Highlights From Nasdaq’s Q3 Earnings

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After an impressive first half of the year, NASDAQ (NASDAQ:NDAQ) continued its strong performance in the third quarter, with revenue of $607 million up 4% over the same period last year. The company’s focus on growing its non-trading lines of business has helped it perform strongly despite a somewhat less volatile period leading to low trading volume. The rise in non-trading business segments – including Corporate Solutions, Market Technology and Information Services – is attributable to both organic growth as well as acquisitions. The Market Services segment saw revenue growth primarily due to acquisitions, and otherwise would have seen a decline driven by unfavorable trading conditions. The company’s operating margins improved by nearly 3 percentage points, primarily due to non-trading business margin expansion, as well as restructuring expenses in the prior year period.

Non-Trading Businesses Continued Growth Due To Acquisitions, Proprietary Products

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NASDAQ’s non-trading business lines generate nearly 64% of the company’s overall revenues. These businesses grew by over 4% in the third quarter. The growth in the Information Services segment was supported by the increased adoption of its in-house products such as IR Insights and Influencer. The Market Technology segment grew organically due to increased uptake of software licensing and support, surveillance, and advisory. Increased demand for data and technology-related products and services is likely to sustain the growth momentum for these segments.

Market Services Has Grown Due To Acquisitions

The company generates about  36% of its revenue from Market Services, and the segment has grown by nearly 3% year on year. The growth due to acquisitions was partially offset by the decline in trading volumes resulting from unfavorable economic conditions and increased competition. The equity options volumes picked up pace following the acquisition of ISE, which gave NASDAQ a 42% market share in the U.S. equity options market. However, a decline in revenue per contract, driven by stiff competition, offset the overall revenue growth. Cash equities revenue saw an impressive growth due to the positive impact of foreign exchange rates on European trading.

Please refer to the full Trefis analysis for Nasdaq

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