Nasdaq ($NDAQ) wrapped up 2024 with a mix of outcomes that had Wall Street on edge and investors watching closely. The exchange operator reported a Q4 adjusted net profit increase of 10.9%, reaching $438 million (76 cents per share), slightly surpassing expectations. However, the spotlight was on its financial technology segment, which investors are relying on to wean Nasdaq off its dependence on the unpredictable trading revenue. While fintech revenues rose by 9.8% to $438 million, they fell short of the $441.2 million analyst forecast, causing shares to dip slightly to $80.91 during afternoon trading.
This situation underscores a balancing act between Nasdaq’s traditional operations and its ongoing tech-focused shift. CEO Adena Friedman’s efforts to expand into anti-financial crime software and regulatory tech tools have been promising, with fintech now making up over 35% of total revenue. However, the minor shortfall this quarter caught the market’s attention. One trader remarked, “Fintech was expected to drive growth, but it seems to have stumbled out of the gate,” highlighting the need for greater clarity in the division’s annualized recurring revenue, a crucial metric for SaaS businesses.
Nasdaq is strategically planning for the long haul. It has been steadily acquiring compliance and analytics companies like a savvy investor picking up undervalued stocks, banking on tools that assist institutions in navigating increasingly stringent global regulations. Oppenheimer’s Owen Lau emphasized, “The ARR figure is crucial here – securing those recurring contracts could turn this downturn into a buying opportunity.”
During the earnings call, Friedman maintained a positive outlook, pointing to a favorable “Goldilocks” economic landscape for 2025, characterized by cooling inflation, stable interest rates, and a strong labor market. She mentioned the recent listings of ServiceTitan and WeRide as early indicators of a reviving IPO market, which has been notably quiet since 2022. Nasdaq’s listings increased by 0.7% to 4,075 companies, leading to a modest 1.6% rise in revenue from listing services.
Excitement is building behind the scenes. Industry insiders speculate about a potential resurgence in IPO activity if the SEC becomes more amenable under new leadership. “There’s pent-up demand from unicorns that postponed their IPOs,” Friedman observed, projecting a possible Q2 2025 opening for new listings. This speculation aligns with a 33% surge in Nasdaq’s stock last year as traders anticipated a listings surge.
Although the fintech shortfall slightly dampens the report, Nasdaq is diversifying its strategies adeptly. Trading revenues remained stable despite reduced volumes, and the company is venturing into AI-powered market analytics, a rapidly growing area. The 8-K filing revealed a 9.8% increase in total net revenue, reaching $1.23 billion, demonstrating the strength of its diversified model.
As the day came to a close, Nasdaq’s future focus is on transitioning from being merely “the stock market” to becoming “the market’s tech infrastructure.” With global spending on regulatory technology projected to hit $160 billion by 2025 and AI compliance tools gaining momentum, Friedman is wagering that what seems mundane today could become Nasdaq’s next significant driver. However, investors remain cautiously optimistic, similar to day traders monitoring Level 2 screens, waiting for clear signals to confirm trends.
Advance your trading skills and secure capital. We support your growth in manual, algo, quant, and pair trading. Discover training programs at Promo Limex.
