NDAQ · Nasdaq, Inc.

Nasdaq's Q1 2026 results demonstrated resilient revenue growth and significant margin expansion, underpinned by strategic data center investments and diversified revenue streams. Total revenue reached $2.1 billion, up 2% from $2.1 billion in the prior year quarter. This modest increase reflects higher revenues from data center growth, including a change in pricing structure that enhanced margins, alongside higher Calypso upfront license revenues, increased subscription revenues across the business, and certain one-time fees. These gains were partially offset by lower professional services revenues, highlighting the company's shift toward higher-margin, recurring revenue models.

Gross profit expanded sharply to $1.4 billion, a 14% increase from $1.2 billion, lifting the gross margin to 65.8% from the prior period. This improvement stems from the favorable revenue mix, with data center pricing adjustments and subscription growth contributing to better profitability. Operating income followed suit, rising 20% to $657 million on a 30.7% operating margin—up from $547 million last year. Expense discipline amid colocation data center expansion, which drove higher occupancy costs, enabled this operational leverage, positioning Nasdaq to capture demand in high-growth areas like connectivity and cloud services.

Bottom-line performance accelerated meaningfully, with net income climbing 31% to $519 million and diluted EPS advancing 34% to $0.91 from $0.68. The increase in net income directly supported stronger operating cash flow of $689 million, up from $663 million, primarily driven by higher earnings despite changes in working capital and reduced adjustments related to prior divestitures. After $60 million in capital expenditures—directed toward growth infrastructure—free cash flow totaled $629 million. This robust cash generation aligns with management's prudent capital deployment strategy, balancing internal investments in technology and data centers, debt repayments, shareholder returns via dividends and repurchases, and potential acquisitions.

Operationally, colocation data center expansion underscores Nasdaq's focus on infrastructure to support client demand, while revenues remain classified by customer location to reflect global reach. The company continues to navigate regulatory capital dynamics, with shifts toward longer-term investments, and maintains compliance with financial covenants in its 2022 Revolving Credit Facility. Looking ahead, factors like revenue stability across segments, working capital needs, and expense control will influence internally generated funds, reinforcing Nasdaq's capacity to execute on growth initiatives amid evolving market conditions.