Why did the Nasdaq share price rocket 19% in July?

The financial stock surged on strong earnings, among other factors.

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This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

What happened

Nasdaq Inc. (NASDAQ: NDAQ), the company that owns the Nasdaq Composite Index and the Nasdaq Stock Exchange, had a better month than the index, according to S&P Global Market Intelligence

Nasdaq Inc. returned 18.6% in July, beating the S&P 500, which was up 9.1% for the month, and the Nasdaq Composite, which gained 12.4% in July. The company's stock is down 15% year to date as of today, beating the Nasdaq Composite, which is down 21% so far in 2022.

So what

The primary catalyst for Nasdaq in July was its second-quarter earnings report, which showed a 10% year-over-year gain in revenue to $1.5 billion and a 6% rise in net revenue to $893 million. In addition, adjusted earnings per share (EPS), taking out gains in the prior year from divestitures, was up 9% year over year to $2.07.

All four of its business segments saw revenue gains, led by Market Technology (solutions for institutional investors in trading and settlement, and financial-crime deterrence, among other areas), which was up 12%.

Corporate Platforms -- encompassing index listing services, as well as investor relations and ESG (environmental, social, governance) services -- was also up 12% year over year. 

The largest segment, Market Services, which includes revenue from trading on the exchange, was up 11%. Investment Intelligence, which generates revenue from market data and intelligence and licensing its indexes, saw an 8.5% spike in revenue year over year.

The growth of its businesses outside of Market Services gives Nasdaq not only multiple revenue streams and growth opportunities, but also diversity in the types of revenue it generates. The company has increased its amount of recurring revenue from subscriptions, particularly within the Market Technology segment, via its software-as-a-service (SaaS) offerings. Revenue from SaaS rose 12% year over year and makes up 35% of recurring revenue.

Now what

The other big driver for Nasdaq was the finalization of a planned 3-for-1 split. It was first announced in April, and in July it was approved. After Aug. 12, every shareholder will get two additional shares of the stock, currently about $177 per share, for each share they own. The new shares will be given out on Aug. 26, and the stock will begin trading at the new split-adjusted price on Aug. 29.

The idea is to make the stock more accessible to more investors at a lower entry price, thus boosting liquidity. The market reacted to the move with approval, as the price jumped sharply on the news when it came out on July 20. There are a bunch of high-profile stock splits coming on the Nasdaq exchange, and that is generally good for Nasdaq Inc. as it creates more trading activity. 

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

Dave Kovaleski has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has recommended Nasdaq. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips. 

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