# Nasdaq (NDAQ) Financial Model

Free Excel 3-statement financial model and company analysis for Nasdaq.

- Canonical: https://finamodel.com/companies/nasdaq
- Industry: Capital Markets
- Downloadable model: Yes
- Excel download: https://finamodel.com/company-models/NDAQ.xlsx

## Model Purpose

This model provides a comprehensive equity valuation and credit analysis of Nasdaq, Inc. (NDAQ), specifically designed to evaluate the company's transition toward highly recurring SaaS revenue and its rapid deleveraging trajectory following the $10.5 billion acquisition of Adenza.

## Company Overview

- Nasdaq is a global technology company serving corporate clients, investment managers, banks, brokers, and exchange operators. While historically known as an equities exchange, it has transformed into a diversified data, analytics, and software provider.
- **Business Segments:**
  - **Capital Access Platforms (~35% of Net Revenue):** Includes Data & Insights, Index, and Corporate Platforms (listings and IR services).
  - **Financial Technology (~30% of Net Revenue):** Includes Financial Crime Management (Verafin), Capital Markets Technology (Calypso), and Regulatory Technology (AxiomSL).
  - **Market Services (~35% of Net Revenue):** Includes Cash Equities, Equity Derivatives, FICC, and Trade Management Services.
- **Key Geographies:** Primarily the United States and Europe (specifically the Nordics and Baltics).
- **Business Model Type:** Asset-light, high-margin platform business rapidly shifting toward a subscription-based Software-as-a-Service (SaaS) model.
- **Competitive Position:** Operates in a duopoly for US corporate listings (with NYSE); holds a dominant market share in Nordic equities; competes globally in financial technology and index licensing against MSCI, S&P Global, ICE, and CME Group.
- **Recent Major Events:** Completed the $10.5 billion acquisition of Adenza in November 2023, which significantly increased debt but accelerated the shift to recurring revenue. Completed a major divisional realignment in late 2024 to integrate Adenza and Verafin into the Financial Technology segment.

## Revenue Deep Dive



### Capital Access Platforms

- **Segment Name:** Capital Access Platforms
- **Revenue Driver Formula:** (Number of Listed Companies x Average Listing Fee) + (AUM linked to Nasdaq Indices x Basis Point Fee Rate) + Data Subscriptions.
- **Historical Growth Rate:** 5-8% CAGR.
- **Key Growth Levers and Headwinds:** Driven by the IPO environment, net inflows into Nasdaq-linked ETFs (e.g., QQQ), and pricing power in proprietary data feeds. Headwinds include prolonged IPO droughts or shifts to passive funds tracking non-Nasdaq indices.
- **Pricing Dynamics:** Highly contractual and sticky; annual price escalators are standard for data and corporate platforms.
- **Revenue Recognition Notes:** Listing fees are typically deferred and recognised over the estimated service period (often several years).
- **Seasonality:** Relatively stable, though index revenues fluctuate with end-of-quarter market valuations.

### Financial Technology

- **Segment Name:** Financial Technology
- **Revenue Driver Formula:** Beginning Annualised Recurring Revenue (ARR) + Net New ARR (Upsells + New Logos - Churn).
- **Historical Growth Rate:** 12-15% organic CAGR (boosted significantly by the Adenza acquisition).
- **Key Growth Levers and Headwinds:** Driven by regulatory compliance demands, anti-financial crime mandates (Verafin), and bank risk management upgrades. Headwinds include long enterprise sales cycles and bank IT budget constraints.
- **Pricing Dynamics:** Multi-year SaaS contracts with volume-based tiers and inflation-linked escalators.
- **Revenue Recognition Notes:** SaaS revenues are recognised ratably over the contract term. On-premise software licenses (legacy Adenza/Calypso) may have upfront recognition components.
- **Seasonality:** Q4 is typically the strongest quarter for software bookings and ARR generation due to enterprise budget cycles.

### Market Services

- **Segment Name:** Market Services
- **Revenue Driver Formula:** (Industry Trading Volume x Nasdaq Market Share) x Average Capture Rate per Contract/Share.
- **Historical Growth Rate:** 1-4% CAGR (highly volatile year-to-year).
- **Key Growth Levers and Headwinds:** Driven entirely by market volatility (VIX) and trading volumes. Headwinds include intense price competition from off-exchange venues (dark pools) and retail broker internalisation.
- **Pricing Dynamics:** Highly competitive, transaction-based pricing. Nasdaq pays significant rebates to liquidity providers to attract order flow.
- **Revenue Recognition Notes:** Recognised on a trade-date basis.
- **Seasonality:** Q1 and Q4 are typically the strongest due to higher market volatility; Q3 is usually the weakest (summer slowdown).

## Cost Structure



### Variable Costs / COGS

- **Transaction-Based Expenses:** This is the most critical cost line. It includes liquidity rebates paid to market makers, brokerage, clearance, and exchange fees.
- **Gross Margin Range:** Nasdaq reports "Net Revenue" (Total Revenue less Transaction-Based Expenses). The "Net Revenue Margin" is effectively 100% for modeling purposes, as all other costs are treated as operating expenses. Transaction-based expenses consume roughly 35-40% of *Gross* Revenue.
- **Key Input Costs:** Server hosting, cloud infrastructure (AWS partnership), and bandwidth.
- **How COGS Scales:** Transaction rebates scale perfectly linearly with Market Services gross revenue.

### Operating Expenses

- **Compensation and Benefits:** The largest operating expense. Driven by headcount, wage inflation, and variable performance bonuses.
- **Professional and Contract Services:** Consulting, legal, and integration costs (elevated recently due to Adenza).
- **Computer Operations and Data Communications:** Cloud migration costs and legacy data centre maintenance.
- **Depreciation & Amortisation:** High (approx. 8-10% of Net Revenue) due to heavy amortisation of acquired intangible assets from Adenza and Verafin.
- **Restructuring / One-Time Charges:** Frequent in recent years due to the divisional realignment program and Adenza integration (completed late 2024).

### Margin Profile

- **Non-GAAP Operating Margin:** 51-54% (expanding as SaaS revenue mix increases).
- **EBITDA Margin:** 55-58%.
- **Margin Trend:** Expanding. The shift away from lower-margin Market Services toward high-margin Financial Technology and Index licensing is driving structural margin expansion.

## Balance Sheet Structure

- **Total Assets:** ~$25-28 billion.
- **Key Asset Categories:** Goodwill and Intangible Assets dominate the balance sheet.
- **Goodwill & Intangibles:** >70% of Total Assets, stemming from the $10.5B Adenza acquisition (2023) and $2.7B Verafin acquisition (2021).
- **Working Capital Profile:**
  - **DSO:** 45-55 days.
  - **DPO:** 20-30 days.
  - **Net Working Capital:** Often structurally negative or neutral when excluding regulatory assets/liabilities.
  - **Regulatory Assets/Liabilities:** Section 31 fees (collected from broker-dealers and owed to the SEC) gross up both current assets and current liabilities but have zero net cash impact.
- **PP&E:** Minimal (asset-light). Primarily leasehold improvements and data centre equipment.
- **Right-of-Use Assets:** Material but manageable (~$300-$400 million) related to global office leases.

## Capital Expenditure & Investment

- **Capex as % of Net Revenue:** 3-5%.
- **Maintenance vs. Growth Capex:** Heavily skewed toward growth (capitalised software development for new SaaS products and cloud migration).
- **Major Capex Programmes:** The multi-year migration of exchange matching engines to AWS infrastructure.
- **Capitalised Software:** Highly material. Nasdaq capitalises significant internal engineering costs, which flatters operating expenses and shifts cash outflows to investing activities.
- **M&A Pattern:** Transformational acquirer. Management has paused large M&A to focus on deleveraging post-Adenza, limiting near-term activity to small bolt-ons (<$200M).

## Debt & Capital Structure

- **Total Debt:** ~$9.0-$9.5 billion (down from peak post-Adenza).
- **Debt/EBITDA Ratio:** ~3.0x at year-end 2025 (down from >4.0x in early 2024). Target is <3.0x.
- **Credit Rating:** BBB+ (S&P, upgraded Aug 2025), Baa1 (Moody's, upgraded Mar 2025).
- **Key Debt Instruments:** Senior unsecured notes (various maturities), $1.25 billion revolving credit facility, and commercial paper program.
- **Maturity Profile:** Well-laddered. Next major maturity is $500 million in 2026, with the bulk maturing 2028 and beyond.
- **Interest Rate Profile:** Primarily fixed-rate bonds. Weighted average cost of debt is approximately 4.0-4.5%.
- **Covenants:** Maximum Debt-to-EBITDA covenant on the revolver (stepped down to 4.0x in Q3 2025).
- **Share Repurchase Programme:** Active but constrained by deleveraging targets. ~$616 million repurchased in 2025 (primarily to offset stock-based compensation dilution).
- **Dividend Policy:** Progressive dividend policy. Yield is typically 1.2-1.5%, with a payout ratio of roughly 30% of non-GAAP net income.

## Cash Flow Characteristics

- **Operating Cash Flow Conversion:** Very strong. OCF / Net Income typically >1.2x due to high non-cash D&A from acquisitions.
- **Free Cash Flow Margin:** 40-45% of Net Revenue.
- **Major Non-Cash Items:** Amortisation of acquired intangibles, depreciation, and stock-based compensation.
- **Working Capital Cash Flow Impact:** Minimal impact on long-term growth; short-term swings driven by timing of regulatory fee payments.
- **Cash Tax Rate:** Typically tracks closely to the GAAP effective tax rate (24-26%).

## Sheet Structure

1. **Assumptions:** Hardcoded drivers for ARR growth, trading volumes, pricing, margins, tax rates, and capital allocation.
2. **Revenue & ARR Build:** Detailed build of Gross Revenue, Transaction-Based Expenses, and Net Revenue by the three reporting segments (Capital Access Platforms, Financial Technology, Market Services). Includes an ARR roll-forward for the SaaS businesses.
3. **Income Statement:** Driven by Net Revenue. Breaks out Compensation, Professional Services, Computer Operations, D&A, and Restructuring. Calculates GAAP and Non-GAAP Operating Income.
4. **Balance Sheet:** Highlights Goodwill/Intangibles, Deferred Revenue, and Regulatory Assets/Liabilities (Section 31 fees).
5. **Cash Flow Statement:** Standard indirect method. Must clearly separate capitalised software development from standard PP&E capex.
6. **Debt & Interest Schedule:** Tranches of senior notes, commercial paper, and the revolver. Calculates interest expense and tracks the rapid deleveraging trajectory (Debt/EBITDA metric).
7. **DCF & Valuation:** Unlevered free cash flow build, WACC calculation, terminal value, and implied share price.

## Key Financial Relationships

1. `Net Revenue = Gross Revenue - Transaction-Based Expenses` (All margin calculations MUST be based on Net Revenue, not Gross Revenue).
2. `Financial Technology ARR = Prior Period ARR * (1 + Net Retention Rate) + New Logo ARR`.
3. `Financial Technology Revenue = (Beginning ARR + Ending ARR) / 2 * SaaS Conversion Factor + Non-Recurring Implementation Fees`.
4. `Index Revenue = Average AUM in Nasdaq-linked ETPs * Average Basis Point Fee`.
5. `Market Services Gross Revenue = Total US Equity Market Volume * Nasdaq Matched Market Share * Average Capture Rate per Share`.
6. `Transaction-Based Expenses = Market Services Gross Revenue * Historical Rebate Payout Ratio (~60-65%)`.
7. `Capitalised Software Development = Total R&D / Engineering Spend * Capitalisation Rate (~30-40%)`.
8. `Non-GAAP Operating Income = GAAP Operating Income + Amortisation of Acquired Intangibles + Restructuring Charges + M&A Integration Costs`.
9. `Gross Leverage Ratio = Total Debt / LTM Non-GAAP EBITDA`.
10. `Shares Outstanding = Prior Shares - (Share Repurchases / Average Share Price) + Stock-Based Compensation Dilution`.

## Cross-Sheet Dependencies

- **Revenue & ARR Build** feeds the top line of the **Income Statement**.
- **Income Statement** (Net Income, D&A) feeds the top of the **Cash Flow Statement**.
- **Cash Flow Statement** (Free Cash Flow after Dividends) feeds the **Debt & Interest Schedule** to determine discretionary debt paydown.
- **Debt & Interest Schedule** feeds Interest Expense back to the **Income Statement** (creating a circular reference that must be managed with a toggle) and ending debt balances to the **Balance Sheet**.
- **Balance Sheet** Deferred Revenue balances are driven by the SaaS bookings in the **Revenue & ARR Build**.

## Sign Convention

- **Income Statement:** Revenues are positive. Expenses are positive numbers (subtracted in subtotal formulas).
- **Balance Sheet:** Assets are positive. Liabilities and Equity are positive.
- **Cash Flow Statement:** Cash inflows are positive. Cash outflows (capex, dividends, debt paydown) are negative.
- **Debt Schedule:** Debt balances are positive. Debt issuances are positive. Debt repayments are negative.

## Things Most Likely to Go Wrong

- **Gross vs. Net Revenue Confusion:** The builder will calculate operating margins based on Gross Revenue. Nasdaq's margins are always evaluated on *Net Revenue* (excluding transaction-based expenses).
- **Ignoring Capitalised Software:** Failing to model capitalised software will overstate operating expenses and understate capex, distorting EBITDA and OCF.
- **Pro-Forma vs. Organic Growth:** The Adenza acquisition closed in Nov 2023. YoY growth rates for 2024 are heavily distorted by this. The model must use organic growth rates for forecasting Financial Technology.
- **Section 31 Fees:** These regulatory fees gross up both revenues and expenses equally. They have zero impact on operating income but can distort top-line growth if not isolated.
- **Amortisation Add-Backs:** Nasdaq's GAAP earnings are heavily depressed by the amortisation of Adenza and Verafin intangibles. Valuation multiples must be based on Non-GAAP EPS, which adds these back.
- **Deferred Revenue Disconnect:** As Financial Technology shifts to SaaS, cash collection outpaces revenue recognition. The model must capture the positive working capital benefit of growing deferred revenue.
- **Share Count Dilution:** Nasdaq issues significant equity for compensation. If the model assumes all share buybacks reduce the share count without accounting for this dilution, EPS will be overstated.

## Validation Checks

- "Net Revenue Operating Margin should be in the 51-54% range; flag if outside this band."
- "Gross Leverage (Debt/EBITDA) must drop to ~3.0x by year-end 2025; flag if deleveraging stalls."
- "Financial Technology ARR growth should remain between 10-14% based on management guidance."
- "Capex (including capitalised software) as a % of Net Revenue should be 3-5%."
- "Free Cash Flow conversion (FCF / Non-GAAP Net Income) should be approximately 85-95%."
- "Balance sheet must balance: Total Assets = Total Liabilities + Equity in every period."
- "Dividend payout ratio should remain within 28-32% of Non-GAAP Net Income."

## Key Assumptions (Default Values)

| Assumption | Default Value | Unit | Rationale |
|---|---|---|---|
| Capital Access Platforms Rev Growth | 6.5 | % | Mid-point of historical organic growth and management targets |
| Financial Technology ARR Growth | 12.0 | % | Reflects strong demand for Verafin and Adenza cross-selling |
| Market Services Net Rev Growth | 2.0 | % | Assumes normalized volatility; structurally lower growth segment |
| Transaction-Based Expense Ratio | 62.0 | % | Historical average of rebates paid vs Market Services Gross Rev |
| Non-GAAP Operating Margin | 53.5 | % | Reflects cost synergies from Adenza and shift to high-margin SaaS |
| Effective Tax Rate | 25.5 | % | Mid-point of management's 24.5-26.5% guidance range |
| Capex as % of Net Revenue | 4.0 | % | Historical average, heavily weighted to capitalised software |
| Cost of Debt (Interest Rate) | 4.25 | % | Weighted average rate on existing senior unsecured notes |
| Share Repurchases (Annual) | 600 | $M | Matches 2025 actuals; offsets dilution while prioritizing debt paydown |
| Dividend Payout Ratio | 30.0 | % | Consistent with management's progressive dividend policy |
| Target Debt / EBITDA | 3.0 | x | Management's stated deleveraging target for year-end 2025 |
| WACC | 8.5 | % | Standard cost of capital for diversified financial infrastructure |
| Terminal Growth Rate | 2.5 | % | Reflects GDP+ growth due to sticky financial technology infrastructure |

## Data Sources & Benchmarks

- **Filings:** SEC EDGAR (Nasdaq, Inc. 10-K, 10-Q, 8-K).
- **Presentations:** Nasdaq Investor Relations (Quarterly Earnings Presentations, 2024 Investor Day materials).
- **Peers for Benchmarking:** Intercontinental Exchange (ICE), CME Group (CME), S&P Global (SPGI), MSCI Inc. (MSCI), London Stock Exchange Group (LSEG).
- **Industry Data:** CBOE VIX index (for volatility forecasting), ETF fund flows (for Index revenue forecasting).
- **Consensus Estimates:** FactSet or Bloomberg for forward NTM P/E and EV/EBITDA multiples.

## Sources

- Nasdaq Q4 2025 Earnings Press Release and Presentation (January 29, 2026)
- S&P Global Ratings Research Update: Nasdaq Inc. Upgraded to 'BBB+' (August 12, 2025)
- Moody's Ratings Upgrade: Nasdaq to Baa1 (March 31, 2025)
- Nasdaq 2024 Form 10-K and Q4 2024 Earnings Release

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## Frequently asked questions

### How has Nasdaq's business model evolved beyond its traditional exchange role?

Nasdaq has transformed from primarily an equities exchange into a diversified data, analytics, and software provider. It now operates through segments like Capital Access Platforms, Financial Technology, and Market Services, increasingly focusing on a subscription-based Software-as-a-Service (SaaS) model.

### What are the primary revenue drivers for Nasdaq, Inc.?

Nasdaq's revenue is driven by its diversified segments, including data and insights, index licensing, corporate listings, and financial technology solutions like financial crime management and capital markets technology. The company is rapidly shifting towards recurring SaaS revenue streams, which are key to its growth.

### What is Nasdaq's capital expenditure strategy, and how does it impact its financial model?

Nasdaq's capital expenditure, typically 3-5% of net revenue, is heavily skewed towards growth, particularly capitalized software development for new SaaS products and cloud migration. This strategy shifts significant internal engineering costs from operating expenses to investing activities, impacting cash flow presentation.

### What is a key revenue growth assumption used in the Nasdaq financial model?

A key revenue growth assumption in the Nasdaq financial model for the forecast horizon is approximately 9.24%. This reflects the company's transition towards highly recurring SaaS revenue and its strategic acquisitions, such as Adenza.

### Why are Goodwill and Intangible Assets so significant on Nasdaq's balance sheet?

Goodwill and Intangible Assets represent over 70% of Nasdaq's total assets, primarily due to large acquisitions like the $10.5 billion Adenza acquisition in 2023 and the $2.7 billion Verafin acquisition in 2021. These assets are crucial for understanding the company's valuation and credit profile.

### Can I download an Excel financial model for Nasdaq, Inc. (NDAQ)?

Yes, an Excel financial model for Nasdaq, Inc. (NDAQ) is available for download. This model provides a comprehensive equity valuation and credit analysis, specifically designed to evaluate the company's transition to SaaS revenue and its deleveraging post-Adenza acquisition.

[Interactive forecast calculator](https://finamodel.com/companies/nasdaq/forecast)