Cboe Global Markets, Inc. (CBOE) Q4 2025 Earnings Call Transcript
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Overview
The earnings call highlights strong financial performance, with increased revenue growth guidance and reduced expenses, indicating financial health. New product launches and strategic realignment further bolster growth prospects. The Q&A section reassures analysts on growth strategies and market expansion, with positive sentiment towards retail and international market engagement. Although some specifics were avoided, the overall tone remains optimistic, especially with the dividend increase and share repurchase plans. The market is likely to react positively, with a stock price increase expected in the 2% to 8% range.
Key Financial Performance
Net Revenue (Q4) $671 million, up 28% year-over-year. Growth driven by double-digit increases in all segments, particularly derivatives.
Adjusted Diluted EPS (Q4) $3.06, up 46% year-over-year. Growth attributed to strong revenue performance and disciplined expense management.
Net Revenue (Full Year) $2.4 billion, up 17% year-over-year. Growth supported by strong performance across core businesses.
Adjusted Diluted EPS (Full Year) $10.67, up 24% year-over-year. Growth driven by robust revenue and operational efficiency.
Derivatives Net Revenue (Q4) Up 38% year-over-year. Growth driven by strong volumes in multi-list and proprietary index options.
Cash and Spot Markets Net Revenue (Q4) Up 27% year-over-year. Growth driven by strong equity volumes in Europe, North America, and global FX.
Data Vantage Net Revenue (Q4) Up 9% year-over-year. Growth driven by new unit sales and strong demand for market data and access.
Options Segment Net Revenue (Q4) Up 34% year-over-year. Growth driven by a 40% increase in net transaction and clearing fees.
North American Equities Net Revenue (Q4) Up 17% year-over-year. Growth driven by strong industry volumes and increased market data and access fees.
Europe and APAC Net Revenue (Q4) Up 24% year-over-year. Growth driven by a 33% increase in net transaction and clearing fees and 15% increase in non-transaction revenues.
Futures Net Revenue (Q4) Up 12% year-over-year. Growth driven by a 16% increase in total ADV due to resurgence in VIX activity.
Global FX Net Revenue (Q4) Up 22% year-over-year. Growth driven by a 17% increase in average daily notional value and 8% increase in net capture.
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Operating Highlights
Launch of Monday and Wednesday expirations for select multi-list names: This innovation expands the toolkit available to investors and complements the index options franchise by elevating awareness of the utility of 0DTE strategies.
Expansion of Russell 2000 Index options to global trading hour session: This allows investors to trade small-cap stocks around the clock, capitalizing on strong demand from international investors.
Newer product offerings in Data Vantage: Includes dedicated cores, time stamping services, and 1-minute open-close data, contributing to revenue growth.
Growth in international trading demand: Total volume in global trading hour sessions increased by 34% last quarter, driven by international investors accessing U.S. markets.
Expansion in Europe and Asia Pacific: Net revenue in these regions grew 24% year-over-year, supported by strong industry volumes and improved net capture dynamics.
Record net revenue and adjusted earnings: Net revenue grew 28% year-over-year to $671 million in Q4, with adjusted diluted EPS up 46% to $3.06.
Operational efficiencies in securities financing transactions: Cboe Clear Europe introduced central clearing to the securities lending market, achieving notional outstanding loan values exceeding EUR 1 billion.
Strategic realignment and divestitures: Sales processes initiated for Cboe Australia and Cboe Canada businesses, and closure of Cboe Europe Derivatives Exchange (CEDX) due to unmet revenue targets.
Leadership transitions: New appointments include Heidi Fischer as head of Cash and Spot Markets and Scott Johnston as COO, strengthening management capabilities.
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Risk or Challenges
Single Stock 0DTE Trading Risks: The company is focused on educating market participants about the unique risks associated with single stock 0DTE (zero days to expiration) trading. This indicates potential challenges in managing and mitigating risks tied to this trading strategy.
Geopolitical Tensions and Economic Uncertainty: Rising geopolitical tensions and increasing economic uncertainty are highlighted as factors that could impact the company's operations, though they are also seen as potential tailwinds for certain products.
Concentration Risk in U.S. Equity Markets: Concerns over concentration risk in U.S. equity markets are noted, which could affect investor behavior and market dynamics.
Strategic Realignment Challenges: The company is undergoing strategic realignment, including the sale of Cboe Australia and Cboe Canada businesses, ceasing operations in certain areas, and winding down the Cboe Europe Derivatives Exchange (CEDX). These actions could pose operational and financial challenges during the transition.
Retail Investing Landscape in Europe: The decision to wind down CEDX was influenced by the retail investing landscape and market structure in Europe, which did not meet targeted revenue and profitability metrics.
Inflation and Expense Management: The company anticipates modest inflation in core expenses, which could impact operating margins and financial performance.
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Guidance & Outlook
2026 Financial Outlook: Cboe anticipates Data Vantage organic net revenue growth to be in the mid- to high single-digit range and total organic net revenue growth to be in the mid-single-digit range. Adjusted operating expenses are expected to range from $864 million to $879 million, representing 3.3% to 5.1% growth. Capital expenditures are projected between $73 million and $83 million, with depreciation and amortization expected to range from $56 million to $60 million. The effective tax rate on adjusted earnings is estimated at 27.5% to 29.5%.
Core Derivatives Franchise Outlook: Cboe remains optimistic about its core derivatives franchise, driven by strong retail demand, international growth, and product innovation. Rising geopolitical tensions and economic uncertainty are expected to act as tailwinds for derivatives products as investors seek risk management and income generation tools.
Cash and Spot Markets Growth: Cboe expects continued growth in cash and spot markets, supported by strong industry volumes, stable market share trends, and improved net capture dynamics. Incremental revenue opportunities are anticipated through securities financing transactions clearing services in Europe.
Strategic Realignment Impact: The 2026 guidance incorporates the anticipated revenue and expense impacts of strategic realignment actions, including the sales processes for Cboe Australia and Cboe Canada, the wind-down of Cboe Europe Derivatives Exchange (CEDX), and efficiency improvements in U.S. and European ETP listings businesses.
Capital Allocation and Shareholder Returns: Cboe plans to continue optimizing capital deployment, with a focus on organic and inorganic growth opportunities, dividends, and opportunistic share repurchases. The company returned $350 million to shareholders in 2025 and maintains a strong balance sheet with $2.2 billion in adjusted cash and a leverage ratio of 0.9x.
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Shareholder Return Plan
Dividend Payments: In the fourth quarter, Cboe returned $76 million to shareholders in the form of a $0.72 per share dividend. For the full year 2025, the total amount of dividends paid was $284 million.
Share Repurchases: Factoring in both share repurchases and dividends, Cboe returned a total of $350 million to shareholders in 2025. The company also highlighted its balance sheet flexibility, with plans to redeploy capital to shareholders through dividends or opportunistic share repurchases in the future.
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Key Q&A
Q:Why did the company maintain the mid- to high single-digit revenue growth target for Data Vantage despite recent trends showing higher growth?
A:The company sets annual guidance based on a full-year perspective rather than quarter-to-quarter trends. They remain comfortable with the mid- to high single-digit range due to the durability of the Data Vantage business. They also highlighted strong international momentum, with 45% of new data sales this quarter coming from overseas clients, compared to 35% a year ago. Additionally, recurring sales from Asia Pacific clients and strong demand for option-embedded ETFs contribute to their confidence.
Q:What gives the company confidence that the single name 0DTE rollout will not cannibalize their index business?
A:The company believes single name 0DTE and SPX products serve different customer needs and risk profiles. SPX products are more macro-driven and smoother, while single names are company-specific with sharper price movements. The fundamental differences in product design, such as cash settlement for SPX versus physical settlement for single names, also support this view. They see single name 0DTE as additive to the market rather than cannibalistic.
Q:What is the contribution of new brokers like Robinhood and APAC brokers to SPX volumes, and what is the pipeline for further broker additions?
A:The company did not provide specific SPX attribution but noted that Robinhood and APAC brokers have contributed to strong SPX volume growth. Robinhood has seen options volume grow, with an estimated 40%-45% growth in options penetration. In APAC, 7 out of 10 identified local brokers in Korea now offer SPX options, compared to none two years ago. Taiwan also saw its first local retail broker launch SPX and VIX options in Q4, with more expected to follow.
Q:What is the company's update on prediction markets and their plans for product design and launch?
A:The company is focusing on financial and economic style contracts as their initial offerings, leveraging their existing SPX options ecosystem. They plan to launch securities products in Q2, assuming regulatory approval and partner readiness. These products will align with their SPX options ecosystem and provide a natural connection for investors. They are also encouraged by recent regulatory clarity, which boosts confidence among retail brokerage platforms.
Q:What is the revenue and expense guidance impact from the strategic realignment and new initiatives?
A:The 2026 revenue guidance includes a small contribution from prediction and event contracts, with more growth expected over time. The strategic realignment is expected to result in a 3% net revenue loss, with some savings from winding down Japan equities, corporate listings, and other optimizations. The 2026 expense guidance includes costs related to Canada and Australia, with savings from other areas already reflected.
Q:What are the company's plans for share repurchases and capital allocation?
A:The company prioritizes organic investments, such as building out securities financing and event prediction markets, which historically yield high returns. They also plan to continue share repurchases on an opportunistic basis and maintain their quarterly dividend, which was increased by 14% in August 2025. They aim to optimize capital returns based on available opportunities.
Q:What are the updates on pricing improvements and market maker incentives for multi-listed options?
A:The company is continuously evolving pricing schemes and market maker incentives to balance market share and revenue capture. They are preparing to launch multi-list trading during limited global trading hours (GTH) sessions and are engaging with industry participants on options regulatory fee (ORF) reform to align fees with where trades occur. These initiatives aim to reduce friction and improve market efficiency.
Q:What are the company's plans for extending trading hours to 24/7 across markets?
A:The company already trades 23x5 in Futures Index Options and FX, with plans to extend U.S. equities trading to 23x5 in late November, pending infrastructure readiness. For multi-list options, they plan to launch extended hours in Q3, starting with 25 high-cap names. They are also exploring 24/7 trading capabilities, focusing on customer demand and market readiness.
Q:Review of Unclear Management Responses
A:Management avoided providing specific SPX attribution for the contribution of new brokers like Robinhood and APAC brokers to SPX volumes. They also did not break down the exact expense savings from the 8%-10% reduction mentioned in the last call, citing a balance of savings and investments. Additionally, they did not provide a detailed timeline for launching traditional prediction market contracts beyond the initial securities products in Q2.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
BATS
COO
Cboe Australia
DTE ADV
Derivatives
ETP
Isaacson
Markets
Mini SPX
Options
VIX option
Vantage basis
Volume
business opportunity
cap stock
capture
cash equity
cash spot
category derivative
contract option
contribution
core business
decision CEDX
fee revenue
financing transaction
impact
market fee
momentum
owner
pricing
process Cboe
realignment
risk market
sale process
security financing
segment increase
service
spot market
term shareholder
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Frequently Asked Questions
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