Nasdaq Inc - 144A (NDAQ) — Q3 2025 Earnings Call Transcript

Good morning, everyone, and thank you for joining us today to discuss Nasdaq's third quarter 2025 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 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'll be making forward-looking statements in 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 the divestiture and the impact of changes in FX. Adjusted and organic year-over-year changes reflect the $32 million revenue adjustment in the third quarter of 2024 for the change to the accounting treatment of revenues associated with AxiomSL on-premises subscription contracts, which are included in the Financial Technology segment. 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 Financials section of our Investor Relations website at ir.nasdaq.com. And with that, I will now turn the call over to Adena.

Thank you, Ato, and good morning, everyone. I will begin with Nasdaq's third quarter results and then discuss the performance across our divisions before handing the call over to Sarah for a detailed financial discussion. I'm pleased with Nasdaq's overall financial performance in the quarter. We achieved $1.3 billion in net revenue, representing an 11% increase year-over-year. We reached over $1 billion in quarterly revenues from Solutions for the first time in our history, reflecting a 10% year-over-year growth and marking a significant milestone in our transition to a leading technology platform. Our annualized recurring revenue, or ARR, rose by 9% to $3 billion. Expenses totaled $583 million, a 5% increase from the previous year. Operating income reached $732 million, which is a 16% growth, and we achieved a 19% increase in diluted EPS. These results highlight the strength of our diversified platform and our capability to effectively collaborate with clients on their evolving needs. We are demonstrating the value of being a trusted part of the financial system by enabling clients to utilize technology, data, and advanced analytics to seize opportunities, manage risks, and bolster resilience. We're enhancing our leadership in capital markets, strengthening our competitive edge as we promote innovation throughout the financial industry. Looking at the broader macroeconomic context, the U.S. economy remains resilient, bolstered by solid fundamentals, although economic indicators are mixed. While some consumers are dealing with challenges, overall consumer spending has improved recently. Moreover, the services sector continues to expand, and corporate investments in technology and AI are ongoing, contributing to consistent economic growth. In Europe, while growth is still subdued, there are hopeful signs of recovery in demand and renewed investments indicating an improving outlook. We maintain a steady demand for technology that facilitates the modernization of the financial system and are increasingly offering clients AI-enabled solutions. Our investments in AI are reinforcing our competitive standing and delivering value through a blend of innovative solutions enhanced by our extensive expertise, unique proprietary data, and the strong network effects of our platforms across our clients. Focusing on our financial performance within the divisions, Capital Access Platforms saw an 8% revenue growth and a 6% ARR growth. Financial Technology generated a 13% growth in revenue and 12% in ARR. Market Services also recorded a 13% growth in net revenue. Now, I will share business and operational highlights, starting with Capital Access Platforms, specifically data and listings. We had a strong quarter in data and listings, backed by our persistent market leadership. In our U.S. listings segment, we welcomed operating companies that raised $6 billion in proceeds during the quarter, totaling over $14 billion year-to-date. Our European listings business also performed well in the third quarter, and we are excited to welcome Verisure to the Stockholm market in October, marking the largest European IPO since 2022. The rise in IPO activity suggests encouraging developments in public markets, particularly among companies with strong fundamentals and compelling growth narratives. While ongoing global uncertainties are affecting certain sectors, leading to some IPO delays, this is counterbalanced by trends that are instilling greater investor confidence in new issuances, such as expectations for lower capital costs, the resilience of the U.S. economy, and a deregulatory approach in Washington. Our IPO pipeline remains strong, and we anticipate a notable increase in IPO activity in the upcoming quarters. Although we are experiencing some short-term delays due to the government shutdown, there are positive signs of sustained market reengagement. Recent SEC announcements aimed at enhancing the public company experience give us encouragement. Significant progress has been made on the policy priorities we outlined in our March white paper, particularly around scaled disclosure relief, smart regulation, and modernization of the proxy process. We are pleased that the SEC has approved the option to file IPO documentation with mandatory arbitration as a requirement, and we are hopeful about the administration's focus on minimizing SEC-mandated disclosures. Shifting to our data business, we experienced strong growth driven by solid sales, high net retention, and active retail engagement in the markets, which continues to drive usage. We signed five enterprise license agreements this quarter, including with a leading U.S. financial advisory firm, showcasing our ongoing momentum in this area. In our index franchise, we achieved strong growth, capturing a record $91 billion in net inflows over the last year and $17 billion in net inflows this quarter. We finished the quarter with an all-time high of $829 billion in Exchange-Traded Product (ETP) assets under management. We also continued to progress on our three growth pillars: product innovation, international expansion, and institutional adoption. This quarter, we launched 30 new index products, which included 18 international products and 13 in the institutional insurance annuity space. Our Corporate Solutions and Analytics sectors experienced growth from new product innovations that enhance the value we provide to clients. In Corporate Solutions, while the corporate buying environment has been slow, our focused investments in product enhancements and client engagement are improving our foundation, leading to better gross and net retention rates. In the analytics realm, we are enhancing eVestment capabilities and expanding our influence across investment management workflows through partnerships, setting the stage for sustained growth. In Q3, we signed an agreement with Juniper Square, which partners with over 2,000 private market general partners to distribute eVestment data through Juniper Square's fundraising platform. We are broadening the scale and reach of our unique data assets to meet our clients' evolving needs and boost the value we provide to asset owners and managers, especially in private markets. Since the start of 2025, we have nearly doubled the number of private funds represented in eVestment to 60,000 funds, supporting growth in new sales and upsells. Earlier this month, we sold Nasdaq Solovis to Insight Partners. While Solovis has valuable portfolio management capabilities for asset owners, we concluded that its offerings were not strategically aligned with our portfolio and offered limited integrated value to the eVestment analytics platform. We believe Solovis will perform better under new ownership that aligns more closely with its long-term direction. Next, in financial technology, we experienced solid growth across all subdivisions, supported by ongoing global demand for our essential technologies and effective execution by our teams. Our sales remained strong, and we secured 65 new clients, four cross-sells, and 97 upsells this quarter. In terms of subdivisions, starting with Financial Crime Management Technology, Nasdaq Verafin continued to show solid performance across its customer base, which now includes over 2,700 financial institutions, accounting for more than $11 trillion in combined assets. This quarter, we onboarded Goldman Sachs as a new Nasdaq Verafin client. This cross-sell of our consortium-based payments fraud solution enhances Nasdaq's relationship with the bank and showcases our One Nasdaq strategy's strength. In regulatory technology, we realize strong momentum with six new clients, two cross-sells, and 31 upsells in Surveillance, along with 22 upsells for AxiomSL. Recently, we partnered with the Commodity Futures Trading Commission to bolster its market surveillance and fraud detection capabilities by deploying Nasdaq's premier surveillance technology suite. Additionally, early in the fourth quarter, we signed an AxiomSL cross-sell with a global Tier 1 bank for an enterprise cloud deployment, reinforcing our market leadership through the scalability of our solutions and the trust we've established across our various products. Capital Markets Technology also reported a strong quarter, maintaining solid client engagement and sustained demand for our technology solutions. Market Technology recorded five upsells, while Calypso signed four new clients and achieved 39 upsells. Now onto Market Services, which continues to show double-digit organic net revenue growth thanks to widespread strength across our U.S. and European markets. Increased volumes in U.S. options and U.S. equities, alongside significant growth in index options trading, drove this growth. We achieved record revenues and volumes in U.S. options during the third quarter, with the industry logging six of the top ten trading days by options contracts and setting a subsequent record in October. In our U.S. options segment, Nasdaq Index options also hit record volumes in the third quarter, with a subsequent record established in October. In U.S. equities, industry volumes remained steady during the summer and have continued into the fall. Nasdaq-listed securities now account for 53% of total industry volume, up from 49% last year, underscoring our platform's strength as a dependable source for bringing issuers and capital into the most liquid and transparent market worldwide. Additionally, in September, Nasdaq's Closing Cross reached a daily notional record. In conclusion, our robust performance in the third quarter reflects solid momentum across all three divisions, driven by our teams' disciplined execution within our diversified businesses, along with ongoing progress on our strategic goals of integrating, innovating, and accelerating. Within our integration focus, we are thrilled to have exceeded our expanded net expense efficiency target by taking over $150 million action as of the quarter's end. We recorded a gross leverage ratio of 3.1x by the quarter's close. In addition, S&P acknowledged our deleveraging efforts with an upgrade of the company's senior unsecured debt rating from BBB to BBB+ on August 12, positioning us back up to pre-Adenza acquisition levels in both agencies' ratings. With respect to our innovation focus, we are leading the incorporation of new technologies within the financial system and forming innovative partnerships to bolster our growth. This quarter, we filed with the U.S. Securities and Exchange Commission to utilize our established resilient trading infrastructure, which, if approved, would allow equity securities and exchange-traded funds to be traded on the Nasdaq stock market in both traditional and tokenized formats. Our proposal aims to tokenize the underlying security while preserving investors' rights and share ownership benefits. In terms of AI integration into our solutions, over 800 clients have adopted our AI-powered Board summarization tools in Boardvantage. Our AI features in IR Insight are enhancing efficiency in Investor Relations officer workflows by providing insights and facilitating successful investor connections. Additionally, in financial crime management technology, we are seeing strong client engagement with our rollout of Nasdaq Verafin's Agentic AI workforce. This new suite of digital workers is being offered to our existing clients to help alleviate resource-intensive challenges in daily compliance workflows. The first digital worker is our digital sanctions analyst, launched this month, with the next digital worker, focusing on enhanced due diligence, set for release by the end of the year. Nasdaq Verafin also announced a strategic partnership with BioCatch, integrating their alerts into Verafin's anti-financial crime solution workflow and launching a joint go-to-market campaign within Verafin's SMB segment, which is generating positive early engagement. Looking forward, we plan to collaborate with BioCatch to expedite our growth into enterprise banks and international markets. Lastly, in our accelerate priority, our One Nasdaq strategy is yielding results, with four cross-sell wins across financial technology this quarter, totaling 30 cross-sells since the Adenza acquisition concluded. At the close of the quarter, cross-sells made up over 15% of the financial technology sales pipeline, and we remain on track to exceed $100 million in run-rate revenue from cross-sells by the end of 2027. We are also pleased to see our transformation being recognized externally; Nasdaq made its inaugural appearance on Interbrand's Best Global Brands, ranking among the top 100 most valuable brands, signifying the essential role we play across global economies. As we move into the end of 2025, Nasdaq stands well-positioned to continue delivering for our clients and shareholders, driven by strong momentum across our platform. I will now hand the call over to Sarah for a deeper look into our financial results.

Thank you, Adena, and good morning, everyone. In the third quarter of 2025, Nasdaq delivered another strong quarter with 19% EPS growth. We surpassed the EPS accretion milestone provided when we acquired Adenza, achieving our goal 6 months ahead of plan. Let's start with quarterly results on Slide 11. We reported net revenue of $1.3 billion, up 11%, with solutions revenue up 10%, exceeding $1 billion for the first time. Operating expense was $583 million, up 5%, leading to an operating margin of 56% and EBITDA margin of 58%, both up 2 percentage points over the prior year quarter. This resulted in net income of $511 million and diluted EPS of $0.88. Slide 12 shows the drivers of our 11% net revenue growth for the quarter. We generated 8 percentage points of alpha, driven by new and existing clients and product innovation. Beta factors contributed 3 percentage points of growth this quarter, driven by elevated volumes in Market Services and higher valuation in NASDAQ indices. As shown on Slide 13, we achieved a third consecutive quarter of 9% ARR growth, including 12% in fintech, and ARR surpassed $3 billion for the first time. Total SaaS revenue grew 12% for a second consecutive quarter, including 17% SaaS growth in fintech. SaaS as a percentage of ARR increased 1 percentage points versus the prior year quarter to 38%. Let's review division results, starting on Slide 14. In Capital Access Platforms, we delivered revenue of $546 million, up 8% with ARR growth of 6%. Data and Listings revenue was up 6% with ARR up 7%. Data revenue growth was driven by new sales, upsells and usage. We also had improved listings revenue growth due to the increase in IPO activity. Growth from new listing and pricing was partially offset by delistings and lower amortization of prior period initial listing fees. This is consistent with our previous comments, and our previously stated expectations of these impacts in the fourth quarter remain unchanged. Index revenue was up 13% in the quarter with 9 percentage points from alpha factors. Revenue growth was driven by a 35% increase in average ETP AUM, which reached a record $777 billion. The strong growth of AUM was partially offset by a year-over-year decline in derivatives contract volumes, a mix shift in asset-based products and derivatives as well as a decline in revenue from discontinued advertising on nasdaq.com. Net inflows over the last 12 months reached a record $91 billion, including $17 billion in the third quarter. In Workflow and Insights, revenue was up 5% with ARR growth of 4%. The revenue increase was driven primarily by analytics, mainly eVestment and Datalink with continued demand from hedge funds, asset managers, asset owners and consultants who value our differentiated data and continued product enhancements. Corporate Solutions revenue was essentially flat, but we saw improving new sales as well as better gross and net retention trends. Quarterly operating margin for the division was 60%, up 2 percentage points versus the prior year quarter. Before we wrap up on Capital Access Platforms, the impact of the October 16 Solovis sale will be approximately $7 million to $8 million in quarterly revenue with approximately $6 million in direct quarterly costs. Moving to Financial Technology on Slide 15. Revenue was $457 million, up 13% with ARR growth of 12%. Our business continues to experience strong demand across all fintech subdivisions and high levels of client engagement. The division signed 65 new clients, 97 upsells and 4 cross-sells in the quarter. Cross-sells continue to represent over 15% of the Financial Technology division's pipeline with strength across all 3 subdivisions. Financial Crime Management Technology revenue grew 22% with ARR growth of 18%. We signed 55 new SME clients in the third quarter. Net revenue retention was 111%, reflecting strong client engagement, supported by the increasing adoption of the GenAI entity Research Copilot and targeted typology analytics. We also had continued momentum with enterprise clients, including the cross-sell to Goldman Sachs, which Adena mentioned earlier. With that, we are at 6 new enterprise client signings so far this year, which is more than triple the number of enterprise signings in 2024 and more than double the ACV. As the business continues to make strong progress in moving upmarket, we want to reiterate that sales cycles and time to value for Tier 1 and Tier 2 deals can take time to flow into subscription revenue run rate. We continue to expect the recent enterprise signings to translate into stronger revenue growth starting in the fourth quarter, consistent with our comments last quarter. Regulatory Technology revenue grew 9%, with ARR up 11% for the quarter, reflecting a decline in professional services revenue versus the prior year period, which we expected and communicated on the second quarter call. The subdivision signed 6 new clients, 53 upsells and 3 cross-sells. Revenue growth reflects solid performance, and we continue to expect professional services revenue to start to improve in the fourth quarter and early 2026. Capital Markets Technology revenue grew 12%, benefiting from strong performance in trade management services and a contribution from Calypso upfront revenue. ARR was up 10% for the quarter. The subdivision signed 4 new clients and 44 upsells. Financial Technology operating margin was 45%, up 1.5 percentage points versus the prior year quarter. As we wrap up our Solutions division, we continue to expect full year 2025 revenue growth within the medium-term outlook for both Capital Access Platforms and Financial Technology, with Capital Access Platforms at or slightly above the high end of the range, coming from continued strength in index growth and slightly better-than-expected performance in data and listings. Within Fintech, we have great business momentum in Financial Crime Management Technology. But based on the performance of the first 3 quarters of the year, we are expecting the business to end the year just below the range. Turning to Market Services on Slide 16. We had net revenue of $303 million, reflecting growth of 13%. Growth was primarily driven by elevated market-wide equities volumes, record U.S. option industry volumes, increased volumes and capture in index options with index options revenue more than doubling versus the prior year period and elevated capture in European derivatives. This was partially offset by lower share in U.S. options, lower capture in U.S. equities, which our team is managing actively and effectively in a competitive landscape and lower U.S. revenue versus the prior year quarter, which included a previously disclosed $3 million benefit, reflecting cumulative audit and other one-time benefits. Market Services operating margin was 65%, up 5 percentage points versus the prior year quarter due to higher revenue. Moving to expense on Slide 17. We had operating expense of $583 million, up 5%, driven by employee compensation, strong investments in technology and people to support revenue and drive innovation and growth and other increases largely due to inflation. This resulted in an operating margin and EBITDA margin both up 2 percentage points to 56% and 58%, respectively. We are updating our organic expense expectations for the year to a range of $2.305 billion to $2.335 billion from the previous range of $2.295 billion to $2.335 billion. This update reflects our strong revenue growth throughout the year, continued investments in our technology and people and the sale of Solovis that just closed, which was mostly offset by FX. Lastly, on expenses, we have surpassed our extended net expense efficiency program target of $140 million with over $150 million in cost reduction actions as of the end of the third quarter. On taxes, while we believe our previous 2025 non-GAAP tax rate guidance of 22.5% to 24.5% is an appropriate expected tax range, we are lowering our full year tax guide to 22.5% to 23.5% due to some discrete items that lowered our tax rate in the third quarter. Turning to capital allocation on Slide 18. Nasdaq generated free cash flow of $516 million in the third quarter and $2.1 billion in free cash flow over the last 12 months at a strong conversion ratio of 110%. The strong level of cash flow supports our dividend, deleveraging and share repurchases. We paid a dividend of $0.27 per share or $155 million in the quarter, representing a 33% annualized payout ratio. In our continued commitment towards deleveraging, we repurchased $69 million of debt and reached a gross leverage ratio of 3.1x at the end of the quarter, which was an improvement of 0.1x from the second quarter. We expect to reach 3.0 by the end of the year, excluding the effects of FX. We also repurchased a total of 1.2 million shares of our common stock for $115 million in the third quarter. In closing, Nasdaq delivered excellent results in a dynamic operating environment while demonstrating strong operating leverage. Our third-quarter financial results, particularly the new records in quarterly solutions revenue and ARR reflect our transformation into a leading technology platform. We remain confident in our ability to achieve our strategic objectives, deliver sustainable growth and generate long-term shareholder value. With that, let's open the line to Q&A.

I just wanted to touch on digital assets here for my question. Adena, you talked about some wins in surveillance today as well as the ongoing tokenization initiative, but there seems to be a growing presence in digital assets and crypto across Nasdaq's various businesses. Can you just talk through any particular areas where you think Nasdaq has a propensity to drive higher growth? And is there a broader approach to frame the opportunity ahead for Nasdaq as the digital ecosystem continues to develop?

Thank you, Michael. We have been engaged with the digital assets ecosystem for several years as a technology provider, and we are continuing to grow in this area. We see our fintech solutions as increasingly relevant as the digital asset ecosystem evolves and institutional interest in digital assets becomes more widespread. We are excited about our role in supporting global markets with trading and surveillance technology, including specific trade surveillance technology for crypto assets. Additionally, we are collaborating with the digital asset ecosystem on collateral management capabilities, having conducted a proof of concept earlier this year with some digital asset companies to demonstrate the potential of using blockchain technology for collateral management. We are actively working to enhance trade infrastructure solutions in light of institutional adoption of digital assets, which is very promising. In terms of indices, we have launched investable index products related to crypto assets and serve as the listing exchange for IBIT and other crypto index ETFs. We see significant opportunities across our entire franchise. As a market operator, we are optimistic about the collaboration between the SEC and the CFTC regarding the regulatory framework for crypto markets. Understanding this regulatory landscape is crucial for ensuring investor protection and providing resilient infrastructure, and we believe there may be opportunities for us to expand once we have a clearer picture of where regulatory developments are heading.

Maybe just along the same themes, just digging in a little bit on tokenization, if we could. You've announced a proposal to allow for tokenized securities to trade on your exchange. I was hoping you could elaborate on how you envision that working? What are some of the key issues and hurdles that need to be resolved? And more broadly, how do you think about some of the use cases? What do you think is most compelling? And who would be minting the token? And how would that mechanically work?

That likely requires a deeper discussion, but I'll provide a brief overview. Regarding our tokenization filing, we plan for investors to indicate on an order-by-order basis that they want to settle their purchased shares in a tokenized format and store them in a digital wallet. This request would integrate into our systems and the post-trade systems. We are collaborating with DTCC to clarify how they would implement two different settlement paths: one for standard settlement and another for digital wallet infrastructure. DTCC is exploring various blockchains to launch this initiative and aims to provide multiple blockchain options for investors to choose from for settlement. Ultimately, this process would enable a digital wallet accessible through brokerage or investment management firms, allowing investors to manage their securities alongside other digitized financial assets in a more flexible manner. Our markets are exceptionally liquid, efficient, and cost-effective for trading, which we take pride in. It's crucial to maintain the integrity of our markets while offering investors more options. Investors can choose to have their securities in a digital or tokenized format, and we're working with infrastructure providers to ensure that the underlying equity is tokenized, not as a derivative but as the actual equity. We are not altering the settlement cycles as we transition into this new phase. Looking ahead, the benefits of tokenized equities lie in the enhanced mobility of collateral. This is where our Calypso platform facilitates collateral mobility over time. Additionally, potential changes to settlement cycles could help reduce systemic risk and create capital efficiencies through a more integrated payment infrastructure for global transactions. We firmly believe our markets are among the best worldwide, and we aim to incorporate this technology thoughtfully and progressively.

I know it's a little maybe early to talk about your 2026 outlook, but just curious on the OpEx side, it looks like your full year guidance implies much slower year-over-year growth in Q4. In your prior medium-term guidance, you laid out this sort of 3 percentage point gap between your expected solutions growth and OpEx growth, assuming that the OpEx will sort of flex up and down with solutions, but creating some operating leverage there. There's a number of initiatives. You're talking about tokenized equities. You've talked in the past about upgrading to be able to operate the exchanges 24/5. So just curious, given the revenue momentum, any early thoughts you can share on what the pace of spend looks like going into next year?

Yes, I would describe our trajectory as consistent. What you're observing aligns well with the medium-term outlook we discussed. Over the last three quarters, including this one, we have seen very strong revenue and solid solutions revenue, both in double digits for each of these quarters. Unsurprisingly, this has led to some volume-related expenses, and we are continuing to support our investments. Everything Adena mentioned is accounted for in the guidance we provided for the full year.

Yes. And as we think about ongoing investments, what we want to make sure is we believe that we are a provider of solutions that help the entire financial ecosystem modernize. And those investments are embedded in what we've provided you in our guidance for this year. And as Sarah said, we kind of think of ourselves as consistent in how we sponsor investments in our platform. We have very robust product road maps across our solutions, our technology solutions. The 24/5 trading is embedded in kind of the outlook that we've provided to you and as we think about that investment and going into '26. So all of those things are incorporated into how we're thinking about the investment landscape within the business while also taking that efficiency program and factoring that in as well to help us fund these kind of H1, H2, what we call Horizon 1, Horizon 2 types of investments, we're trying to make sure we're driving as much efficiency into the core enterprise as we can.

It sounds like the Fin crime business is maybe the only business that's kind of lagging your expectations for the year a little bit. I know you gave a lot of detail already what's going on there, but maybe you can kind of flesh out a little bit more what exactly is driving the maybe slower-than-expected expectation? And what gives you confidence to accelerate here in the fourth quarter? And maybe related to that, I think last quarter, you talked about a proof of concept with a European bank. Any update on that one would be helpful as well.

Thanks, Alex. As we consider the overall anti-financial crime business with Verafin, there are three key areas driving our growth. First, in the small to medium bank sector, we're seeing strong sales and engagement. Our partnership with BioCatch presents new opportunities to enhance our offerings with integrated workflows, ensuring a seamless experience for our clients. Additionally, we plan to introduce new Agentic AI capabilities as a new module for sale. This area has consistently been at the core of our business. In the enterprise sector, we anticipate some variability in our quarterly ARR growth as we implement solutions, which may lead to inconsistent implementation revenue. However, we have signed three times more enterprise clients this year than last, and as we continue to implement these clients, we expect them to contribute to ARR growth in the future. Our international expansion is still in its early stages, but we are encouraged by the initial proof of concept results and are engaging with various clients in Europe. However, this process will require time as the sales cycles are lengthy, and we want to establish a strong reputation in this new market. Over time, we believe the BioCatch partnership will also bolster our international presence, helping us connect with their global clientele. Overall, we see significant momentum in our business and anticipate an improving trajectory as we move toward the end of the year and into next year.

I wanted to follow up on capital markets technology. You talked about trade management services in the quarter as well as some data center growth. So just curious a little bit more detail around the momentum in that business as we think about the fourth quarter as well as into next year.

Sure. As you know, Capital Markets Tech includes three main businesses: Market Tech, Calypso, and Trade Management Services, which provides connectivity services for our markets in the U.S. and Europe. We've observed a strong demand for connectivity services due to robust market volumes. This suggests that our clients are interested in enhancing their connectivity capabilities and investing more technology into the data center to facilitate trading activities. We have expanded the size of the data center, allowing us to accommodate that growth, and we are actively engaging with clients, which has contributed to this year's growth. Additionally, we continue to see strong demand for Calypso, and we're pleased that clients are viewing us as a core partner in areas like collateral management, treasury management, and trading risk management, all of which are performing well. We have also experienced significant growth in certain regions, particularly in Latin America, where our Calypso services have thrived. Similarly, in our Market Tech business, we have successfully expanded our presence in Latin America and achieved good upsells to our clients this quarter. Overall, new sales for the year have been impressive, indicating a healthy environment as we approach the end of the year and look forward to next year.

Slightly bigger picture question for you on AI broadly. In the last couple of months or quarters, the market continues to sort of contemplate various areas of potential disruption, whether it's in business services or other types of software businesses as well. So 2-part question here. So I guess, one, curious how you sort of think about areas of risk when it comes to AI with respect to Nasdaq's revenue model and as an offset potentially incremental revenue opportunities as well as areas where the expenses could also be sort of pivoted and where you guys could extrapolate some efficiencies relative to the sort of 5% to 8% expense growth that you have over time.

Thanks, Alex. We believe our business is well-protected regarding the core assets against potential AI risks, but we also view AI as a significant opportunity. We have two programs within Nasdaq: one focused on AI products and another on integrating AI into our business operations. Our primary focus is on product development, as it is a crucial aspect of our organization. We aim to utilize automation to increase efficiency in routine tasks associated with product maintenance, as these tasks are often repetitive. This approach allows us to free up resources to concentrate on our future opportunities in product development and support our product roadmaps. Additionally, we are enhancing client experience and implementation by automating these processes, which improves efficiency and provides consistent interactions for our clients. Our product suite demands a high level of expertise, offering custom solutions that meet our clients' complex needs, which sets us apart. We also have unique data sources, including our data lake within eVestment and Verafin, along with market-generated data. Transitioning more solutions to cloud technology allows us to aggregate data assets, further enhancing our products and creating differentiation. Lastly, we are dedicated to modernizing our solutions and incorporating AI to streamline workflows. For instance, the Agentic AI launched in Verafin has shown to reduce workflow time by 80%, providing a strong return on investment for our clients. We see potential across various areas such as anti-financial crime, surveillance, and regulatory reporting. We are excited about the value we can deliver to our clients and are actively pursuing these initiatives as a key part of our strategy.

Maybe just along those lines, actually, the last question on the digital AI workers as well, as you talked about earlier, Adena. Just maybe relaying that to the revenue synergy targets of exceeding $100 million before the end of 2027. Do you see the emergence of your AI solutions helping to advance that faster? And then if you can just remind us where you are currently on that revenue synergy target as we go into 2026?

Yes. We have been sharing the number of clients we’ve gained through our cross-sells, and we’ve reached 30 cross-sells since closing the Adenza deal. We also provide statistics showing that about 15% of our pipeline is supported by cross-sells, and this figure has remained stable, indicating strong demand. As we secure these cross-sells, we're simultaneously adding more opportunities to our pipeline, which is quite encouraging. Regarding AI, it absolutely helps us deliver advanced solutions that transform our clients' workflows. We integrate robust capabilities from cybersecurity and expertise, positioning ourselves as a trusted provider and partner. As a critical infrastructure provider, we understand the importance of doing things correctly. Our clients are increasingly looking to us for these solutions, which will support our cross-sell efforts. We are also noticing that many upsells stem from the Generative AI features we’re implementing in our solutions, which is definitely boosting our confidence.

To what extent is the BioCatch announcement a one-off partnership versus an adjustment in your strategy at Verafin? I know the AML fraud space has a lot of start-up activity. And I wonder if there are other firms in the ecosystem that would pay for access to the Verafin network. I mean, maybe said a little differently, like could Verafin become more of a platform provider than a vendor?

Yes, we already see that Verafin is built as a platform. Its architecture and the ability to integrate through modern APIs make such integrations possible. The integration of BioCatch's alerts into our workflows has been seamless and easy. BioCatch is a well-established global business, not limited to the U.S., and it's growing effectively with a significant client base worldwide. We are pleased to partner with them. BioCatch specializes in pre-transaction signals by integrating into banking applications to monitor user behaviors. If they detect signs of account takeover or unusual behavior, they alert the bank, which can then stop potential fraudulent transactions before they happen. This advanced system utilizes the same AI technology we employ for post-transaction analytics. By combining their pre-transaction analytics with our at- and post-transaction capabilities, we create a comprehensive solution that reduces the risk of fraud for our bank clients. This partnership enhances our value to clients and streamlines workflows for smaller banks that may have limited resources. It’s a prime example of how we can grow our capabilities through collaboration, and while this is our first partnership, we see potential for more in the future.

I just wanted to focus on the RegTech. We continue to see good momentum there, but just wanted to understand how are the conversations with the bank or your customers in general on the regulatory technology solutions? And then just maybe a follow-up on the CFTC partnership. How should we think about the benefit of the partnership outside of CFTC?

It's been encouraging to see the progress in both AxiomSL and Surveillance. We've noticed increased engagement from our clients throughout the year as the regulatory landscape becomes clearer, aiding their decision-making and partnerships with us. We believe that smart deregulation benefits the industry overall. However, regulatory changes persist globally, with various regulators pursuing different paths, making AxiomSL an essential asset for our clients. In early October, we secured another global Tier 1 client for our cloud-delivered AxiomSL solutions, enhancing our support in new areas of regulatory reporting. We're excited about this growth, alongside the upsells achieved in the quarter, indicating strong demand for AxiomSL. Similarly, Surveillance has consistently shown growth through new sales and upsells. A notable example is the CFTC, where increased use of market surveillance by regulators can influence member firms to adopt the technology, enhancing our sales efforts with trading firms associated with those regulators. We've experienced similar dynamics with AxiomSL, where collaboration with a central regulator encourages banks to utilize the same technology for their regulatory reporting, creating a beneficial network effect. This pattern is evident across Calypso, AxiomSL, and Surveillance, providing a solid strategy for business expansion.

Sorry, I was on another call, so I'm not sure whether you have addressed the tokenization question. So NASDAQ filed with the SEC to trade tokenized equities. Could you please give us an updated view on using blockchain to trade an already very liquid market? How do you see the incremental opportunity here? Is this something that you want to keep in your back pocket at this point? Or have you already seen a good demand to trade tokenized equities for U.S. and non-U.S. investors?

Thank you, Owen. We did touch on that topic earlier, but your question offers a different perspective. We began our discussion by highlighting that the U.S. equity markets are the most liquid, efficient, effective, and cost-effective globally when it comes to overall trading costs. They truly are remarkable markets. Our primary focus is to ensure we maintain the integrity of what we've established here. However, we view the opportunity to expand the market by allowing investors the choice to hold their shares in either a tokenized or traditional format. This gives them greater flexibility in managing their investment portfolios. There is definitely a trend towards tokenization, which is an innovative technology that facilitates streamlined payment processes and enhances efficiency in post-trade processing. The initial phase of our initiative involves synchronizing at the core equity and security levels, not as a derivative but as part of the security itself, all while keeping trading within the markets. Over time, we will collaborate with core infrastructure providers like DTC to improve post-trade efficiency. We are well partnered with DTC as they assess and implement this first step.

On the Axiom to Calypso cross-selling opportunities, I know Thoma Bravo never really kind of fully monetized that avenue, but are you doing anything different than they did? And just are you seeing those opportunities pick up under your leadership?

Yes. Before we acquired the two businesses, they established a data connection between Axiom and Calypso. This allows Calypso clients who use it for trade infrastructure to easily transfer data to AxiomSL, facilitating the implementation of AxiomSL for regulatory reporting based on that trade infrastructure. We were very excited about this development, which we illustrated at our Investor Day with M&T Bank. It significantly eases implementation and fosters greater consistency. We are continually looking for ways to create these connections across our solutions. Additionally, as we engage with clients, the discussions become more comprehensive the higher up you go in the organization. For instance, if you're the COO or Chief Risk Officer of a bank, your focus is on managing risk, navigating regulatory requirements, and preventing crime in the systems and networks. When we engage at that level and have these broader discussions, I believe Nasdaq excels beyond what Adenza is capable of, fundamentally changing our interactions with clients. One of the best questions I receive from clients is, what are other banks utilizing that I'm not? I appreciate that question because it leads to a richer dialogue about how we can support them comprehensively across core risk management, trading, regulatory risk management, and overall bank risk management related to transactions. Moreover, we can extend this conversation to their wealth management sector by leveraging the data and index capabilities we provide, creating a seamless flow of support throughout their organization across Capital Access Platforms, markets, and fintech.

Thank you very much for joining the earnings call today, and I look forward to speaking to all of you again in January. Thanks very much.