Once again, Alex Kramm, Senior Research Analyst at UBS, covering exchanges and business services. And since I just said exchanges, we actually are delighted to have an exchange here today, although that may be a misnomer, but we'll get to that in a minute. But Sarah Youngwood, CFO of Nasdaq here, for the first time at this conference, thanks for being here.
That's right.
So, look, let's just dive right in. And I usually like to start these very big picture. So, look, Nasdaq has been a company in transition for a while. A lot of people, when they hear Nasdaq, as I just mentioned, they think about an equities exchange, but you find yourself here at a tech and AI conference. So why don't you tell the audience briefly where the company is today and what your vision for the next decade or so will be?
Sure, no, that's great. And I appreciate the question. Indeed, we like calling ourselves a technology platform company at this point. We've made technology decisions and investments that have put us on that path. And if you look at it first by the numbers, you would say we are there, so 80% approximately of our revenue is solutions revenue. We're a Rule of 60+ business. This is a good conference because I don't need to explain what that means, and we are to the $2.2 billion per that we were at in 2017 when Adena, our CEO, became the CEO. That actually is larger than that in EBITDA, so we've grown quite nicely. This year we have had double-digit revenue growth for the three quarters we have reported, double-digit solutions revenue growth, as well as 9% ARR each of those three quarters, and I'm sure we'll come back to that.
So those are the numbers. How have we done that? We've done that, with three pillars which have remained our core. The first pillar is you know us as architecting modern markets, and that's what we do and a t this point, 135 markets are operating by us, 19 of which we own. But in that delta, you can think of that as a software business. So we provide software exchange in a box. Because we also know how to exchange hundreds of billions of messages each day, we have proven ourselves as a very high-tech technology platform that does very difficult things, which enables them to translate that into other things. We power innovation. We've got 20% of the world's market cap on Nasdaq. We've got almost 50% of the U.S. market cap on Nasdaq.
And we also have a little index called Nasdaq 100 and other indexes which together represent $800 billion of AUM. In 2017, that was like $100 billion, so it was really not a business at that time and we've really diversified into that, as well as data products around innovation. Then the last one is trust. That's the one where we've done more of the investments to start the gears and w e already had the connectivity and the trust of financial institutions. They asked us if we could do more for them, especially in the things they don't want to do themselves, like regulatory and compliance. That's what we've done, including financial crime management, surveillance, capital markets tech, reg tech, all of the software that we provide to help the trust in the system.
So when you take all of that, we would like the transitions we have made, and we feel we have the pieces in place with a very large SAM of $31 billion, TAM of $79 billion.
All right. Well, that was a lot. So let's dig a little bit deeper into this. So for most investors, I think the focus of the last year, maybe a couple of years even, has been on the fintech segment. Again, we're at a tech conference, so it makes sense to start there. But that's really the combination of Adenza, Verafin, those two acquisitions over the last few years, and then your legacy technology business that you already had. So it's been two years, I think, pretty much, since Adenza closed. You've been here for almost that long, right? So can you just talk about how you think you've done against what you thought at the time, what you've learned maybe, and what gets you excited in 2026, most importantly?
No, that's great. So, I'm usually a pretty tough grader, but I would give us a really good grade. If you look at what we have told you two years ago when we closed, we have delivered everything and more. The first thing was leverage. Deleveraging was very important in our financials, achieving 3.2 times 16 months ahead of schedule. And we're on our path to 3.0 at the end of this year. And it has been really a steady drumbeat of accelerated deleveraging. We've also been able to achieve the synergies and overachieve on the synergies. So we announced $80 million to be achieved over two years of actions. And that $80 million was actually achieved in one year, at which point we upped the program to $140 million. And last quarter, which is two quarters before the end of the program, we were already at $150 million.
So, I would again say, on efficiencies, we've done extremely well. We're, of course, fully integrated, from all of the, systems and teams' points of view. And then, the last one, which is very important, to the rationale and to the future, is the cross-sell. The rationale of putting, those things together is strong. We're seeing that in this cross-sell. We announced a $100 million of cross-sells by year-end 2027. And, we are executing well towards that. 15% of our pipeline is actually in cross-sell. And what we had explained at the time of the acquisition is if you have 10% or more on average of your cross-sell, consistently, in the pipeline, then, that gives you the path to your 100 million plus. So you've seen us replenishing the pipeline as we execute and sign deals.
We have been fairly consistently in the last few quarters around the 15% mark and happy to be there. Excited about seeing the reaction of our clients, seeing that we can do more for our clients, and also excited to see that the Adenza businesses are doing well, but the Nasdaq businesses that are under the same leadership are also doing very well. It's really not either/or, but both that have been firing and for us.
Good. So let's turn this a little bit more near term. So there's a lot of focus, and you mentioned it before, on ARR growth. And I think there's an expectation that ARR accelerates into year-end. At least that's what we're modeling. So hopefully I heard you correctly there. So sitting here in early December at a public event, anything you can point to that gives you more or less confidence in that outlook that we're all looking for?
So what we gave first of all just the facts we have reported on 9% each of the three quarters in ARR. That 9% was driven by the fintech piece, but also with a nice contribution coming from the capital access platform piece. When you look towards the comments that we have given last quarter as it relates to this quarter as well as the beginning of next year, we have said we have very strong signings in enterprise in the financial crime management business that should translate into revenue starting in the fourth quarter, with the beginning of it being professional services fees and ARR and subscription to come thereafter. We have also talked about the AxiomSL professional services fees, which had been a bit slower and which were set to restart starting in the fourth quarter and going.
We haven't made any particular comments on the ARR, but we have benefited from, I would say, good momentum. But we will want to make sure that we leave the time to the business to translate that into the acceleration as those professional services fees become subscription revenue.
Fair enough. Now digging into fintech a little bit deeper, let's start actually with AxiomSL. You know, I remember earlier this year I did a fireside chat like this with with Adena, which is Nasdaq CEO for everybody who's not aware, at our FIN Miami Financials conference, in February, and at that point, we were somewhat concerned post-election that, you know, there may be more deregulation of financial services coming and how could that impact your business there. It's been again almost a year since then, so maybe you can talk about what you've seen on that front and how the business should be positioned against those trends.
Yeah. So to back up, AxiomSL is the number one regulatory software that's used by all of the large banks for their requirements, and that not only does the data lineage, but also delivers it to 55 regulators across the world. It's a great, great, great software. And what you talked about with Adenza, which made sense at the time, was at a time when nobody knows where regulation is. Surely that has to have an impact on the regulatory software. I will say, we were very glad to see that the administration gave the signals that there were going to be pro-simplification of regulation, but not deregulation. SLR was their first piece of regulation that they changed, which is a good help to the capital requirements of banks. And anything that's good for the banks is good for us. We advocate on behalf of the banks.
It's we don't have like a big sales process around SLR per se, but the fact that the administration had done something that made sense to our client was very promising to the tone and to the level of engagement and conversations we were able to have with our clients. The next, big one would be Basel III Endgame. There is an expectation that we could see something beginning of next year. Obviously, that timeline will be driven by the regulators. But the banks are across the world continuing to make the investments in our software. We're seeing good momentum, which is why we had talked about that acceleration in professional services fees that was restarting starting in the fourth quarter.
Perfect. And then again, going kind of business by business here in fintech, Verafin, which is still your highest growth business, but it's been a little bit softer this year, again, marginally, but, you know, it's all about the margin. So maybe you can talk about what's been weighing on that and how, you know, some of the solutions there, and some of the new initiatives are kind of taking hold, larger banks, international, and, how that could, you know, drive acceleration in particular into next year again.
Yeah. So financial crime management is a $3 trillion problem for the world. We have had a tremendous platform. We believe that we are the number one solution in that domain. What makes us different is that we have 2,700 banks which gave us under the Patriot Act their data. So it's a contributory model. And so 2,700 banks represent now $10 trillion in assets. And we've been able to have that multi-data set, which we can serve in workflows and tremendously add value to banks. So the business has done extremely well, has executed extremely well. What you're referring to is the fact that our enterprise strategy is nascent and therefore has a sales cycle that's fairly elongated as well as a time to value that is fairly elongated.
So, before we go there, you've got a core, which is the small and medium-sized banks, which has been persistent in its contribution to our growth. And that has been there, has been steady. And then you have a sort of a timing, of when those deals are signed. And we did sign six deals this year, including Goldman Sachs, which enabled us to use their brand. And we had Citi, which we had announced two years ago. So those are the type of names that take our products. But if you take those six deals, it's twice the ACV. It's three times the number of deals in three quarters versus what we had in the full year last year. Tremendous momentum, very meaningful that we're accelerating in enterprise. But yet, as I mentioned earlier, that starts in professional services fees starting in the fourth quarter.
And then it comes into your subscription and your full revenue opportunity. And then international, again, even more nascent. We have a POC that we believe will work very well with one of the large European banks. And if we start to unlock international, we have massive growth opportunity. So we love the execution. We love the business. We're doing a lot in GenAI in partnerships like BioCatch to feed the business. And we're executing well in international as well as in enterprises.
All right. Great. Thanks. And then last, lastly, on fintech, there's still the capital markets business. There are a lot of potential changes here. So blockchain, tokenization, regulatory changes, and so forth. So look, how do the various businesses in there, Calypso, for example, fit with all of that? And what gives you confidence in your medium-term outlook of, I believe it's high single digits or low double digits?
Yeah. So if you're placing yourself in capital markets world, you're seeing a convergence of trends that are accelerating, whether it's tokenization, whether it's the 24/5 or 24/7. And all of those changes require infrastructure. So that is good for us since we provide infrastructure to banks in those regards. We're also helping to drive the dialogue towards what we believe is the right regulatory framework for that change. So for example, on tokenization of equity, we believe that there is a place for that to happen. But what's important is to maintain the excellent characteristics of the U.S. capital markets. It's the deepest, largest, highest integrity, transparent capital market in the world. And the last thing you want to do is to break the liquidity pools. And if you tokenize the equity, how can you do that without breaking the liquidity pools?
And we put forward the proposal with the SEC, which we believe has a lot of merit, that does just that. So you can trade in on the regular rails and with all of the attached protections and depth. But then as you settle, you give an instruction, for example, to the DTCC, of settlement in traditional form or in tokenized form. And if you do that, then you have both the benefits of all of the characteristics that I just described of the U.S. capital markets and the depth of execution, but you also have the ability to benefit from mobility from the ability to move those tokenized equity into your different wallets. You can get more optimization around them. For example, the collateral management can be very efficient. You can have speed. And so we believe that there are benefits.
We're building our technology platform to be able to be digital assets ready. For example, we have, on Calypso, collateral management partnerships to put a POC on the Canton, and that has worked. And now we are building that. So we are very much embracing it, but not to the detriment of the strength of the existing ecosystem.
Makes a lot of sense. All right. Then moving on to some of the other businesses, maybe starting with listings. Clearly, IPO markets have improved a lot in 2025. A lot of people very happy about that, obviously. And then, you know, the outlook, I think, for 2026, I think Adena mentioned even on the last calls, very, very robust too. So can you just talk about what you're seeing right now and then how that will impact your listings business actually from a revenue perspective next year? Because it usually takes a while for those IPOs to really move to the flywheel, let's put it this way.
Yeah, that's right. So, we are seeing a sustained level of pipeline of engagement and of desire both from the sellers and the buyers for those IPOs to happen. So at this point, we believe that there is a real need for that to happen, but also desire for it to happen. We've seen $6 billion of executed deals last quarter and 14 for the year. So that was a good level of engagement. We have a very good pipeline both continuing into finalizing this year. So even though we are into December, we are still seeing deals that can happen on this side of the year, but with a good pipeline for next year. Next year, of course, you've got the first quarter, but we're seeing a good cadence of people who are targeting different parts of the year.
We do think that, if you look at the performance of the deals that have happened in general, it has been promising for both the sellers and the buyers. If you look at the queue of people who want to go, it's very strong. It's also very strong in size, and we are seeing a volatility that has now really reduced very much. So whereas you have very high volume, you actually have low volatility. The rates are most likely not going up, which is also helpful to capital markets. So when you look at all of those signals, you are seeing a reason for it to continue, and then you did mention it. It does amortize over three years.
It's not a high effect right away, but it's a good forward trend that can then has leverage into the rest of the organization, both in capital access platform as well as in market services.
To kind of get to that for a minute, I think the workflow and insights business can benefit there over time, but it right now is a bit of a soft spot, across, I think, if you look at the whole business, maybe that's the business that's been the softest of everybody, of everything. So look, what would it eventually take to achieve, I think, high single digit to low double digits in that business, which is what you've laid out? So how do you think about those targets in general?
Yeah. So I would separate in workflow and insights workflow, which is some of the corporate services, which have actually been fairly correlated to the IPO environment and with the lag. So that translation has taken some time to happen, and they are really at the very low end of the growth profiles that we have. In terms of the insights piece, which is Data Link as well as eVestment, those are good businesses that have been growing very nicely. eVestment is also a data contributory model, which is which many of you probably use, and which is invaluable. We've added also privates, and so good innovation there. So we would say we are investing in those businesses, and there is a difference between the two pieces of it in terms of the time to returning to higher growth.
Good. And then maybe finishing on the solution side of the businesses, quickly on the index business, which clearly has been a great growth story, but a lot of it has also been beta because markets, in particular the Nasdaq-listed companies, a lot of them are here today, have been doing very well. So maybe you can talk about the alpha component a little bit as well. What are you really doing to drive new product and flows in that, in that business, and how can that add over time?
So we have been at double-digit growth very consistently. And the double-digit growth has been more than 50% alpha to calibrate. In its own right, last quarter, for example, we gave 9% of alpha, 13% in total. So yes, there is better, but it's that outperformance even beyond our, if you're looking at us as an 8-11% solutions business, it's the outperformance that is better, but the performance is alpha. And how are we doing that? We're doing that alpha performance through a diversification. So we've got $91 billion of last 12 months inflows that we had last quarter, and 38% of that came from products that were invented at Nasdaq in the last five years. We also have international that has been a very good strategy for us. And at this point, we've been able to grow that in the 40s%.
And that's now on a base that's close to $150 billion. And so it's not growing very fast because it's on a small base. It's on a very large base. So that's also very interesting. And then the last piece of the strategy is institutional. It's an $800 billion opportunity where we have a 7% market share. We can certainly have much more than that. So you've seen us in the last three quarters announcing 27 products, annuity type of products. And that's on top of the full year of 2024 being also at 27 annuity products. And so you're seeing an acceleration there, and that's also translating in revenue. And so you're seeing the three pillars that we talked about at Investor Day being new products, international, institutional, being exactly how we're delivering with very good investments in technology and marketing to support this very high-growth business.
Great. And then since we haven't spoken at all about the trading business, we should go there at least for one question. It's still an important part of the company. It's around maybe a little bit more than 20% of revenues and very, very high margin. You know, equities and equity options volumes have been really, really strong this year. That's certainly helped financial results. So how do you think, and I know it's a crystal ball question, but how do you think about the sustainability of that growth? And what can you actually do if volumes start walking, running against you?
Yeah.
What could happen?
So what's interesting is to observe the transition between the type of volume we had in the first half of the year, which was high volatility, high volume, as opposed to the second half of the year, which has been low volatility, high volumes, much more sustainable. And retail, we believe, has been a very strong contributor, but people right after COVID said, "Is there a retail bubble?" I will say it has been a long time since COVID. And retail has continued to expand. We've been able to go through small cycles, and we've seen the persistency. We've seen the sophistication. And we, Nasdaq, are very well positioned. We've been playing for revenue, as opposed to either share or capture, but we are very much has been a double-digit contributor for us.
Whereas I don't have a crystal ball, we would say that we continue. We are not seeing any signals that those trends towards 24/5, strong retail, or tokenization would actually do anything else but continue to support the high level of volumes that we're seeing even without volatility.
Let's all hope for that. Great. And then, with three or so minutes left, a couple of guest CFO questions. Let's start on expenses first. So historically, exchanges have been viewed as very fixed cost businesses, a lot of operating leverage. Is that still a good way to think about Nasdaq, or how do you now, in your role, balance top-line growth with expense growth and margin expansion ultimately?
So again, technology company, and we have the privilege of having tremendous free cash flow. And that free cash flow enables us to fully fund our investments, organic investments. We have an organic path that needs to be well invested in. And that's exactly what we do. We have a Horizon framework where we do defense, we do cash flow, we do R&D, and we do that, I would say, with a lot of rigor and discipline. We also deliver efficiencies. We talked about the efficiency program around the Adenza transaction, which we overachieved. So we're very good at delivering those goods. And that enables us to do both things, support a very high volume of revenue with volume related with investments, and then offset a portion of our structural expense with efficiencies and therefore deliver margin, operating margin to our shareholders.
So, it's a balance, but we're certainly making sure that we can privilege the revenue growth while delivering operating margin.
Great. And then maybe finally, to finish up here, capital allocation, clearly you mentioned at the beginning, I think on the first question, you've done a great job delivering deleveraging, sorry, quicker than expected. So where to from here? So you've stepped up buybacks a little bit recently. You clearly, though, have a history of M&A and fintech, which is now one of your segments, can mean a lot of different things and a lot of different end markets. So and those are changing all the time. So what are you looking to do to make sure Nasdaq is really positioned to keep on being successful?
Yeah. So we start with, once we have fully funded those organic investments, we still have, call it $2 billion of free cash flow, which does enable us to do more than one thing. And so the first thing that we've always done is having an organic strategy, and that's before the $2 billion. The second is a progressive dividend. The third becomes deleveraging versus share repurchase. And that gives us a lot of optionality. And we've been, I would say, very thoughtful about balancing those two and delivering a lot of value to our shareholders. In terms of M&A, as I have mentioned, our focus is organic. That doesn't mean that we couldn't look at an add-on if that made sense in a buy versus build discussion. But we continue to see a lot of opportunity around the platform that we have today on an organic basis.
Fair enough. With that, we're actually out of time. Sarah, thank you very much for making the long trip to Scottsdale. Hope to have you back, and I'll see you at the Investor Day, early next year.
Excellent.
Thank you.