Nasdaq Inc. (NDAQ) is well known for not just being the operator of one of the largest stock exchanges in the world, but also for the sheer amount of data and analytics (along with other similar services) it offers to customers. The company was founded in 1971 as one of the first electronic stock exchanges, primarily dealing in OTC markets, but soon grew to become the official stock exchange it is today – with a focus primarily on the technology and biotech sectors. The Nasdaq business has three different business segments: Market Platforms, Capital Access Platforms, and Anti-Financial Crime, all of which were created in 2022 as part of a larger restructuring in the business and its products.
The Market Platforms business segment covers the Trading Services and Marketplace Technology products that Nasdaq offers, which essentially deal with the various exchanges that the Nasdaq corporation owns and manages. As of December 31, 2022, a total of 4,230 companies listed securities on The Nasdaq Stock Market. The Capital Access Platforms segment covers most of the data services that the Nasdaq corporation offers, whereas the Anti-Financial Crime segment operates various financial services that seek to preserve the integrity of the financial world.
What drew our attention to the company this week was the generally attractive profit margins that many stock exchange operators and financial data services like the Nasdaq enjoy. The business’s gross margin is a fairly strong 59.54%, and the company manages to squeeze out an 18.07% net margin from that number. Growth for the company has been moderating. For 2022 the company managed to grow revenue by 5.8% to $6.23 billion, which after transaction rebates and other transaction-based expenses, led to a total revenue of $3.58 billion for the year.
As for more recent quarterly results (Q2 2023), Nasdaq saw total revenue of $1.43 billion, which represented a decrease of 7.7% when compared to Q2 2022. However, after all transaction-based expenses were applied, revenue for the quarter sat at around $925 million, which was a 3.6% increase QoQ. However, operating expenses increased by 12.9%, leading to net income of $267 million, which represented a 13% decrease when compared to Q2 2022.
This week’s insider purchase came from Nasdaq’s Chair and CEO, Adena T. Friedman, who after being named CEO in January 2017, became the first woman to lead a global stock exchange. Ms. Friedman had originally joined the company in 1993, and later joined The Carlyle Group, serving as the CFO from 2011 to 2014.