Adena T. Friedman
Chair and Chief Executive Officer at Nasdaq
Thank you, Ato, and good morning, everyone. Thank you for joining us. On the call this morning, I'll provide some perspective on the external environment, discuss our quarterly performance and review our progress against our strategic priorities. I will then hand the call over to Sarah to walk through the financial results in more detail.
Beginning with the macroeconomic environment, internationally, major central banks have pivoted to lowering rates over the past several months to combat slowing economic growth. Notably, the European Central Bank has cut rates three times this year, which, coupled with a solid labor market, has helped the European economy stabilize in recent months. The U.S. continues to show overall strength supported by the Fed's September rate cut and more recent services and labor data.
Looking ahead, while the global macro-environment remains fluid, which could lead to a range of potential outcomes, the U.S. is currently trending toward a soft landing, with additional rate cuts expected in the coming quarters. The current positive economic trends and outlook provide a constructive potential for sustained trading activity across our markets as well as a rebound in the global IPO environment in 2025. And as financial institutions continue to operate in a dynamic environment, we see consistent demand for our mission-critical technologies. Against this economic backdrop, Nasdaq remains well-positioned to deliver sustainable and durable growth across our diversified platforms.
Now, let me turn to our financial results. We delivered a strong quarter with 10% year-over-year growth in both net revenues and Solutions revenue, marking our fourth consecutive quarter of double-digit Solutions growth. Total annualized recurring revenue, or ARR, grew 8% to $2.7 billion. Expenses increased 5% in the quarter, reflecting investment in the business, partially offset by synergy achievement, while our operating margin increased to 54%. We continue to make progress on the successful integration of AxiomSL and Calypso, which has enabled us to action over 80% of our net expense synergies target and our strong key -- free cash flow generation has allowed us to continue to delever, resulting in a 3.8 times leverage ratio in the quarter.
Turning now to our business highlights, starting with Capital Access Platforms. The division delivered 2% ARR growth and 9% revenue growth, fueled by another quarter of strong Index performance. Beginning with Data and Listings, we continued to see modest growth in data revenue, offset by a decline in listings revenue due to lower listings activity and prior year delistings. In the quarter, we experienced a modest uptick in listings activity in the U.S. We welcomed 33 operating companies, contributing to a 75% win rate year-to-date through September of Nasdaq eligible operating company listings.
Additionally, we have listed five of the top 10 largest IPOs in the first three quarters of the year, including the year's largest listing to date, Lineage. We also celebrated a major milestone as we recorded our 500th listing switch to Nasdaq from our primary listing competitor, cumulatively representing approximately $3 trillion of market value. This year alone, we've attracted 16 switches, including prominent government technology contractor, SAIC, and legendary food manufacturer, Campbell, reinforcing Nasdaq's role as the premier venue for listings in the U.S. In data, we benefited from new enterprise license sales, higher demand from heightened market activity and continued strength in international markets.
Across Workflow and Insights, we drove moderate growth with strength in Analytics offset by Corporate Solutions. In Corporate Solutions, the broader operating environment, including sales cycles, has not materially changed. We remain focused on client retention and product enhancements to ensure Nasdaq is well-positioned when the IPO flywheel resumes as evidenced by the previously announced introduction of new AI features across our suite of solutions.
Within Analytics, we've seen increased activity and demand for our data and workflow solutions, with the asset owner and asset manager communities. Asset owners are using more manager research products and new tools, such as the recently launched Peer Benchmarking solution, while asset managers continue to seek unique insights through our data and services.
And finally, our Index business delivered another exceptional quarter of growth, with $62 billion in net inflows in the trailing 12-month period, including $14 billion in the third quarter, resulting in $575 billion in average AUM in the quarter. This reflects the broad strength of our Index franchise, while we continue to drive innovation and expansion with 35 new product launches this quarter.
Turning next to Financial Technology. ARR across -- growth across the division was 14%, including 24% in Financial Crime Management Technology, 15% in the combined AxiomSL and Calypso solutions and 11% in combined Market Technology and Trade Management Services. Overall, we signed 39 new clients, 110 upsells and two cross-sells.
Moving to the specific sub-divisions. We're proud that Financial Crime Management Technology debuted as the number one provider for managed services and financial crime on Chartis Research's industry rankings, representing a strong recognition of our leadership across the financial crime management industry. From an operational standpoint, we've seen strong client adoption in our integrated GenAI Entity Research Copilot roll-out, which now is in the hands of over 2,000 U.S. institutions. We signed 28 new small-medium bank clients for a total of 109 new small-to-medium bank or SMB clients year-to-date. We continue to maintain a robust pipeline of SMB sales opportunities with a particular emphasis on targeting larger clients in the segment. During the quarter, we also signed one international Tier 1 client to our Wire Fraud solution as previously announced. We are making solid progress on our push for Tier 1 and Tier 2 clients and continue to have a growing pipeline in this key cohort.
Moving to Regulatory Technology. AxiomSL was ranked number one by Chartis in regulatory reporting for markets and securities, in part, due to our extensive coverage across jurisdictions as well as our expertise in adapting to complex regulatory environments. During the quarter, we maintained momentum across AxiomSL and Surveillance with seven new clients and 70 upsells. AxiomSL delivered two significant upsells as it signed its first local banks in India and in the Philippines that can serve as reference clients as we build new relationships in these geographies. Surveillance delivered strong ACV bookings in the quarter, with growth across exchanges and market participants. And we continue to advance our Nasdaq Trade Surveillance cloud transition, as 64% of clients are now cloud deployed and 11 percentage point increase since the beginning of this year.
We also continue to see sustained momentum in Capital Markets Technology, with a total of four new clients, 40 upsells and one cross-sell. This was a strong quarter across our market structure provider client segment, as Calypso signed its 20th central bank client and Market Technology signed one new cross-sell and 13 upsells. More broadly, as financial institutions continue to expand coverage across the assets and geographies in which they trade, we see constructive environment for continued growth across our solutions.
The Financial Technology division has a strong global presence. And this quarter, I would like to highlight our progress in Latin America. We continued to increase our footprint in the region through an enhanced partnership with Nubank, which is now using AxiomSL to support its regulatory reporting responsibilities in Colombia. We also signed a significant expansion of our technology partnership with Argentina's leading stock exchange group, BYMA, which is an existing CSD client, and we signed them to modernize its clearing technology through a cloud delivered -- through a cloud delivery of our next-generation clearing solution.
Across Latin America, Nasdaq serves 10 marketplaces as well as roughly 50 banking and payment services clients, comprising a broad range of digital and traditional banks, local and regional players as well as Tier 1 global banks. We're experiencing strong new client growth and over half of our Latin American clients have adopted -- that have adopted AxiomSL and Calypso have sought to expand their partnership with us in the last 12 months. Across the exchanges in the region, clients are seeking to modernize critical infrastructure to serve the evolving needs of global market participants as well as their domestic clients, many of which are digitizing their own operations. Latin America is just one of the many regional economies where we're helping financial institutions better navigate regulatory complexity and the modernization of market infrastructure, and we look forward to our continued international expansion.
Turning to Market Services, where we're generating alpha in a higher beta environment, Nasdaq delivered a record third quarter with 13% revenue growth. The growth was driven by higher volumes across U.S. and European cash equities as well as record revenue for U.S. multi-listed options and proprietary index options. In U.S. equity derivatives, our multi-listed options market share continues to increase over the course of the year. Additionally, U.S. index options continued its high growth, delivering another record quarter with revenue doubling year-over-year.
Turning to U.S. cash equities, Nasdaq's overall equity market share was stable and on-exchange market share increased, while capture remained healthy. And wrapping up with European cash equities, our market share remained steady as members increasingly favor quality and retail participation increased.
I now want to provide an update on our strategic priorities of Integrate, Innovate and Accelerate. Starting with Integrate. As we near the one-year anniversary of the completion of the Adenza acquisition, I'm extremely pleased with our progress to date. The integration continues seamlessly and we're delivering ahead of plan on net expense synergies and deleveraging. Operationally, our teams are unified and delivering for our clients as One Nasdaq. As a testament of the combined benefits of Nasdaq and Adenza for our clients, Nasdaq was recently ranked five in -- number five in Chartis' 2025 RiskTech100. This is an early validation of the thesis underpinning the acquisition as Adenza and Nasdaq placed 10 and 18th, respectively last year. Nasdaq is in the early innings of unleashing the power of our Financial Technology division, and we look forward to building on this momentum.
We continue to make strong progress advancing our Innovate priority. We reached a major milestone during the quarter with the completion of the rollout of AI copilot tools to 100% of our developers. We also launched an internal GenAI platform that features custom-built skills, designed to enhance productivity and efficiency. In less than two months, we've deployed roughly 400 unique skills with nearly 50% of our employees engaging with the platform. Nasdaq also launched new AI-enabled products, headlined by the expansion of Nasdaq Verafin's Targeted Topology Analytics, which provides new detection capabilities for tariff financing and drug trafficking activity. Following an extensive beta program, the tariff financing analytic is expected to be released later this year.
Earlier this month, Calypso also announced a new methodology to conduct investment portfolio risk calculations and produce predictive analytics using an AI-based machine learning capability. This technology allows financial institutions to improve the efficiency of conducting the most complex trading and regulatory risk calculations, with up to 100 times faster processing speeds.
Beyond AI, we continue to innovate by expanding our suite of new products and capabilities. This is particularly evident in our Index franchise, which is a true innovation engine within Nasdaq and was recently recognized as the Best Index Provider by Structured Retail Products. Partnering with our clients, we brought 35 new investment products to market, including seven insurance annuity vehicles, aligned with our growth -- with our focus on international adoption, and eight options overlay products, where we see strong sustained interest from investors.
We also remain focused on international expansion, with 57% of new products launched outside the United States. In Market Services, we successfully migrated Nasdaq ISE to our next-generation derivatives platform called Fusion. Today, four of our six U.S. options markets are now running on Fusion, resulting in lower latency, higher throughput and overall increased productivity.
And concluding with our Accelerate priority, we continue to make progress on our One Nasdaq strategy, driving two cross-sells across the Financial Technology division in the quarter. The percentage of cross-sell opportunities in Financial Technology's pipeline is now above 10%, driven by strong client engagement in the cross-sell campaigns launched to date. The pipeline spans across regions, client segments and product lines and we expect to build on this in the coming quarters. We will launch additional cross-sell campaigns in the fourth quarter and remain on-track to exceed $100 million in cross-sells by the end of 2027.
To wrap up, the power of Nasdaq's diversified business model enabled us to deliver another strong quarter, headlined by our fourth consecutive quarter of double-digit Solutions growth. As we continue to execute against our strategic priorities and deliver on the Adenza acquisition thesis, Nasdaq has become a trusted partner to the world's financial system, poised to solve our clients' most complex challenges. We look forward to capitalizing on this momentum to deliver sustained profitable growth to our shareholders.
And with that, I will now turn the call over to Sarah to review the financial details.
