Nasdaq’s Profit Decline Signals Caution for IPOs Amid Uncertain Economy

Nasdaq Inc. reported a decline in profit for the first time in over a year, signaling caution among companies waiting for the economy to stabilize before going public. Earnings fell to 63 cents a share from 69 cents a year ago, missing analysts’ expectations of 65 cents. Revenue from Nasdaq’s data and listing segment, which includes its trading exchanges, remained flat compared to the same period last year and also fell short of projections.

Only 27 companies went public on the exchange in the first quarter of this year, down from 40 in the same period last year. The earnings statement did not include any commentary on IPOs for the first time since the third quarter of 2022. Nasdaq highlighted its pivot to more predictable revenue streams instead of focusing on its traditional “listings leadership” in the US.

Despite challenging market conditions, Nasdaq saw 5% growth in annualized recurring revenue excluding recent acquisitions, driven by a 12% increase in financial crime and regulatory products. The company also raised its full-year operating expense guidance to account for increased technology investments.

The hesitation among companies to go public is likely due to ongoing global conflicts such as wars in Ukraine and Israel, as well as uncertainty about when the Federal Reserve will cut interest rates. The US economy experienced a slowdown in the first quarter due to cooling consumer and government spending and rising inflation. These factors seem to outweigh recent successful IPOs like Reddit, which has seen a 25% increase since its debut in March.

Nasdaq’s shares dropped about 1% in early trading in New York despite being up nearly 6% for the year as of Wednesday’s closing price. Trading volume on Nasdaq’s exchanges remained flat year-on-year for the second consecutive quarter.