Nasdaq's AxiomSL Expands with Revolut, Reinforcing RegTech Growth Amid High Valuation and Leverage Concerns

What happened

Nasdaq announced the expansion of its AxiomSL regulatory reporting platform with Revolut, supporting the fintech's global footprint and aligning with Nasdaq's strategic pivot toward higher-margin SaaS and reg-tech revenues. This deployment contributes to the company's growing annual recurring revenue, which reached $3.0 billion with a 38% SaaS mix, as noted in the DeepValue report. However, Nasdaq's stock trades at a rich valuation—25% above the base-case DCF estimate—with elevated leverage of 3.8x net debt/EBITDA and significant goodwill and intangibles on the balance sheet. While this client win underscores execution in the Financial Technology segment, it is an incremental step that does not address broader risks like regulatory scrutiny or integration challenges from acquisitions such as Adenza. Thus, the news reinforces Nasdaq's growth narrative but highlights the persistent need for deleveraging and margin expansion to justify investor optimism.

Implication

For investors, the Revolut deal demonstrates Nasdaq's ability to secure high-profile reg-tech clients, potentially boosting ARR and SaaS revenue mix in line with strategic goals. However, it is a single, unquantified win that does not materially change the risk-reward profile, given the stock's elevated P/E of 31x and net debt/EBITDA of 3.8x. Investors should view this as a positive but incremental development, emphasizing the need to monitor whether such deployments drive sustained ARR growth above current trends, as per the DeepValue report's watch items. The deal fails to mitigate ongoing regulatory overhangs, such as European antitrust investigations, or integration risks from major acquisitions like Adenza and Verafin. Consequently, while the news aligns with Nasdaq's transformation story, it underscores the importance of patience for clearer evidence of deleveraging and execution before considering a more aggressive investment approach.

Thesis delta

The DeepValue report maintains a 'WAIT' judgment due to Nasdaq's rich valuation and leverage, and this AxiomSL expansion with Revolut does not shift that stance. It supports the growth narrative in reg-tech but is insufficient to alter the thesis, as it doesn't address key risks like regulatory scrutiny or balance sheet concerns. Investors should continue monitoring ARR growth and deleveraging progress for any meaningful change in the investment outlook.