Tradeweb Markets Inc. (TW) Q3 2025 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call summary indicates strong financial performance with record revenues, growth in emerging markets, and significant contributions from digital assets. The Q&A session reveals optimism about electronification trends, tokenization, and strategic investments, although management's vague responses on market volumes pose a slight concern. Overall, the company's positive revenue growth, strategic focus, and potential catalysts suggest a favorable stock price movement, likely in the positive range of 2% to 8% over the next two weeks.
Key Financial Performance
Quarterly Revenue $509 million, up 13% year-over-year on a reported basis and 11% on a constant currency basis. Growth driven by strong client activity, international revenue scaling higher (25% year-over-year growth), and strategic initiatives in EM and APAC.
Adjusted EBITDA Margin 54.2% year-to-date, increased by 90 basis points compared to 2024 full-year margins. Expansion attributed to balancing growth investments and profitability.
Rates Revenue Year-to-date revenues up 23% year-over-year. Growth driven by organic growth across swaps, global government bonds, and mortgages. Majority of global rates products still trade over phone or chat, presenting significant electronification opportunities.
Equities Revenue Up 17% year-over-year, led by growth in global ETFs and equity derivatives. AiEX automation solution contributed significantly with average daily trades increasing over 90% year-over-year in European ETFs and 70% quarter-over-quarter in U.S. ETFs.
Global Swaps Revenue Record revenues with over 30% year-over-year growth. Growth driven by strong client engagement, favorable mix shift towards risk trading, and a 7% year-over-year increase in weighted average duration. European swaps revenues rose nearly 30% year-over-year.
Global Credit Revenue Low single-digit growth driven by strong double-digit growth in European credit and municipal bonds. U.S. credit revenues fell year-over-year, mainly due to retail corporate credit revenues down nearly 30% year-over-year.
International Revenue Up more than 30% year-over-year. Over half of overall revenue growth is from outside the U.S., with significant contributions from Asia and Europe. Emerging markets revenue pacing at over $100 million annually, nearly triple 2023 levels.
Money Markets Revenue Growth led by the addition of ICD and record quarterly revenues across global repos. ICD revenues were up 7% relative to the second quarter of 2025.
Other Revenues Grew over 50%, driven by contributions from emerging digital asset initiatives and $2.3 million earned from work with the Canton Network.
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Operating Highlights
Digital Asset Initiatives: Other revenues grew over 50% due to contributions from emerging digital asset initiatives.
AiEX Automation Solution: Strong adoption across U.S. ETFs with AiEX average daily trades up 70% quarter-over-quarter.
Electronic Swaption Package Trading Protocol: Launched the first fully electronic swaption package trading protocol, enhancing transparency and efficiency.
International Revenue Growth: International revenues grew 25% year-over-year, driven by strategic initiatives in EM and APAC.
Emerging Markets Initiative: Annual revenue from emerging markets is pacing at over $100 million, nearly triple from 2023.
Saudi Arabia Bond Trading System: Launched the first electronic bond alternative trading system in Saudi Arabia.
Revenue Growth: Achieved $509 million in quarterly revenues, up 13% year-over-year.
Adjusted EBITDA Margins: Expanded by 54 basis points relative to Q3 2024.
Fee Adjustments: Introduced minimum fee floors and subscription fees for certain dealers.
Market Data Agreement Renewal: Renewed LSEG market data agreement for 3 years, increasing value by 9% annually.
Voice to Electronic Trading Shift: Continued shift from voice to electronic trading, with 30% of the cleared swaps market electronified.
Global Dealer Algorithmic Execution: Expanded dealer algorithmic execution capabilities, with more global dealer algos to be onboarded.
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Risk or Challenges
Low volatility and limited data: The market is experiencing unusually low volatility and limited fresh data, which are near-term headwinds for the company and the broader market. This environment makes it difficult for clients to position effectively, impacting trading volumes and revenues.
Shift towards voice-centric trading: The rise of voice activity in tandem with electronic trading is creating a mix shift that has weighed on U.S. Treasury market share. This trend is driven by extreme market conditions and low volatility, which favor more complex voice-centric package trades.
Decline in U.S. Treasury revenues: U.S. Treasury revenues decreased by 2% year-over-year due to weaker wholesale trends, which thrive in heightened volatility. This decline was partially offset by growth in institutional channels.
Challenges in U.S. credit market: Revenues in U.S. credit fell year-over-year, mainly due to a 30% decline in retail corporate credit revenues. This was driven by better relative yields in money markets and municipal bonds, leading to a shift away from retail credit.
Compression in European swaps: Total market share in swaps declined due to a significant reduction in European client-related compression volumes, which carry much lower fee rates. This has impacted overall revenue growth in the swaps segment.
Operational cost pressures: Increased expenses in technology, communications, and occupancy are putting pressure on margins. Investments in platform infrastructure, AI, and data are driving double-digit growth in technology and communication expenses.
Regulatory and geopolitical uncertainties: Geopolitical uncertainty and shifting regulatory frameworks are reshaping the market environment, posing challenges to strategic execution and client engagement.
Dependence on international markets: Over half of revenue growth is coming from international markets, which exposes the company to foreign exchange risks and regional economic uncertainties.
Emerging market challenges: While emerging markets are growing, they still face challenges such as geographic dispersion, pricing opacity, and operational inefficiencies, which have traditionally made voice trading the default.
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Guidance & Outlook
Revenue Growth: 2025 revenue growth is trending approximately 9% higher relative to October 2024, despite low volatility and fewer data points. International revenue growth is nearly 20% year-over-year for October.
Market Data Agreement: The LSEG market data agreement has been renewed for three years, with a 9% annual increase in value effective November 1, 2025. This is expected to generate significant additional revenue.
Adjusted Expense Guidance: 2025 adjusted expense guidance has been tightened to $1 billion to $1.025 billion. Investments in technology, AI, and data infrastructure will continue, with double-digit growth in technology and communications expenses expected through 2026.
Adjusted EBITDA Margin: 2025 adjusted EBITDA margin is expected to exceed 2024 levels, though expansion will be more modest due to ongoing investments.
Global Swaps Market: The long-term growth potential for swaps remains significant, with only 30% of the cleared swaps market currently electronified. New initiatives, such as the first fully electronic swaption package trading protocol, are expected to drive growth.
Emerging Markets Revenue: Emerging markets revenue is pacing at over $100 million annually, nearly triple the 2023 level, with a total addressable market exceeding $1.5 billion.
Global Rates Revenue: Year-to-date revenues for Global Rates are up 23% year-over-year, with an estimated revenue TAM of nearly $500 million annually from new initiatives in voice-centric markets.
U.S. Credit Growth: U.S. credit remains a key growth initiative, with RFQ share expected to be the #1 driver of revenue growth going forward.
Technology Investments: Continued investments in platform infrastructure, AI, and data are planned, with a focus on enhancing trading efficiency and client experience.
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Shareholder Return Plan
Quarterly Dividend: The Board declared a quarterly dividend of $0.12 per Class A and Class B shares, up 20% year-over-year.
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Key Q&A
Q:What potential catalysts could spark volatility and improve activity in the rate environment?
A:The lack of data points, tied to the government shutdown, has contributed to muted activity. Potential catalysts include new data releases, growing dissent within the Fed, midterm elections, geopolitical uncertainties, and structural challenges. International clients are not affected by the data drought, and the global backdrop of moderate growth and easing inflation presents opportunities. The recent rate cut announcement and the end of QT have sparked market activity.
Q:What is driving the greater mix of voice trades in electronic market share for treasuries?
A:Voice trading is driven by larger, complex trades like basis trades, asset swaps, and swap spreads, which are better suited for voice execution. Lower volatility and less conviction on rate direction have also contributed to this trend. However, electronic ADV in the treasury market is up double digits year-to-date, and there is optimism about continued electronification.
Q:What is the outlook for trading volumes given the lower rate environment?
A:The environment is constructive for Tradeweb, with real yields of 2-3% on the short end making fixed income attractive. A sustained upward-sloping yield curve incentivizes duration extension, benefiting higher-duration products. Lower rates positively impact swaps and cash credit fee per million. Historical data shows Tradeweb's revenue growth even in challenging environments like 0 rates.
Q:What are the opportunities and risks for Tradeweb in tokenized assets?
A:Tradeweb sees tokenization as a natural extension of its electronification efforts, offering benefits like faster settlement, 24/7 trading, and capital efficiency. The company has generated $5 million year-to-date from its work as a validator on the Canton Network and holds $55 million in coins. Risks include complacency and evolving market dynamics, but Tradeweb believes it is well-positioned to lead in institutional crypto trading and tokenized assets.
Q:What are the next stages of electronification in U.S. credit, and how is Tradeweb positioned?
A:Electronification in U.S. credit progresses gradually, with sharp accelerations when key ingredients like better technology and improved data align. The credit market's structural challenges play to Tradeweb's strengths. The company focuses on portfolio trading, dealer balance sheet integration, and innovations for risk trades. Tradeweb is optimistic about its position and future progress.
Q:What is the adoption status of treasury trading on ICD, and are there plans for more products?
A:Early interest in treasury trading on ICD has been positive, with a few clients executing trades. Larger potential clients are reengaging due to the added ability to bring Tradeweb products onto the ICD portal. Tradeweb is focused on integrating straight-through processing and custody relationships. The company continues to evaluate M&A opportunities and strategic investments.
Q:What is the electronification trend in interest rate swaps?
A:The overall electronification rate for cleared IRS is around 30%, but risk-based swap share has grown from 10% in 2020 to 19% in 2025. Emerging markets have also seen significant growth, from 1% electronic in 2020 to 18% in 2025. These trends drive revenue growth and highlight the nuanced progress in electronification.
Q:What are Tradeweb's capital allocation priorities?
A:Tradeweb prioritizes organic investments, followed by M&A, share repurchases, and dividends. Current focus areas include emerging markets, swaps, credit, AI, data infrastructure, and digital initiatives. The company is actively considering share repurchases given the current share price and continues to evaluate strategic opportunities.
Q:Why have market volumes been lower despite high uncertainty?
A:Factors include the Fed's perceived autopilot mode, lack of data, and timing of rate cuts. However, fiscal developments, macro data surprises, and credit risks are expected to bring volatility and client activity back. Tradeweb is confident in its ability to perform well in both volatile and calm markets.
Q:Review of Unclear Management Responses
A:Management avoided directly addressing why market volumes have been lower despite high uncertainty, providing general factors like the Fed's autopilot mode and lack of data but not offering specific or detailed explanations.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
Clients
Credit
ETF
ETFs
FX
Global Rates
RFQ
Slide
agreement
asset
basis point
challenge
currency
date
digit
dollar
fee
government bond
increase
interest
investment
level
mix shift
month
mortgage
package trade
platform
position
protocol
record
rise
risk
solution
swap revenue
trading
voice
volatility
volume
yield
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