Nasdaq, Inc. (NASDAQ:NDAQ) is attracting more money into investment products tracking its indexes. Year-over-year index revenue growth accelerated from 14% in the first quarter to 38% in the second quarter of 2026. That strengthens the investment case, but asset-based licensing fees rise with markets as well as customer inflows. The question is how much growth survives when appreciation slows.
Nasdaq, Inc. trades at approximately 24x forward earnings, compared with 28x trailing earnings. Analysts expect 2026 adjusted EPS growth of approximately 19%, supported by stronger index and financial-technology revenue. Reported earnings also include acquired-intangible amortization, totaling $243 million in the first half. The stronger earnings outlook supports a lower forward multiple; acquisition accounting also separates reported profit from adjusted forecasts.
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Forward multiples are 18x for Intercontinental Exchange, Inc. (NYSE:ICE) and 22x for CME Group Inc. (NASDAQ:CME), with analysts expecting approximately 17% and 9.5% adjusted EPS growth in 2026, respectively. The first is the closer diversified exchange-and-data comparison, although mortgage technology adds different cyclicality; the second depends more on derivatives trading. The valuation looks provisionally reasonable, but the premium needs durable earnings and cash that reaches shareholders after investment.
New Money Matters More Than Rising Asset Values
Nasdaq, Inc. has evidence of broader adoption: licensed exchange-traded products increased to 481 from 422 a year earlier. Recognizable benchmarks and distribution through fund providers help attract investors without requiring a matching increase in physical capital. Still, a valuable brand needs repeat demand to produce lasting returns. Fund providers can promote competing benchmarks, and investors can move their money.
For Nasdaq, Inc., second-quarter net inflows reached $51 billion. Over the preceding twelve months, inflows contributed $109 billion to assets, while market appreciation contributed $260 billion. Appreciation was therefore the larger driver of the increase to $1.114 trillion in period-end assets. Persistent inflows could sustain fees in a flat market, but would have to offset asset losses in a falling one.
Nasdaq, Inc. also received a $6 million one-time contract benefit. Excluding it, index revenue grew 35%, still strong but below the reported headline. Management’s medium-term index growth outlook is high single digits to mid-teens, assuming stable markets. That is a more useful reference for sustainable growth than extending the latest quarter indefinitely. Lower asset values would reduce fee revenue while index maintenance and distribution spending continued.
Software Supports Earnings, but Cash Sets the Limit
Nasdaq, Inc. has another source of resilience. Annualized recurring revenue, or ARR, reached $3.258 billion, up 11%, while Financial Technology ARR grew 16%. This measure annualizes eligible recurring contracts and excludes variable asset-based fees. It is not annual reported revenue. Regulatory complexity and market modernization support demand for compliance and trading software. Replacing embedded systems can disrupt customer operations, supporting renewals, although continued development spending is necessary to preserve that advantage.
Nasdaq, Inc. expects non-GAAP operating expenses of $2.53 billion–$2.57 billion for 2026. First-half operating cash flow was approximately flat at $1.4 billion despite earnings growth. Company-defined non-GAAP free cash flow was $1.106 billion after capital expenditure and adjustments for net regulatory-fee cash movements. Gross debt remained $8.761 billion. These figures show why recurring earnings still need disciplined financing and capital allocation: slower fees would reduce the cash available for investment, debt repayment and distributions.
The published forward-P/E series for Nasdaq, Inc. shows 26x at December 2025 and 22x at June 2026, compared with the current 24x. Stronger operating performance and progress in reducing leverage support a higher valuation than the June observation. The discount to December does not establish a bargain, because current forecasts already include substantial profit growth.
Accounting also limits what historical reported earnings reveal. Investment gains boosted earnings at Intercontinental Exchange, Inc., while acquisition amortization reduced earnings at both businesses. A modest difference in expected EPS growth alone does not justify the full premium. Sustained software growth, positive index flows and better cash conversion must supply the remaining support.
Conclusion
Nasdaq, Inc. looks provisionally reasonable at its forward valuation. Index adoption and software demand support continued earnings growth, but market appreciation supplied much of the recent asset expansion. Persistent inflows through weaker markets, recurring growth that outpaces expenses, and cash generation sufficient to reduce debt would strengthen the case. Falling assets alongside slowing software growth would make the same multiple demanding.
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This article is originally published at Insider Monkey.
