CME Group Inc. (CME) Q4 2025 Earnings Call Transcript

Access earnings results, analyst expectations, report, slides, earnings call, and transcript.

Overview

The earnings call summary and Q&A highlight strong financial performance, with increased revenue, operating income, and a solid cash position. The partnership with FanDuel and the new pricing strategy show proactive market engagement. Despite some unclear management responses, the overall sentiment is positive, supported by a robust market data revenue stream and strategic capital allocation. The positive guidance and effective expense management further bolster the outlook, suggesting a stock price increase of 2% to 8% over the next two weeks.

Key Financial Performance

Average Daily Volume 28.1 million contracts, a 6% increase year-over-year. Growth was broad-based, including records in interest rate, energy, metals, agricultural, and crypto complexes. Reasons include global participants choosing CME Group's markets for risk management.

International Business Volume 8.4 million contracts per day, up 8% from 2024. Reasons include increased global participation in CME Group's markets.

Customer Margin Savings $80 billion average daily margin savings, up $20 billion year-over-year. Reasons include the ability to offset margin across diverse asset classes.

Revenue $6.5 billion, a 6% increase from 2024. Reasons include annual revenue records in 5 out of 6 asset classes and market data revenue growth.

Market Data Revenue Surpassed $800 million, up 13% from 2024. Reasons include increased demand for market data.

Adjusted Annual Expenses $1.625 billion, excluding license fees. Adjusted operating margin was 69.4%, up 110 basis points from 2024.

Adjusted Net Income $4.1 billion, resulting in 9% adjusted earnings per share growth. Reasons include revenue growth and expense management.

Q4 Revenue $1.65 billion, an 8% increase from Q4 2024. Reasons include higher average rate per contract and increased clearing and transaction fees.

Market Data Revenue (Q4) $208 million, up 15% year-over-year. Reasons include increased demand for market data.

Adjusted Operating Income (Q4) $1.1 billion, with a 67% operating margin. Reasons include revenue growth and expense management.

Adjusted Net Income (Q4) $1 billion, 10% higher than Q4 2024. Reasons include revenue growth and expense management.

Cash at End of Quarter $4.6 billion, including $1.3 billion in remaining OSTTRA proceeds.

Dividends Paid $3.9 billion in 2025, with $455 million in Q4.

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Operating Highlights

Event contracts: Launched on financial and commodity products, economic indicators, and sports. Over 68 million contracts traded in 6 weeks, including 7 million market-related contracts.

Retail-focused products: Micro products up 59% in Q4 to 4.4 million contracts per day. 1-ounce gold contract successful with Q4 volume of 66,000 per day. Launching 100-ounce silver contract next week.

Cryptocurrency trading: Record-breaking year with Q4 average daily volume of 379,000 contracts, up 92%, representing $13 billion in notional value traded per day. Launching Cardano, Chainlink, and Stellar futures on February 9. 24/7 trading for crypto suite to begin next quarter.

International business: Record year with 8.4 million contracts per day, up 8% from 2024.

Capital efficiencies: Customers' average daily margin savings reached $80 billion, up $20 billion from last year. Extending CME FICC cross-margining to end-user clients in early 2026.

Securities clearing: Received SEC approval for CME Securities Clearing. On track to launch new clearing house in 2026.

24/7 trading evaluation: Strategically evaluating whether other asset classes would benefit from 24/7 trading.

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Risk or Challenges

Regulatory Compliance: The company is preparing for the SEC's U.S. Treasury clearing mandate and launching a new clearing house. This regulatory requirement could pose challenges in terms of compliance and operational readiness.

Market Complexity: The macroeconomic landscape is described as increasingly complex, which could impact the company's ability to provide effective risk management tools and maintain its growth trajectory.

Strategic Investments: The company is making significant investments in new initiatives such as 24/7 crypto trading, securities clearing, and event contracts. These investments require careful execution to ensure they deliver the expected returns and do not strain resources.

Fee Adjustments: The company plans to evaluate transaction fees on a regular basis, which could lead to customer dissatisfaction or competitive pressures if not managed effectively.

Cryptocurrency Expansion: The expansion into cryptocurrency trading, including 24/7 trading and new product launches, carries risks related to market volatility, regulatory scrutiny, and operational challenges.

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Guidance & Outlook

Launch of CME Securities Clearing: CME Securities Clearing is set to launch later in 2026, ahead of the SEC's U.S. Treasury clearing mandate. This initiative aims to enhance capital efficiencies for the industry.

Expansion of CME FICC cross-margining: CME plans to extend CME FICC cross-margining to end-user clients in early 2026, further improving capital efficiencies.

Retail-focused product launches: CME will launch a 100-ounce silver contract next week to cater to the retail community, following the success of the 1-ounce gold contract.

Cryptocurrency trading expansion: CME will launch Cardano, Chainlink, and Stellar futures on February 9, 2026, and introduce 24/7 trading for its entire crypto suite next quarter. The company is also evaluating the potential for 24/7 trading in other asset classes.

Fee adjustments: Transaction fee changes effective April 1, 2026, combined with market data fee changes and incentive program revisions, are expected to increase total revenue by approximately 1% to 1.5% based on 2025 activity levels.

2026 Operating Expense Guidance: Total adjusted operating expenses, excluding license fees, are projected to be approximately $1.695 billion, including investments in new initiatives like 24/7 crypto trading, securities clearing, and event contracts.

Capital Expenditures: Total capital expenditures for 2026 are expected to be approximately $85 million.

Adjusted Effective Tax Rate: The adjusted effective tax rate for 2026 is projected to range between 23.5% and 24.5%.

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Shareholder Return Plan

Dividends Paid in Q4 2025: $455 million

Total Dividends Paid in 2025: Approximately $3.9 billion

Annual Variable Dividend Declaration and Payment Dates: Aligned with Q1 regular dividend, to be declared next week

Share Repurchases in Q4 2025: $256 million

Share Repurchases in 2026 (so far): $276 million

Use of OSTTRA Proceeds: $1.3 billion in remaining proceeds approved for share repurchases over time

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Key Q&A

Q:How is the customer base performing during periods of elevated volatility, particularly in the metals complex?

A:The customer base is healthy, as evidenced by the market direction and open interest. For example, despite margin changes in silver, the market reached a historic high, indicating strong retail and institutional participation. Open interest and volume are steady or increasing across regions and asset classes.

Q:What has been the engagement and interest in the prediction market offering and the JV with FanDuel?

A:The prediction market has attracted new individual participants, institutional clients, and market makers. The partnership with FanDuel has been successful in distributing products to a new customer base. The regulatory landscape is being monitored, with the CFTC committed to overseeing these contracts as swaps. CME will not engage in legal battles over the classification of these contracts but will continue as long as they are deemed legal swaps.

Q:What are the recent pricing changes and their impact by asset class?

A:A 3.5% rack rate increase was implemented for market data products, contributing to record revenue growth. Transaction fee changes impacted metals, micro complexes, crude oil, and grains. CME is moving away from consolidating fee changes in December and will implement them throughout the year as needed.

Q:Why is CME changing its pricing strategy, and what does it mean for future increases?

A:CME is shifting to a real-time pricing strategy to align with business needs and value delivery. This approach allows for flexibility in timing and magnitude of price changes, which may vary year to year.

Q:What is the interest from other distribution partners in prediction markets, and what is the future product pipeline?

A:CME is engaging with its 120-130 retail distribution partners to expand the offering of event contracts. The pipeline is robust, and future products may include larger-scale political contracts and other financial indicators, subject to regulatory approval and market demand.

Q:What is CME's approach to capital allocation and the impact of OSTTRA proceeds?

A:CME is using OSTTRA proceeds for stock repurchases and will continue to deploy capital towards buybacks over time.

Q:What is the durability of market data revenue given AI developments?

A:Market data revenue is resilient, driven by recurring subscription revenue and institutional demand. AI is seen as an enhancement to trading strategies rather than a disruption to CME's proprietary data business.

Q:What is the progress on the Google Cloud migration and its financial impact?

A:The migration is on track, with non-ultra-low latency migration completing early this year and ultra-low latency markets available for testing in 2027. Total spending on Google Cloud was around $100 million in 2025, with costs integrated into overall expense growth.

Q:What is CME's stance on tokenized collateral and its potential benefits?

A:CME is exploring tokenized cash and other forms of tokenized collateral, focusing on risk management and issuer credibility. CME will accept tokens from credible institutions but will avoid those from less reliable sources.

Q:What are the cross-margining programs and their expected adoption?

A:CME's cross-margining program with FICC is operational, generating $1-$1.5 billion in daily savings for firms. Expansion to client accounts awaits SEC approval. The program is expected to enhance capital efficiency and attract more participants.

Q:What is the potential impact of treasury and repo clearing on collateral balances?

A:Treasury clearing is expected to add to collateral balances over time, especially with potential mandates for broader clearing. CME's agreement with FICC is driving significant growth in offsets, currently generating around $1 billion in daily savings.

Q:Review of Unclear Management Responses

A:Management avoided directly addressing the potential impact of AI on CME's market data business, providing only general statements about its role in enhancing trading strategies. Additionally, there was a lack of specific details on the timeline and financial impact of the Google Cloud migration and the adoption of tokenized collateral.

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