Nasdaq, best known as the stock exchange where many of the world's biggest tech companies list, is increasingly being judged on something else: its software business. And according to a new note from Morgan Stanley, that business is firing on all cylinders.
The investment bank highlighted that Nasdaq's "Solutions" segment—which includes its market technology, data, and financial technology (fintech) offerings—is gaining momentum. Morgan Stanley pointed to 18% annual recurring revenue (ARR) growth in the fintech unit during the third quarter, along with early signs that agentic AI is starting to convert into paid contracts. ARR is a key metric for subscription-based businesses, measuring the annualized value of recurring revenue from existing customers.
Cloud migrations are the growth engine
A major driver of this growth is the shift to the cloud. Morgan Stanley noted that cloud now represents 85% of new annual contract value (ACV) bookings. ACV is the total value of a contract divided by its length, giving a snapshot of how much new business is being signed.
Moving clients to the cloud is more than just a technology upgrade—it's a revenue opportunity. When a customer migrates from an on-premise system to Nasdaq's cloud-based platform, the contract typically expands, meaning the customer pays more even before they add any new products. This "land and expand" dynamic is a familiar pattern in the software industry, and it's a big reason why investors often reward companies that successfully push cloud adoption.
The fintech unit's 18% ARR growth is particularly notable because it suggests the business is behaving less like a traditional exchange operator—where revenue can be cyclical and tied to trading volumes—and more like a predictable software subscription company. That distinction matters for how investors value the stock.
Agentic AI: the next catalyst?
Morgan Stanley also flagged early signs that agentic AI—a term for AI systems that can autonomously perform tasks and make decisions—is starting to generate paid contracts. While still in its infancy, this could be a meaningful new revenue stream for Nasdaq's fintech arm.
For context, the broader market has been watching how AI monetization plays out across the tech sector. Some companies have seen AI-driven demand boost their results, while others have faced pricing pressure. Nasdaq's early traction with agentic AI suggests it may be on the right side of that trend, though it's too soon to say how big the opportunity will be.
The note from Morgan Stanley comes at a time when investors are paying close attention to how technology companies are capitalizing on AI. For example, Infosys trimmed its growth outlook recently, citing AI pricing pressure in North America—a reminder that not every AI story is a win. But Nasdaq's position as a critical market infrastructure provider may give it more pricing power than a typical software vendor.
What it means for investors
For everyday investors, the key takeaway is that Nasdaq is no longer just a stock exchange. Its Solutions segment is becoming a larger and more profitable part of the business, and the shift to cloud-based, recurring revenue could support a higher valuation multiple.
Morgan Stanley's analysis suggests that if the fintech unit continues to grow at this pace, the market may start to value Nasdaq more like a software company than a traditional exchange. That could be good news for shareholders, as software companies typically trade at higher price-to-earnings ratios than exchanges.
However, it's important to keep expectations in check. ARR growth of 18% is strong, but it's not the 30%+ growth seen at some pure-play software firms. And while cloud migrations are a tailwind, they can also create short-term disruption as customers transition. Investors should also watch how the agentic AI opportunity develops—early signs are positive, but it's still a nascent market.
Nasdaq's fintech momentum is part of a broader trend of exchanges diversifying into data and technology. Rivals like the London Stock Exchange Group (LSEG) are pursuing similar strategies, and RBC sees upside in LSEG on the back of 2026 growth and 2027 buyback potential. This suggests that the market is rewarding companies that can build sticky, high-margin software businesses on top of their core exchange operations.
For now, Nasdaq's fintech engine appears to be running hot, and Morgan Stanley thinks the market hasn't fully priced it in. Whether that leads to a re-rating depends on sustained execution—and on whether the broader economic environment cooperates. With US business growth cooling and price pressures persisting, the path for growth stocks may be bumpy. But for a company with a strong recurring revenue base, the outlook remains solid.
As always, investors should consider how this fits into their own portfolio and risk tolerance. Nasdaq's story is a reminder that sometimes the most interesting opportunities come from companies that are evolving beyond their traditional roots.
