What Much Will IntercontinentalExchange’s Data Services Grow In The Next Two Years?

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Trefis
ICE: Intercontinental Exchange logo
ICE
Intercontinental Exchange

IntercontinentalExchange Group (NYSE: ICE) has seen robust growth over the past couple of years. The company’s revenue grew by slightly under 12% annually and its stock price increased by over 17% between 2015-2017. We attribute this growth primarily to revenue from Data Services division. This revenue stream continued its robust performance between 2015-2017, largely driven by a series of acquisitions – NYSE, SuperDerivatives, IDC, and Trayport – coupled with increased demand for data-driven insights and recommendations. As a result, the Data Services segment contributes almost 39% of the company’s overall revenue and grew by nearly 55% annually between 2015-2017. Below we take a look at what to expect from the Data Services division in the next two years.

Based on recent market trends, synergies of recently acquired companies, and a host of new acquisitions, we forecast IntercontinentalExchange to report 6-7% annual revenue growth in the next two years, from $5.8 billion in FY 2017 to about $6.5 billion in FY 2019. Of the estimated $672 million incremental revenues, we estimate that the Data Services segment will contribute just over 48%, or $325 million. We have summarized our expectations on our interactive dashboard on IntercontinetalExchange’s Data Services segment through FY’18 and FY’19 on an. If you disagree with our forecasts, you can change the key drivers for the segment to gauge how changes will impact its expected revenue. Below we take a look at the key drivers for this revenue stream.

Acquisitions And Increased Demand To Drive Data Services Segment In Near Term

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The Data Services division generates revenue from terminal and license fees obtained from data vendors in exchange of the provision of real-time futures prices information. The segment has been the fastest growing business of late, with revenues witnessing around 55% annual growth between 2015-2017, reaching just under $2.1 billion in 2017. The massive growth was as a result of a string of acquisitions and increased demand for data-related products. Consequently, the segment has doubled its percentage contribution to the overall revenue to around 36%. We believe, an uptick in trading volumes should likely improve the demand for market data, which in turn should increase the demand for ICE’s Data products. As a result, enhanced demand for data-related products and services should likely propel further growth in this segment in near term. Additionally, the host of new acquisitions – BondPoint, Chicago Stock Exchange, and TMC – should expand its market reach, offer advanced and diverse fixed income solutions, improve technology platforms, provide new data and valuation services, and provide for good medium term growth opportunities. Accordingly, we estimate the segment’s revenue to grow just under 7% annually going forward.

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