How Much Of NASDAQ’s Revenue Growth Through 2021 Will Come From Market Data And Technology?

by Trefis Team
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NDAQ
Nasdaq OMX Group
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NASDAQ (NASDAQ: NDAQ) has seen solid growth over the past couple of years. The company’s revenue grew by slightly over 8% annually and its stock price jumped by nearly 65% between 2015-2017. We attribute this performance primarily to the growth in the company’s non-trading lines of business. The rise in non-trading business segments – including Market Data, Market Technology, Corporate Services, and Information Services – is attributable to both organic growth as well as acquisitions. Consequently, Market Data and Technology contributes to roughly 19% of the company’s overall revenue and grew by nearly 8% annually between 2015-2017. We expect the non-trading segment to maintain growth momentum as a result of improved need for technological and data products.

Based on recent market trends, economic conditions in the U.S. and Europe, and a host of new acquisitions, we forecast Nasdaq to report 2-3% annual revenue growth in the next four years, from $3.9 billion in FY 2017 to about $4.3 billion in FY 2021.  Of the estimated $290 million incremental revenues, we estimate that the Market Data and Technology segment will contribute just under 29%, or $84 million. We have summarized our expectations on our interactive dashboard, Nasdaq’s Market Data & Market Technology Revenue Outlook For the Next 4 Years. 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.

NASDAQ’s Market Data and Technology divisions generate around 19% of the company’s overall revenues. These businesses have grown by over 8% annually of late. The growth in the Market Data business line was largely due to the increased adoption of its in-house products such as IR Insight and Influencer, and the company’s continued efforts in innovating customer-centric financial products. The Market Technology segment grew organically due to enhanced adoption of software licensing and support, surveillance, and advisory services. In addition, we believe the eVestment acquisition should support its Market Technology division and attract more institutional investors. Additionally, its acquisition of Cinnober should further strengthen its foothold in the technology and analytics space, and better equip Nasdaq in the fast-growing crypto space.

Improved need for data and technology-related products and services should likely sustain the growth momentum for these segments. As a result, we expect the Market Data and Technology segment to grow around 3% annually and reach just over $840 million by 2021.

 

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