected customer bills jumped 35.4% from $865 million a year ago and 24.2% from year-end 2025 by our math, growing more than twice as fast as net revenue. That working-capital build held third-quarter operating cash flow to $521 million, down from $711 million in the second quarter despite higher net income.
Combined short-term and long-term debt declined by $264 million, or 2.9%, from $9,004 million at the end of 2025 by our math, and slipped by $21 million from the second quarter. With debt paydown largely completed earlier, management directed third-quarter cash flow into $496 million of dividends and buybacks.
🔮 Guidance
Raised. The middle of the full-year cost plan moved up $15 million to $2.565 billion, or 10.0% growth from 2025 by our math. That leaves $678 million for the fourth quarter, up 11.3% from a year ago against 9.4% growth in the third quarter. It is the third raise this year: +$20M, +$35M, +$15M.
Unchanged. Nasdaq kept its full-year tax rate plan at a 23.5% middle of the range for afourth straight quarter. Through the first nine months, the effective tax rate excluding one-offs is running right in line with that range.
❓ Key Questions
How fast did total FinTech contract bookings grow?
The release gave the 85% cloud share of annual contract value (ACV) bookings in Financial Technology after skipping ACV entirely in the second quarter, but still omitted the dollar growth rate that topped 50% in the first quarter.
Where does cross-sell revenue stand against the $100M target?
FinTech signed 5 cross-sell deals in the third quarter, down from 7 in the second quarter and 12 in last year's fourth quarter. Management has not updated cumulative dollar run-rate progress toward its $100 million end-2027 goal since late 2025.
How much of Q3 revenue growth came from market levels?
In prior quarters, the finance chief provided a bridge splitting revenue growth between customer wins and market-driven volumes or asset prices. With Index providing 48% of this quarter's dollar revenue gain, that split is needed to judge underlying momentum.
What did Nasdaq pay for LeveL Markets and receive for divestitures?
Nasdaq closed the purchase of LeveL Markets early in the fourth quarter and sold Nasdaq Metrio and Nasdaq Fund Secondaries in the third quarter, stripping $12 million of recurring revenue by our math, without disclosing the prices.