Nasdaq NASDAQ: NDAQ CFO Sarah Youngwood said the company sees a constructive macroeconomic backdrop, citing investment in artificial intelligence and digital technologies, resilient consumers and corporate earnings that she said are supporting market valuations.
Speaking at a fireside chat with analyst Ben Budish, Youngwood said the environment has supported a strong initial public offering market. Nasdaq recorded what she described as its best first half for IPO fundraising, with $111 billion raised, including $86 billion associated with SpaceX. She said the market is favoring large, mature opportunities while also showing broad activity across sectors.
Youngwood cited AI infrastructure, semiconductors, data centers, AI models, defense, insurance, real estate and a recovering biotechnology market as areas represented in the IPO pipeline. She said Nasdaq had a 73% listing win rate and hosted seven of the 10 largest operating-company IPOs in the prior quarter.
“People are looking for the association with Nasdaq, the quality of trading of course, but also the innovation and trust that is represented in our brand,” Youngwood said.
Digital liquidity and market infrastructure
Youngwood outlined Nasdaq’s efforts to expand its role as markets evolve around digital assets, tokenization and extended trading access. She said the company has organized its strategy around “Digital Liquidity Networks,” aimed at addressing investor demand for always-on markets while maintaining liquidity, transparency and market integrity.
Nasdaq’s acquisition of LeveL Markets’ alternative trading system, which Youngwood described as the third-largest ATS, expands its presence in off-exchange trading. She said the platform offers connectivity to 2,500 buy-side and sell-side participants and could help Nasdaq participate in additional liquidity pools.
The company is also progressing on a settlement initiative with the Depository Trust & Clearing Corp. that would enable settlement in either fiat currency or tokens, according to Youngwood. She said the initiative had received approval and was moving toward launch.
Youngwood also discussed Nasdaq’s $100 million investment in Payward, the parent company of Kraken, alongside a strategic partnership designed to help bridge fiat and token markets. She said Kraken would use Nasdaq surveillance tools and that the companies are working around a Nasdaq Equity Token.
On event contracts, Youngwood said Nasdaq received Securities and Exchange Commission approval for an off-exchange product involving binary contracts tied to the Nasdaq-100. She said the product is expected to launch near the end of the year. Nasdaq may consider financially focused contracts tied to key performance indicators, but it is not currently focused on sports or political contracts, she said.
Youngwood said perpetual futures account for less than 1% of Nasdaq’s revenue overlap. However, she said Nasdaq remains open to products with appropriate structure and leverage, while providing trading, surveillance and other infrastructure to participants in those markets.
Index business expands beyond core franchise
Nasdaq’s index business reached $1 trillion in exchange-traded product assets under management, Youngwood said. The business generated $109 billion in net inflows over the prior 12 months and grew 35% in the latest quarter.
She said 38% of the $109 billion in inflows came from products launched within the past five years, demonstrating contributions from newer strategies beyond the core Nasdaq-100 franchise. Growth areas have included options strategies and data-center-related products, she said, while AI infrastructure has been a prominent investment theme.
About half of index inflows came from outside the United States, Youngwood said. She added that distribution partners include Invesco, State Street and BlackRock.
Fintech growth and AI adoption
Youngwood said Nasdaq’s fintech segment posted 15% revenue growth and 16% annual recurring revenue growth in the second quarter. Within the segment, the Verafin financial-crime management business signed 11 enterprise deals through the second quarter, exceeding the number signed in all of the previous year.
Verafin’s consortium includes 2,800 banks and $13 trillion in assets, according to Youngwood. She said enterprise clients often begin with fraud-protection services before adding additional products. The sales cycle for add-on products can be roughly half the six- to 12-month timeline associated with initial enterprise contracts, she said.
Youngwood said Verafin has deployed two agentic AI tools since December, used by 800 clients. The tools have produced approximately four times productivity improvements, she said, and are intended to help financial institutions identify fraud more quickly and improve workflows.
Verafin revenue grew 22% in the latest quarter, and Nasdaq has a medium-term outlook for growth in the mid-20% range, Youngwood said. The business has net retention above 110%, she added. Nasdaq is beginning to convert users of its agentic workforce product into paying customers after an initial free-use period, although Youngwood said the current revenue contribution remains small.
The company is also moving AxiomSL regulatory reporting services to the cloud, which Youngwood said should make the offering easier to implement for smaller institutions. AxiomSL serves all but one global systemically important bank and works with 114 regulators across 64 countries, she said.
Capital allocation priorities
Youngwood said Nasdaq generates more than $2 billion in free cash flow and continues to prioritize organic investment, a progressive dividend and share repurchases. Through the second quarter, the company had repurchased about $900 million of shares, exceeding its total buybacks in the prior year, she said.
Nasdaq also launched a $200 million to $250 million variable accelerated share repurchase program at the start of the third quarter. Youngwood said the company considers its shares undervalued.
Following the Adenza transaction, Nasdaq’s gross leverage stood at 2.6 times at the end of the second quarter, within its 2.5 to 3 times target range. Youngwood said the company does not anticipate proactive deleveraging and does not expect transformative acquisitions, though tuck-in or bolt-on deals could be considered.
About Nasdaq (NASDAQ:NDAQ)
Nasdaq, Inc NASDAQ: NDAQ operates financial markets and provides technology, data and analytics services to exchanges, brokers, institutional investors, corporations and other financial institutions. The company is best known for operating the Nasdaq Stock Market, a major U.S. equities exchange and a prominent venue for technology and growth companies.
Nasdaq's businesses include listings, trading, market data, indexes, clearing and market infrastructure solutions. Through its technology platforms, the company provides exchange operators and financial institutions with systems for trading, surveillance, risk management, regulatory compliance and other market functions.
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