Nasdaq Expands Eqlipse Tech to Japan's Osaka Exchange, Yet Valuation and Leverage Risks Persist

What happened

Japan's Osaka Exchange has adopted Nasdaq's Eqlipse trading and surveillance technology to modernize its derivatives platform, strengthening Japan's position as a global derivatives hub. This partnership expands Nasdaq's footprint in Japan's financial ecosystem, aligning with its strategic pivot towards higher-growth, recurring revenue solutions like Financial Technology and RegTech, which saw 12% ARR growth in 3Q25. However, Nasdaq's stock trades at rich multiples—~33x P/E and ~25x EV/EBITDA—over 129% above a conservative DCF estimate, reflecting optimistic assumptions about sustaining 8-11% organic growth post-Adenza integration. The company also faces elevated leverage at ~3.8x net debt/EBITDA, adding balance-sheet risk amid macro sensitivity and regulatory scrutiny. While this deal underscores execution in Nasdaq's solutions push, it likely contributes incrementally and does not mitigate the core valuation overhang or near-term financial pressures highlighted in the DeepValue report.

Implication

The Osaka Exchange adoption of Eqlipse technology supports Nasdaq's shift towards recurring revenue streams in its Financial Technology segment, potentially aiding its 8-11% organic growth target. It may enhance competitive positioning in Asia's derivatives market and contribute modestly to ARR, aligning with management's focus on solutions. However, the financial impact is likely small relative to Nasdaq's overall revenue, and it does not directly alleviate high debt levels or integration risks from acquisitions like Adenza. Investors should view this as a positive but insufficient catalyst to justify current premiums, emphasizing the need for monitoring deleveraging progress and sustainable growth. Ultimately, the news does not alter the risk/reward skew towards downside, maintaining the rationale for a potential sell recommendation at today's prices.

Thesis delta

The Osaka Exchange deal slightly bolsters evidence of Nasdaq's execution on its solutions pivot, potentially supporting organic growth assumptions. However, it does not materially shift the investment thesis, as the stock remains overvalued with persistent leverage and integration risks that outweigh incremental partnerships. No change to the 'POTENTIAL SELL' stance is warranted without clearer signs of deleveraging or sustained growth acceleration.